The U.S. Department of Labor (DOL) is investigating whether data labeling startup ScaleAI complies with the Fair Labor Standards Act (Fair Labor Standards Act). This is a federal law that regulates unpaid wages, misclassifying employees as contractors, and unlawful retaliation against workers.
The investigation has been open since at least August 2024. According to a person directly familiar with the matter, the investigation is continuing. Of course, the existence of the investigation does not mean that ScaleAI did anything wrong. The investigation may be beneficial to the company or it may be dismissed.
ScaleAI is based in San Francisco and was valued at $13.8 billion last year. The company relies on a group of employees it classifies as contractors to do important artificial intelligence work, such as labeling images for big tech companies and other organizations.
ScaleAI spokesman Joe Osborne said the investigation was initiated during the previous presidential administration, when ScaleAI believed regulators misunderstood its work in building, testing and evaluating artificial intelligence.
Osborne said ScaleAI has worked extensively with the DOL to explain its business model and the dialogue has been productive. More broadly, ScaleAI brings more "flexible job opportunities in artificial intelligence" to Americans than any other company, and feedback from contributors has been "overwhelmingly positive." "Thousands of people use our platform to showcase their skills and make extra money."
ScaleAI is indeed a very popular part-time job platform. But it has recently faced legal challenges to its labor practices from some former employees. Two lawsuits were filed against the startup by former employees, one in December 2024 and another in January 2025, claiming they were underpaid and misclassified as contractors rather than employees, denying them protections such as overtime pay and sick leave.
ScaleAI has vigorously challenged the lawsuits, saying the company fully complies with the law and works hard to ensure wages meet or exceed local living wage standards.
ScaleAI’s international labor practices were also the subject of a 2023 Washington Post investigation. Overseas workers described to The Washington Post demanding low-wage jobs as contractors. The company said at the time that wages were increasing.
The U.S. Department of Labor website says the department is able to resolve most cases administratively, but employers who violate the law may be fined or even imprisoned. The Department of Labor also has the authority to force employers to reclassify workers as employees.
For example, Bloomberg Law reported that in February 2024, hotel staffing startup Qwick reached a settlement with the Department of Labor, paying $2.1 million and announcing that all California workers working using the Qwick app would be classified as employees.
ScaleAI also appears to be one of the Silicon Valley companies seeking and gaining favor from the new presidential administration. For example, the company's CEO and founder, Alexandr Wang, attended Donald Trump's inauguration in January, as did many other tech CEOs.
More convincingly, ScaleAI’s former managing director Michael Kratsios is President Trump’s nominee to be the new director of the White House Office of Science and Technology Policy. Kratsios served as U.S. chief technology officer during Trump's first administration.
In this role, Kratsios will advise Trump on technology matters. This position has no supervisory authority over the Department of Labor. Kratsios participated in a Feb. 25 Senate hearing but has not yet been confirmed. Kratsios did not respond to a request for comment.
U.S. Department of Labor spokesman Michael Petersen told TechCrunch that as a matter of long-standing policy, the Department of Labor cannot confirm or deny the existence of any investigation.