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Scale AI Reaches Settlement in Contractor Lawsuits
Scale AI has agreed to settle four lawsuits filed by former California-based workers who alleged they were illegally classified as contractors rather than employees, according to court documents reviewed by Business Insider. The San Francisco-based company, which plays a crucial role in training artificial intelligence models, reportedly reached settlements with all plaintiffs across the four cases, though specific terms remain undisclosed pending judicial approval.
The resolution comes as Scale AI continues to navigate legal challenges related to its workforce management practices. Sources indicate the settlement represents a significant step for the company, which had appeared “bogged down in litigation related to its core business model” earlier this year, according to the report. A hearing for final settlement approval is scheduled for December.
Allegations of Systematic Worker Misclassification
Between December 2024 and May 2025, former workers Steve McKinney, Amber Rogowicz, and Chloe Agape filed four separate lawsuits in San Francisco Superior Court alleging widespread labor violations. The plaintiffs claimed Scale AI misclassified them as independent contractors, resulting in underpayment and denial of benefits including overtime and sick pay that would have been available to regular employees.
In a class action complaint, McKinney described what he called “Orwellian” monitoring software that tracked mouse activity and web browsing behavior. His lawsuit characterized Scale AI as “the sordid underbelly propping up the generative AI industry” and alleged he wasn’t compensated for mandatory training webinars. Meanwhile, industry developments in cybersecurity continue to evolve alongside these workforce challenges.
Below Minimum Wage Claims and Multiple Lawsuits
Rogowicz’s lawsuit alleged she earned below California‘s minimum wage while working on Scale AI’s primary gig work platform, Outlier. Agape, who filed two separate lawsuits, claimed she was similarly underpaid while working for Scale AI through staffing firm HireArt. These cases highlight ongoing debates about worker classification in the technology sector amid broader environmental and social changes affecting business operations.
The settlements come at a pivotal time for Scale AI, which recently saw former CEO Alexandr Wang depart to lead Meta Platforms‘ superintelligence team following Meta’s blockbuster $14.3 billion investment in the startup. The worker lawsuit allegations predate this significant corporate transaction but raise questions about the human infrastructure supporting AI development.
Ongoing Legal Challenges and Operational Shifts
Despite settling these four cases, Scale AI continues to face legal challenges. Another lawsuit remains active in federal district court, where contractors allege they experienced “severe psychological harm” from exposure to “violent and disturbing content” during data labeling work. Additionally, San Francisco’s Office of Labor Standards Enforcement confirmed it has an ongoing investigation into working conditions for city residents employed by the company.
Internal screenshots obtained by Business Insider indicate Scale AI has stopped accepting gig workers who are California residents since the initial lawsuits were filed. This strategic shift coincides with other operational changes, including recent contractor cuts at the company’s Dallas office as part of a move toward more specialized AI training. These workforce adjustments occur alongside significant market consolidation and acquisition activity in the broader AI infrastructure sector.
Broader Implications for AI Industry Labor Practices
Analysts suggest the Scale AI settlements could have ripple effects across the artificial intelligence industry, where reliance on contract workers for data labeling and model training is widespread. The resolution of these cases comes as technology companies face increasing scrutiny over their classification of workers and compensation practices, particularly in California with its stringent labor laws.
The reported settlements and operational changes at Scale AI highlight the ongoing tension between the rapid growth of AI technologies and the labor models that support them. As the company moves toward more specialized training approaches, industry observers will be watching how these workforce adjustments impact both AI development timelines and the broader ecosystem of workers supporting the industry’s expansion.
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