'Billions of Dollars'
New Jersey's Labor Commissioner said that's what the state loses to employee misclassification. A similar claim in California was debunked years ago.
Extreme anti-independent contractor policy is rooted in a claim that employee misclassification is such a widespread problem, our government needs to enact unprecedented restrictions on the freedom to be our own bosses.
One way the freelance-busting brigade tries to justify this claim is by saying that employee misclassification is costing government coffers a ton of money. As just one example, take the following claim that New Jersey Labor Commissioner Robert Asaro-Angelo made in written testimony before the state Senate Labor Committee in 2022:
“Misclassification costs New Jersey billions of dollars in critical income tax and benefits contributions, and we’ve clearly seen during the pandemic how vital these benefits are.”
Here is video of Commissioner Asaro-Angelo reading almost verbatim from that testimony at the 2022 Senate Labor Committee hearing:
Billions of dollars is a lot of coin. It means at least $2 billion. To put that figure into perspective, all the tolls paid on the New Jersey Turnpike each year reportedly cover about $2.3 billion of the New Jersey Turnpike Authority’s $2.8 billion budget. A whole NASA mission to Mars apparently costs about $2.7 billion to $2.9 billion.
Indeed, the claim billions of dollars caught my attention in Commissioner Asaro-Angelo’s 2022 testimony for a few reasons—and all of them raise questions about the figure as it relates to employee misclassification.
Reason One: 75 Years is a Long Time
The first reason this billions of dollars claim jumped out at me is that it didn’t match the language Governor Phil Murphy’s administration had previously used to describe the scope of the misclassification problem.
In 2018, Murphy’s executive order that created his Task Force on Employee Misclassification stated that some audits suggested:
“… misclassification deprives New Jersey of over $500 million in tax revenue every year.”
One year later, in 2019, the first page of the Report of Gov. Murphy’s Task Force on Employee Misclassification claimed far smaller figures of, at most, tens of millions of dollars every year. The Murphy Task Force Report stated:
“Based on a 2000 U.S. Department of Labor study of misclassification in construction in New Jersey, the failure to properly classify construction employees resulted in state income taxes not being paid for up to $11 million in off-the-books employment and nearly $9 million from employment of misclassified workers. In addition, the State lost an estimated $3.1 to $6.7 million in foregone unemployment insurance payments in the same year. Because misclassification has grown since 2000, it is clear that New Jersey has lost tens of millions of dollars every year since 2000 in foregone state income taxes, and unemployment and disability contributions due to misclassification in all industries.”
Now, as I’ve written in the past, there’s a lot to discuss about that paragraph in the Murphy Task Force Report. Try to forget for a moment that:
A “2000 U.S. Department of Labor study of misclassification in construction in New Jersey” doesn’t actually seem to exist.
The estimated $3.1 to $6.7 million figure comes from this union-backed research at Stockton University whose own authors noted that “any estimates should not be taken as absolute.”
Evidence the Task Force report provided for the claim that misclassification has grown is based on mischaracterized data too.
Just let all of that go for a hot second. Roll with me on the overall claim in the 2019 Murphy Task Force Report about how big of a problem employee misclassification is. Focus on the report’s statement that New Jersey has lost tens of millions of dollars every year since 2000 because of misclassification in all industries.
Tens of millions of dollars every year is also what Governor Murphy’s press release about the Task Force report stated in 2019. That release says employee misclassification:
“… costs the state tens of millions of dollars a year in lost employment-related tax revenue.”
Tens of millions of dollars a year, based on the (albeit highly questionable) numbers the 2019 Murphy Task Force Report cites from Stockton University, could mean a total of $26.7 million (the provided figures are $11 million + $9 million + $6.7 million). That total amount of $26.7 million would be tens of millions of dollars.
But put a pin in that figure, because just one year after that, there was this press release in 2020 from the Murphy administration. It quotes William Mullen, president of the New Jersey Building and Construction Trades Council, as saying:
“The cost of misclassification is hundreds of millions of dollars.”
