The U.S. Department of Labor has dropped its investigation into Scale AI’s compliance with the Fair Labor Standards Act (FLSA), according to a source directly familiar with the matter.
The FLSA is a federal law that regulates misclassification of employees as independent contractors and unpaid wages. TechCrunch first reported that Scale was the subject of such an investigation in March.
Upwork and HireArt, two of Scale AI’s HR partners that were also being investigated for FLSA compliance per Inc. magazine, are also no longer being investigated by the DOL, they each confirmed to TechCrunch.
Scale AI, which was valued last year at $13.8 billion, depends on an army of workers it categorizes as contractors to do critical AI work, like labeling images for Big Tech.
However, Scale has been sued by ex-workers alleging they were underpaid and misclassified as contractors instead of employees, denying them access to benefits like sick leave.
It’s not clear exactly why the DOL dropped the probe.
San Francisco-based Scale AI declined to comment. Updated on May 9, 2025 – Scale AI confirmed this news post-publication, with spokesperson Joe Osborne telling TechCrunch it’s pleased with the DOL’s decision:
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“We’re pleased with this update,” Osborne said. “Creating new forms of work in AI is vital to America’s economic growth, and we’re proud of the flexible earning opportunities offered through our platforms.”
The DOL didn’t respond to a request for comment.
There are several possible reasons for why the DOL dropped the probe.
A recent move from the DOL hints at a friendlier approach to classifying workers as contractors, with the agency announcing on May 1 that it was no longer enforcing, at least for now, a Biden-era rule which made this more difficult.
Scale AI is also seeking favor with the Trump administration. Its CEO Alexandr Wang attended Trump’s inauguration (like many other tech CEOs) and has published a letter urging Trump to “win the AI war.”
Meanwhile, Scale AI’s former managing director Michael Kratsios was confirmed in March as the new director of the White House’s Office of Science and Technology Policy.
The position involves advising the president on science and tech issues, and has no oversight over the DOL. Kratsios didn’t immediately respond to a request for comment.
Charles Rollet is a senior reporter at TechCrunch. His investigative reporting has led to U.S. government sanctions against four tech companies, including China’s largest AI firm. Prior to joining TechCrunch, Charles covered the surveillance industry for IPVM. Charles is based in San Francisco, where he enjoys hiking with his dogs. You can contact Charles securely on Signal at charlesrollet.12 or +1-628-282-2811.
