Department of Labor Drops Investigation into Scale AI

Department of Labor Closes Investigation into Scale AI

The U.S. Department of Labor has concluded its investigation regarding Scale AI’s adherence to the Fair Labor Standards Act (FLSA), as confirmed by a source with direct knowledge of the situation.

FLSA Compliance and Initial Scrutiny

The FLSA is a federal statute governing the proper classification of workers and ensuring fair wage practices. Reports initially surfaced in March indicating that Scale AI was under investigation concerning these matters, as first noted by TechCrunch.

Alongside Scale AI, two of its human resources partners – Upwork and HireArt – were also subject to FLSA compliance reviews. Both companies have now confirmed to TechCrunch that the Department of Labor has ceased their investigations.

Scale AI’s Workforce Model

Scale AI, with a valuation of $13.8 billion as of last year, relies heavily on a large workforce categorized as independent contractors. These workers perform essential tasks for artificial intelligence development, such as image labeling for major technology companies.

However, Scale AI has faced legal challenges from former workers who allege they were improperly classified as contractors. These lawsuits claim underpayment and denial of employee benefits, including sick leave.

Reasons for Probe Closure Remain Unclear

The specific rationale behind the Department of Labor’s decision to close the investigation is currently unknown.

Scale AI, headquartered in San Francisco, has declined to provide any commentary on the matter. Updated May 9, 2025 – Following publication, Scale AI acknowledged the news through spokesperson Joe Osborne, expressing satisfaction with the DOL’s decision.

“We’re pleased with this update,” Osborne stated. “The creation of novel work arrangements within the AI sector is crucial for American economic advancement, and we take pride in the flexible earning possibilities our platforms provide.”

The Department of Labor has not yet responded to requests for comment.

Shifting DOL Stance and Political Considerations

Several factors may have contributed to the probe’s closure. A recent policy shift by the Department of Labor suggests a more accommodating approach to classifying workers as contractors.

On May 1, the agency announced it would temporarily suspend enforcement of a Biden-era rule designed to restrict such classifications.

Furthermore, Scale AI is actively seeking to cultivate relationships with the Trump administration. CEO Alexandr Wang attended Trump’s inauguration and has publicly advocated for the U.S. to “win the AI war” in a published letter.

White House Connections

Adding to this, Scale AI’s former managing director, Michael Kratsios, was confirmed in March as the director of the White House’s Office of Science and Technology Policy.

While this position involves advising the president on science and technology issues, it does not include direct oversight of the Department of Labor. Mr. Kratsios did not immediately respond to a request for comment.