Hundreds of millions is obviously not tens of millions.
And then in 2021, the Murphy administration’s Division of Taxation issued this press release that stated:
“According to a 2019 report by the Stockton University William J. Hughes Center for Public Policy, the State did not capture up to $12.1 million in income taxes from off-the-books employment in 2017. The report also projects between $1.1 and $4.4 million in foregone unemployment insurance payments in the same year.”
Again, that Stockton report is actually union-backed research whose own authors noted that “any estimates should not be taken as absolute.” And at most, those quoted figures ($12.1 million + $4.4 million) add up to $16.5 million.
So, to recap:
In 2018, Governor Murphy’s executive order said the State of New Jersey was losing over $500 million a year to employee misclassification
In 2019, the Murphy Task Force Report cited figures totaling $26.7 million, and a state press release noted tens of millions of dollars a year
In 2020, a Murphy administration press release included a claim of hundreds of millions of dollars
In 2021, the Murphy administration’s Division of Taxation cited figures totaling $16.5 million (from the same study that, in 2019, had been quoted totaling $26.7 million, and whose own authors noted that “any estimates should not be taken as absolute”)
In 2022, Labor Commissioner Asaro-Angelo testified that the State of New Jersey is losing billions of dollars
Doing the math on that $26.7 million figure as an example, even if the state had lost that much every year since 2000, it still would not have lost billions of dollars as of today. In fact, the State of New Jersey would have to lose $26.7 million every year for about 75 years in order to lose a total of $2 billion.
Reason Two: ‘We Couldn’t Find Anything’
The second reason this billions of dollars figure seemed notable to me in Commissioner Asaro-Angelo’s 2022 testimony is because a similar claim that Assembly Bill 5 sponsor Lorena Gonzalez made in California about billions of dollars has been debunked.
As The Coast News Group reported in July 2021, in a story written by Karen Anderson, founder of Freelancers Against AB5, “Gonzalez has stated repeatedly that the state of California loses $7 billion a year in payroll tax revenues because of independent contractors.”
But when people tried to figure out where that claim originated, the story explains, this is what happened:
“‘We did a lot of sleuthing and detective work to try to find out where this $7 billion figure comes from,’ said [David] Lewin, a former Columbia University professor and currently the Neil H Jacoby Professor Emeritus of Management, Human Resources, and Organizational Behavior at the UCLA Anderson School of Management.
“‘We talked with all of the agencies in California at every level. We went through a ton of documents. We couldn’t find anything.’
“‘Eventually, we did find what we were looking for. It turns out that in 2012, a report issued by an Obama Administration commission headed by Joe Biden stated that the nation, not California alone, loses $7 billion because contractors don’t pay payroll taxes—not annually, but rather over a 10-year period.’”
The Coast News Group story goes on to state:
“The $7 billion estimate continues to be promoted to this day, not just in California, but nationally.
“On June 16, 2021, the Economic Policy Institute published a paper entitled ‘Misclassification, the ABC Test, and Employee Status—The California Experience and its Relevance to Current Policy Debates,’ written by former AFL-CIO General Counsel Lynn Rhinehart.
“Recently appointed to the Biden Administration’s labor-policy team, Rhinehart repeats the same bogus $7 billion number from California in lost payroll tax revenue and cites AB 5 itself (aka Lorena Gonzalez) as the source.”
It’s unsurprising that the Economic Policy Institute pops up in this context. The multimillion-dollar nonprofit’s current board chairwoman is AFL-CIO President Liz Shuler. Both organizations have been leading voices in the push for freelance busting nationwide for years now, and the AFL-CIO and the Economic Policy institute each filed public comments urging New Jersey’s Department of Labor & Workforce Development to proceed with its proposed independent-contractor rule.
Notable fact: The Economic Policy Institute’s public comment in New Jersey cites the nonprofit’s own 2025 research that states “there is no private or public data on workers misclassified as independent contractors.”
