U.S. Department of Labor Ends Investigation into Scale AI’s Worker Classification Practices

The U.S. Department of Labor (DOL) has dropped its investigation into Scale AI’s compliance with the Fair Labor Standards Act (FLSA), according to a source with direct knowledge of the matter. The FLSA is a federal law that addresses issues such as the misclassification of employees as independent contractors and the payment of unpaid wages. TechCrunch first reported Scale AI's involvement in the investigation in March. The company, valued at $13.8 billion last year, relies heavily on a workforce categorized as independent contractors to perform critical tasks, including labeling images for large technology companies. Two of Scale AI’s HR partners, Upwork and Hireart, were also subjects of the FLSA investigation, but they too have been cleared of scrutiny, both confirming to TechCrunch that the DOL has ceased its probe into their practices. The exact reasons behind the DOL’s decision to drop the investigation are unclear. Scale AI, based in San Francisco, declined to comment, and the DOL did not respond to requests for clarification. However, there are several potential factors at play. On May 1, the DOL announced that it would not enforce, at least temporarily, a regulation introduced during the Biden administration that made it more challenging to classify workers as independent contractors. This shift could have influenced the decision to end the probe. Additionally, Scale AI has been courting political favor, particularly with the Trump administration. CEO Alexandr Wang attended Donald Trump’s inauguration and subsequently published a letter advocating for the U.S. to "win the AI war." While this political engagement may have contributed to a more favorable regulatory environment, it is speculative to link it directly to the DOL’s decision. In March, Michael Kratsios, Scale AI’s former managing director, was confirmed as the new director of the White House’s Office of Science and Technology Policy (OSTP). Kratsios’s role involves advising the President on science and technology matters, though it does not include oversight of the DOL. Kratsios did not respond to a request for comment on the situation. These developments highlight the complex interplay between regulatory scrutiny, political influences, and the rapid evolution of the tech industry, particularly in the realm of AI. Scale AI’s workforce, primarily consisting of independent contractors, has been crucial in supporting the training of advanced AI models. However, the legal classification of these workers and their rights remain contentious issues in the broader tech sector.