You have probably graded a chatbot. An answer appears, a thumbs-up and a thumbs-down sit under it, and you click one or you don't. It takes a second, and you weren't paid for it.
Long before that answer reached you, people were paid to write the prompts, improve the answers and rank them. The training papers of four big labs all describe them. OpenAI's 2022 InstructGPT paper credits a team of about 40 contractors "on Upwork and through ScaleAI." Anthropic's that year describes crowdworkers hired on MTurk and Upwork. Meta's Llama 2 paper had annotators write a prompt, then choose between two sampled model responses. Google DeepMind's Sparrow paper used paid annotators to assess model responses.
Scale AI runs a platform for this work, Outlier, and its FAQ puts the job plainly: you "may generate prompts, rank AI outputs, improve model responses." Pay is weekly, rates "vary by expertise, project complexity, and location," there are "no minimum hour requirements," and the classification comes up front: "You'll work as an independent contractor/freelancer, not as an employee of Outlier."
A court notice in San Francisco has its own names for these people: "Generative AI Annotators, Prompt Engineers, Subject Matter Experts, Contributors, or similar positions." Those who did that work on Scale's platforms, Outlier and Remotasks among them, while living in California between December 10, 2020 and February 28, 2026 are the class in a proposed $12.5 million settlement of suits accusing the companies of misclassifying them as independent contractors. If a judge approves it, they would be paid, and none of the contractors' money would count as wages.
If you rated answers on Scale's platforms from California, this is about your money. If you have only ever clicked a thumb, it is about how the thing you clicked was made — and who answers for the people who made it.
Who gets what, if the judge says yes?
"Scale AI" is shorthand. The defendants are Scale AI, Inc.; Smart Ecosystem, the subsidiary that does business as Outlier; HireArt, which placed some workers at Scale; and four individuals, including Alexandr Wang. The class covers only people who did the work "while residing in the State of California," plus HireArt's placements who lived there. By the defendants' estimate, that is about 15,333 people who worked as contractors, with roughly 118,844 paid workweeks between them, plus about 144 placements. Outlier, for comparison, claims "900K+" trainers.
Class counsel may ask for up to one-third of the $12.5 million ($4,166,666.67) in fees. Take out expenses, payments to the named plaintiffs and the administrator, and penalties under a state labor law (65% of them to the state), and an estimated $7,543,333.33 would be left, shared out by paid workweek. My arithmetic on the defendants' estimates, not a figure from the notice: roughly $63 per paid week, or about $490 per contractor on average, and the average contractor was paid for work in fewer than eight weeks. Treat those as rough: the counts date from mid-2025, and real checks would depend on your weeks and on what the judge approves.
How would the money be booked? Both sides are asking the court to approve "an allocation of 100% of the Individual Class Payment to non-wages" for the contractors, reported on an IRS Form 1099 "if required by law." HireArt's placements would get 10% of theirs as wages, on a W-2. The defendants would owe employer-side taxes only on wages — so on none of the contractors' money. The deal draws the very line the suits attacked. To be fair, a 1099 is a reporting form, not a verdict: California's Labor Commissioner says being paid on one "does not determine employment status."
Nothing has been decided about who was right. The companies "strongly deny violating any laws" and maintain "that Contributors are independent contractors," and the court "has made no determination" on the merits. Granting preliminary approval on May 7, 2026, Judge Ethan P. Schulman called the settlement "a compromise of the Parties' respective positions rather than the result of a finding of liability at trial."
What would class members give up? All claims from the class period "that were asserted, or reasonably could have been asserted, based on the facts, allegations and/or claims" in the suits, including "Willful Misclassification of an Employee as an Independent Contractor," against the defendants and "Released Parties" that include their "customers (only as it pertains to work performed for the customers through Defendants), investors." (Yes, investors.) The notice names none of them.
What wouldn't change? McKinney's original complaint sought "changes to Scale's worker classification model," SFGATE reported. The agreement — "the entire agreement," by its own terms — contains no term that reclassifies anyone or changes how the platforms pay. Outlier's terms, effective May 11, 2026 (four days after preliminary approval), still say you are "an independent contractor of the Company" and that you "assume all liability for proper classification."
As of October 13, 2026, the settlement website still says the court "has not yet decided whether to grant final approval", and the hearing is set for October 30, a date the notice warns could move. The defendants may also withdraw if more than 50 people opted out, a count that isn't public.
When the timesheet becomes the evidence
On September 29, Bloomberg Law counted at least five misclassification suits from AI trainers pending in California courts and one in Texas. Under California's ABC test, a worker is presumed to be an employee unless the company shows, among other things, that the person "is free from control and direction." So plaintiffs are turning the industry's own software around, pointing to continuous monitoring, automated scheduling and performance metrics as proof they lacked a contractor's independence.
