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The U.S. Department of Labor has dropped its investigation into Scale AI\u2019s compliance with the Fair Labor Standards Act, according to a source directly familiar with the matter.\u00a0<\/p>\n
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<\/a> in March.\u00a0<\/p>\n Upwork and Hireart, two of Scale AI\u2019s HR partners that were also being investigated for FLSA compliance per Inc. magazine<\/a>, are also no longer being investigated by the DOL, they each confirmed to TechCrunch.<\/p>\n Scale AI, which was valued last year at $13.8 billion<\/a>, depends on an army of workers it categorizes as contractors to do critical AI work, like labeling images for Big Tech.\u00a0<\/p>\n However, Scale has been sued<\/a> by ex-workers alleging they were underpaid and misclassified as contractors instead of employees, denying them access to benefits like sick leave.<\/p>\n It\u2019s not clear exactly why the DOL dropped the probe. San Francisco-based Scale AI declined to comment, while the DOL didn\u2019t respond to a request for comment.\u00a0<\/p>\n There\u2019s several possible reasons, though.\u00a0<\/p>\n Techcrunch event<\/p>\n \n\t\t\t\t\t\t\t\t\tBerkeley, CA<\/span> \t\t\t\t\t\t\t A recent move from the DOL hints at a friendlier approach to classifying workers as contractors, with the agency announcing on May 1<\/a> that it was no longer enforcing, at least for now, a Biden-era rule which made this more difficult.<\/p>\n Scale AI is also seeking favor with the Trump administration. Its CEO Alexandr Wang attended<\/a> Trump\u2019s inauguration (like many other tech CEOs<\/a>) and has published a letter urging Trump<\/a> to \u201cwin the AI war.\u201d\u00a0<\/p>\n Meanwhile, Scale AI\u2019s former managing director Michael Kratsios was confirmed<\/a> in March as the new director of the White House\u2019s Office of Science and Technology Policy.<\/p>\n The position involves advising the President on science and tech issues, and has no oversight over the DOL. Kratsios didn\u2019t immediately respond to a request for comment.\u00a0<\/p>\n<\/div>\n
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