The U.S. Department of Labor has ended its investigation into Scale AI concerning potential violations of the Fair Labor Standards Act (FLSA), according to a source familiar with the matter. The federal inquiry had been looking into claims that the artificial intelligence startup may have improperly classified employees as independent contractors and failed to compensate them adequately.
Scale AI, a San Francisco-based firm valued at $13.8 billion last year, utilizes a substantial workforce categorized as independent contractors for essential AI functions, such as labeling images for major tech companies. Earlier this year, the company became the subject of scrutiny when former workers filed lawsuits alleging they were routinely underpaid and incorrectly classified, depriving them of employee benefits and protections, including paid sick leave.
Two HR partners of Scale—Upwork and HireArt—which were also involved in the investigation, confirmed separately that they, too, are no longer under review by the Department of Labor. No detailed explanation has been provided by the Department on why the investigation concluded without further action, and the agency has not responded to requests for comment.
Several potential factors may have contributed to the end of the inquiry. Notably, the Labor Department recently indicated a shift toward a softer regulatory position by pausing enforcement of a stricter, Biden-era rule on worker classification. This policy adjustment, announced by the agency on May 1, may have influenced decisions regarding ongoing probes.
At the same time, Scale AI has strategically expanded its presence among influential political figures and policymakers. CEO Alexandr Wang notably attended ceremonies linked to the Trump administration’s inauguration and publicly encouraged President Trump to prioritize investments in artificial intelligence to boost the nation’s global competitiveness. Furthermore, in March, Scale AI’s former managing director, Michael Kratsios, secured a prominent role in Washington as the new head of the White House’s Office of Science and Technology Policy. The office directly advises the President on technology-related concerns, though it does not oversee or direct policies at the Department of Labor.
Scale AI itself has declined all comment on the matter, leaving industry observers and former employees with lingering questions surrounding the Department’s decision.