Mercor, which staffs AI trainers, tells its contractors, "You are paid weekly based on the hours you work, which are tracked using Insightful." A federal suit in Texas, White v. Mercor, says it misclassified more than 30,000 workers, and, in a management-side law blog's summary (the author's firm, Littler Mendelson, represents HireArt in Scale's case), alleges that Mercor "fails to pay experts for work completed outside of the tracking app." Mercor asked the judge in June to send the case to arbitration; White amended her complaint about two weeks later, and as of October 13, 2026, the public docket shows no arbitration ruling.
A California suit, Cox v. Mercor, names OpenAI as a defendant; a legal-data site's summary says the suit alleges Mercor and OpenAI jointly employ and control the workers. It is the only one of these suits I could find that names a lab, and its current status is unclear.
A check now, or a fight in arbitration?
Before deciding that $490 is too little, look at what the workers faced instead.
No court ever certified a class to litigate these claims, and the companies maintain the claims are "subject to binding arbitration agreements." Outlier's current terms send U.S. claims to individual arbitration unless you opt out. Against that, a fund that can't revert to the companies and pays out without a claim form is a real result, and the judge found that the deal "appears at this stage to be fair, reasonable, and adequate."
The companies' case on the merits deserves a hearing too. Scale has said that "Hundreds of thousands of people use our platform to showcase their skills and earn extra money," and that it works to make its pay meet or beat local living wage standards. (That average of under eight paid weeks is a number both sides could use.) And the federal Labor Department dropped its investigation of Scale in May 2025; "It's not clear exactly why," TechCrunch reported.
In short, the case for the deal is strong: money now, for people who might otherwise have faced one-by-one arbitration over small sums. But it settles what one California group is owed for one stretch of time, and it leaves the question the suits were filed over — employee or contractor — where it was, for the class and for everyone who signed up after February 28, 2026.
Kenya took the question to the top of the chain
What happens when outsourced workers go after the company at the top? Kenya has been finding out in open court.
The best-known cases involve content moderation, not AI training. Facebook moderators who worked through an outsourcing firm, Sama, sued Meta and its contractors in Kenya's "Employment and Labour Relations Court," testing, in TIME's framing, whether a Big Tech company can be sued in Kenya for alleged abuses at an outsourcing company. Both companies deny wrongdoing, and Meta's companies argued they were foreign and "not carrying on business in Kenya." On September 20, 2024, the Court of Appeal dismissed their appeals: whether they employed the workers "is an issue of fact which ought to be reserved for the hearing of the petition." The same day, it set aside in its entirety a 2023 ruling that had treated the Meta companies "as the primary and principal employers of the Content Moderators." So the cases can be heard, and who the employer was remains open. (Toussaint Nothias of NYU says the no-business-here argument shows how tech companies can be "both fully present and strategically absent.") On September 29, 2026, Meta and two companies linked to its moderation work got 21 days to respond in one case, and the parties are due back on November 9 for further directions.
Kenya's politicians have pulled the other way. Opponents argue that holding Big Tech liable for what happens at its contractors would make Kenya less attractive to foreign firms. In December 2024, President William Ruto said "we have changed the law, so nobody will take you to court again on any matter." TIME reported that the bill would not do that, and that its text "instead explicitly prevents outsourcing companies' clients" from being drawn into such suits. (Meta said it "has not advocated for changes to these laws.") The bill would make the outsourcing firm "responsible for any claim raised by an employee." It passed the Senate and was amended by the National Assembly, and the Senate's motion to consider those amendments was deferred on October 6 and again on October 8, when the Senate adjourned until November 3. As of October 13, 2026, it is not law.
AI-training work has its own record. In 2023, Kenyans who had labeled data for OpenAI through Sama filed a petition before the country's lawmakers; no outcome has surfaced. TIME had put their take-home pay at between around $1.32 and $2 per hour, against the $12.50 hourly rate in OpenAI's contracts with Sama. Sama said that rate covered all costs and that workers could earn between $1.46 and $3.74 an hour after taxes; Kenya has no universal minimum wage (a Nairobi receptionist's was $1.52 an hour at the time). OpenAI called the workers' efforts "immensely valuable." Scale's own Remotasks paid Kenyans per task, and workers told 60 Minutes they sometimes went unpaid; Scale said work "in line with our community guidelines was paid out." Then, giving no reason, Remotasks told Kenyan users it was "discontinuing operations in your current location," effective March 8, 2024. 60 Minutes placed the exit "as workers started complaining publicly"; local reporters floated other potential reasons, such as account selling. Kenyan data labelers have also formed the Data Labelers Association to organize workers to fight for better pay.
In Kenya, then, whether the company at the top answers for outsourced workers is being argued in open court, and so far Meta is still in the case. In California, the McKinney release, if approved, would take that question off the table by contract for one class, releasing the defendants' customers (for this work) and investors. The counterpoints are real: jurisdiction is not liability, Kenya's Senate passed a bill TIME read as shielding clients, pay looks different against local wages, and American workers can name the client too, as Cox does.
