Labor Department investigates $14 billion AI data labeling giant Scale AI over pay practices

U.S. labor regulators are investigating Scale AI, a critical player in the data labeling industry, for potential labor violations. The investigation, ongoing for nearly a year, examines whether the $14 billion startup backed by tech giants like Nvidia and Meta is complying with fair pay practices and working conditions. This probe highlights the growing regulatory scrutiny of AI infrastructure companies that power the development of advanced AI systems like ChatGPT.

The big picture: Scale AI, valued at $14 billion, provides essential data labeling services that train sophisticated AI tools, including those developed by its clients OpenAI, Microsoft, and Morgan Stanley.

• The company operates a platform connecting AI researchers across more than 9,000 cities and towns, making it a critical but often overlooked component of the AI development ecosystem.
• Founded in 2016, Scale AI has attracted investment from major tech companies including Nvidia, Amazon, and Meta, highlighting its strategic importance in the AI supply chain.

Key details: The Department of Labor investigation into Scale AI began nearly a year ago during the Biden administration, focusing on compliance with the Fair Labor Standards Act.

• The probe specifically examines whether Scale AI’s business practices adhere to fair pay regulations and maintain appropriate working conditions for its contributors.
• Scale AI has been cooperating with investigators over the past year to explain its business model and contextualize its role in the emerging AI industry.

What they’re saying: Scale AI maintains that its contributor payment system functions effectively and that worker feedback has been predominantly positive.

• “The feedback we get from contributors is overwhelmingly positive, and we have dedicated teams to ensure people are paid fairly and feel supported,” a company spokesperson stated.
• The company claims it makes nearly all contributor payments on time and resolves 90% of payment-related inquiries within three days.

Why this matters: The investigation underscores growing regulatory interest in the labor practices behind AI development, particularly for companies that rely on distributed workforces to label the massive datasets required for training large language models.

• As AI becomes increasingly integrated into business operations and consumer products, the labor conditions of workers who make these systems possible face heightened scrutiny.
• The outcome could establish important precedents for how data labeling companies structure their contributor relationships and compensation models.