The city of San Francisco is investigating Scale AI over its labor practices, a Scale AI spokesperson confirmed to Business Insider.

Scale AI, which is based in San Francisco, relies heavily on a vast army of people it considers contractors to train tech companies’ latest artificial intelligence models. Meta bought almost half of Scale AI for $14 billion in a blockbuster AI deal this summer.

The city’s investigation is being led by its Office of Labor Standards Enforcement (OLSE), which oversees sick leave, minimum wage, overtime pay, and other regulations for San Francisco workers.

Scale AI spokesperson Natalia Montalvo told Business Insider that the startup is cooperating with the OLSE to provide the information they need and that Scale AI is fully compliant with local laws and regulations.

San Francisco’s investigation into Scale AI is limited to city residents who worked for the startup — including remotely — over the last three years, according to a now-deleted notice posted by Maura Prendiville, a compliance officer at the OLSE, in a subreddit for Outlier AI, a gig work platform run by Scale AI.

While the notice didn’t specify what types of labor practices the city is investigating, it did mention that investigators are looking to speak to people who worked for Scale AI as “taskers” and “freelancers” rather than the startup’s full-time employees.

The investigation’s existence doesn’t mean Scale AI has broken the law, and the city could find it in favor of Scale AI — or drop its probe altogether.

The OLSE declined to answer further questions about the probe, citing its policy of not commenting on ongoing investigations. The agency has the authority to levy fines for labor violations.

In the Reddit post, Prendiville specified that San Francisco is seeking to speak to people who worked for Scale AI through Outlier AI and Smart Ecosystem, another Scale AI platform. She also wrote that she seeks to speak with people who worked for Scale AI through HireArt, a third-party hiring agency, and the gig work marketplace Upwork.

Upwork said it has not been contacted by OLSE.

“Worker classification and compliance with labor regulations are ultimately the responsibility of the hiring business,” an Upwork spokesperson said. “As a general matter, Upwork does not play a role in those determinations.”

Montalvo, the Scale AI spokesperson, said that the feedback the company gets from its contributors is “overwhelmingly positive.”

“Our dedicated teams work hard to ensure contributors are paid fairly, feel supported, and can access the flexible earning opportunities they value,” she said.

It’s not the first time Scale AI has been investigated by labor regulators. It was also the subject of a federal Department of Labor investigation that was dropped this summer, TechCrunch reported.

Some Scale AI workers have previously alleged that the company illegally underpaid them, denied them benefits like sick leave, and misclassified them as contractors in two lawsuits filed over the past year in San Francisco’s superior court.

Meta declined to comment. HireArt didn’t respond to a request for comment.

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The AI boom has lit a fuse under San Francisco’s housing market, with prices and rents inflamed by a tech workforce increasingly returning to the office, and as the AI talent wars push salaries to dizzying highs.

Tech workers are flocking to the Bay Area to work at OpenAI, Anthropic, and Nvidia after the region was dealt a massive blow during the COVID-19 pandemic. Real estate agents say RTO is fueling the resurgence, with AI being particularly synonymous with in-person work and hardcore culture.

What’s more, tech workers, especially those working in AI, are commanding massive salaries, including multimillion-dollar compensation packages.

Read more about this real estate boom on Business Insider: https://lnkd.in/eXhNxYbY

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