Scale AI Cleared as Labor Dept. Ends Investigation
▼ Summary
– The U.S. Department of Labor has ended its investigation into Scale AI’s compliance with the Fair Labor Standards Act (FLSA), according to a source familiar with the matter.
– Scale AI, valued at $13.8 billion, relies on contractors for AI tasks like image labeling but faces lawsuits alleging worker misclassification and underpayment.
– Upwork and HireArt, Scale AI’s HR partners also under investigation, confirmed the DOL has dropped their probes as well.
– The DOL’s decision may reflect a shift toward a more contractor-friendly stance, as it stopped enforcing a Biden-era rule that tightened worker classification standards.
– Scale AI’s CEO has sought ties with the Trump administration, and its former managing director now heads the White House’s Office of Science and Technology Policy.
The U.S. Department of Labor has officially closed its investigation into Scale AI regarding potential violations of federal labor laws, marking a significant development for the high-profile artificial intelligence company. Sources with direct knowledge confirm the agency has discontinued its examination of whether the startup complied with the Fair Labor Standards Act (FLSA), which governs worker classification and wage protections.
Scale AI, valued at $13.8 billion, relies heavily on contract labor for tasks like data labeling—a crucial component in training AI models for major tech firms. The company faced scrutiny earlier this year when reports surfaced about alleged worker misclassification and unpaid wages. Former employees have filed lawsuits claiming they were improperly categorized as independent contractors, depriving them of benefits like healthcare and paid leave.
Two of Scale’s workforce partners, Upwork and HireArt, were also under review but confirmed their investigations have similarly concluded. While the Labor Department hasn’t disclosed specifics behind the decision, industry observers point to shifting regulatory attitudes. A recent policy reversal by the DOL relaxed enforcement of stricter worker classification rules implemented during the Biden administration, potentially influencing the outcome.
Scale AI declined to comment initially but later affirmed the news, with spokesperson Joe Osborne stating, “We’re pleased with this update. Creating flexible earning opportunities in AI aligns with America’s economic priorities.” The company has actively engaged with political leaders, including CEO Alexandr Wang’s public endorsement of policies supporting AI dominance. Notably, former Scale executive Michael Kratsios now heads the White House Office of Science and Technology Policy, though his role doesn’t involve labor oversight.
Legal experts suggest the dropped probe doesn’t necessarily resolve underlying disputes about gig-economy labor practices. Worker advocacy groups continue pushing for clearer standards, emphasizing that tech giants’ reliance on contract labor often skirts traditional employment protections. The Labor Department hasn’t elaborated on whether future actions are planned, leaving open questions about enforcement priorities under current leadership.
For now, Scale AI can focus on its ambitious growth plans without the shadow of a federal inquiry. The outcome highlights the complex interplay between innovation, labor rights, and regulatory flexibility in the fast-evolving AI sector.
(Source: TechCrunch)