Reason Three: $84 Million is Not $474 Million
The third reason that Commissioner Asaro-Angelo’s claim about billions of dollars caused me to raise an eyebrow is that in April 2025, New Jersey’s Labor Department issued a press release that stated since September 2021, a first-of-its-kind misclassification penalty had assessed “more than $10.6 million to be paid directly to over 12,500 misclassified workers.”
Those figures changed slightly in a July 2025 press release from New Jersey’s Labor Department that stated the first-of-its-kind misclassification penalty had “assessed nearly $11 million to be paid directly to approximately 13,000 misclassified workers since implementation in September 2021.”
While it is of course a good thing for these misclassified employees to receive compensation for being wronged, those figures are paltry compared to the billions of dollars claim. And 13,000 misclassified employees hardly indicates a widespread problem in a state with an estimated 1.7 million independent contractors.
Now, looking beyond the first-of-its-kind penalty, that same July 2025 press release from New Jersey’s Labor Department also states:
“In 2018, Department of Labor audits revealed over 12,300 cases of misclassified workers, resulting in over $460 million in underreported gross wages and $14 million in lost state unemployment and temporary disability contributions. These audits only covered 1 percent of businesses, indicating the true cost of misclassification is substantially higher.
“Since then, NJDOL has collected approximately $84 million in wage assessments and penalties since 2018, much of which went back into the hands of workers. In 2024, that number was $19 million. This year, NJDOL has assessed $37 million in back wages for nearly 8,500 workers.”
Those are bigger financial figures than the ones the Labor Department provided regarding its first-of-its-kind penalty, of course, but we’re still at tens of millions of dollars ($37 million) being assessed during 2025. We’re also at tens of millions ($84 million) being collected since 2018. That’s not billions of dollars either.
And look again at that press release from this past July, because it also reveals a pretty big spread between what the Labor Department initially claimed its 2018 audits calculated regarding employee misclassification—$474 million ($460 million + $14 million)—and the $84 million the Department has actually collected since then. The spread between $474 million and $84 million means the State of New Jersey collected 17% of the original amount that it claimed was being lost.
This 17% figure made me curious about yet another press release New Jersey’s Labor Department issued, this one in 2022. That’s when the State of New Jersey settled a misclassification action against the rideshare company Uber for $100 million.
You may remember that $100 million collection. It was a big deal. The press release noted that it was “the largest such payment ever received in New Jersey.” There were headlines nationwide. CNN and Reuters were among the news outlets that covered it.
But as it turns out, when you go back and read the press release, it makes clear that $100 million was just 15% of what the State of New Jersey originally claimed that Uber and its subsidiary Rasier LLC owed.
Here is that press release, which states:
“In the audit of Uber and Rasier, NJDOL examined the companies’ books over a five-year period, 2014-2018. They were originally assessed a combined $523 million in past-due contributions plus penalties and interest of up to $119 million, but those figures were rough estimates based on incomplete data, as allowed by law, because the companies did not cooperate and share their complete payroll records during the audit. The companies contested the Department’s findings, and the case was transferred to New Jersey’s Office of Administrative Law. The companies have now paid a revised assessment of $100 million – based on additional information from Uber and Rasier, which was more complete and more accurate than the initial data provided.”
Sure, $100 million is a big haul of Benjamins, but it’s not the $642 million ($523 million + $119 million) that was originally claimed regarding Uber (which never conceded misclassification at all).
And even if the State of New Jersey were to collect a historic-size $100 million payment every year, it would still take 20 years to get to billions of dollars.
I’ll leave you with this last bit to consider, because Gonzalez and Asaro-Angelo are not the only people who have used the word billions. At the federal level, U.S. Congressman Bobby Scott of Virginia claimed in a January 2024 press release that misclassification was a nearly $4 billion per year problem—citing this research from, you guessed it, the Economic Policy Institute.
But in December 2024, the U.S. Department of Labor announced that since January 2021—after nearly four full years of the Biden administration prioritizing the issue of employee misclassification nationwide—it had recovered only about $41 million in back wages for some 28,000 workers.
With an average of about $10 million per year being recovered, it would take 400 years to get to $4 billion.