The next settlement, imagined
This part is my extrapolation from documents on file, not a forecast about any company.
Say you sign up in 2027 to write hard questions in your field and grade a model's answers. You click to accept terms that send any dispute to a private arbitrator unless you email an opt-out within 30 days. (Would you think to?) The tracking app that sets your pay becomes — the day you claim you were an employee — the best evidence on both sides: of how closely you were managed, and of how much you worked.
Now multiply you by thousands. If few opt out, the next wage fight may be no class action at all, but a scatter of private arbitrations that never add up to a public number. If a class case does get through, McKinney's release could become the template, letting go of the customers whose models the work was for. And a rater doing the same task for the same model from Nairobi, through an outsourcer, might be able to name the lab in court, or might be told only the outsourcer answers, depending on a Senate vote and a Kenyan trial yet to decide who the employer was. One model, two countries — two answers to who is responsible.
Where the lawyers on both sides agree
In Bloomberg's reporting, lawyers on both sides look past the legal test to the evidence, and the workers' side to the forum too. Shannon Liss-Riordan, a plaintiffs' lawyer, says "defendants became very proficient at blocking these decisions from ever reaching in the courts through their use of arbitration clauses." Miriam Cherry of St. John's University expects the companies' data to be "one of the flash points in these misclassification suits."
Paul DeCamp, a management-side lawyer who was the Labor Department's wage and hour chief under President George W. Bush, says the cases won't necessarily be clear-cut. The question, as he frames it, is whether a worker sees this as a job or as a way to "receive what amounts to pizza money or an honorarium, as opposed to making a living." The tracking data, he told Bloomberg, could cut both ways if there's evidence plaintiffs overstated their work and hours. Orly Lobel of the University of San Diego names the question underneath: "who is actually controlling and economically organizing the work?"
The think tanks split along familiar lines. The labor-aligned Economic Policy Institute says misclassified workers are "stripped of minimum wage and overtime protections." A working paper from the libertarian-leaning Mercatus Center found that after AB5, the law behind California's ABC test, self-employment decreased "by 10.5 percent on average for affected occupations" (an association, not proof the law caused it).
What does this mean for you?
If you did Outlier or Remotasks work (or a HireArt placement at Scale) while living in California between December 10, 2020 and February 28, 2026, you're probably in the class. There's no claim form; the September 3 deadlines to opt out, object in writing or dispute your weeks have passed. If you didn't opt out, the notice says you can still object at the hearing, in person or by video.
Mark October 30, 2026, 9:00 a.m., Department 304, 400 McAllister St., San Francisco. Check the settlement website first, since the date can move, and keep your address current with the administrator, Simpluris, at (833) 234-6281.
Cash the check before it expires; the void date will be at least 180 days after mailing. You're bound by the release either way, though it reaches only claims from the class period that grow out of the suits' allegations, so work after February 28, 2026 falls outside it.
If the allocation is approved, a contractor's share would be reported on a Form 1099 "if required by law," not a W-2, so plan for the tax: the notice says the taxes are yours. Ask a tax professional.
Wherever you live, check which tax form you get and whether every hour is paid, including onboarding, instructions, meetings and time outside a tracking app. Keep your own records.
In California, you can file a wage claim with the Labor Commissioner, report violations affecting a group of workers, or submit a "Request for Preliminary Worker Classification." Retaliation is prohibited, and state law can treat you as an employee even when federal law doesn't.
Anywhere in the U.S., the IRS's control test applies even if the worker can choose to work remotely. You can ask the agency to rule on your status with Form SS-8 (it may take at least six months), and if you qualify, Form 8919 lets a misclassified worker report the employee's share of Social Security and Medicare tax. Both concern platform pay, not the settlement check.
Read the arbitration clause before you click accept. Outlier's lets you opt out within 30 days by emailing a notice yourself, without retaliation, though opting out doesn't undo earlier agreements.
The lesson, as I see it
A settlement puts a price on a question without answering it. This one would pay about 15,000 Californians a few hundred dollars each on average — none of it as wages — and release the companies, and their customers for this work, from misclassification claims.
What should you watch? October 30, and whether the motion for final approval appears on the settlement site before it. Whether White's case goes to arbitration. In Nairobi, the November 9 directions, and the Senate's deferred motion once senators return on November 3.
My vote? If a platform's software can log every minute of the work, the platform can pay for every minute of it, and the next settlement in this field should say in writing what the workers are going forward, not only what they're owed for the past. The people who taught chatbots to answer deserve a straight answer of their own.
Anyone who grades a machine's answers for a living deserves a plain reading of what they signed. Helping the public read AI's fine print is the point of the HAIA Foundation; for the next close reading, subscribe.