The Minnesota Lingo

At a recent hearing, the term "misclassification fraud" was hammered into the public record, along with yet another claim about "billions" of dollars.

The State of Minnesota has been all over the national news in recent months in connection with the word “fraud.” Stories have emerged about fraud in programs intended to feed schoolkids, as well as programs involving autism therapy, home health assistance and more. About a month ago, YouTuber Nick Shirley testified before Congress about his viral report on Minnesota day-care center fraud.

And now, the freelance-busting brigade is hopping on that linguistic bandwagon, repeatedly and purposefully describing employee misclassification as yet another kind of fraud—“misclassification fraud”—that the State of Minnesota needs to address.

Photo by Markus Winkler on Unsplash

On March 5, a hearing was held before the Minnesota House of Representatives Committee on Workforce, Labor, and Economic Development Finance and Policy. The witness list for this hearing was heavily stacked against independent contractors, with the following individuals among those invited to testify:

• Lee Atakpu and Carin Mrotz from Minnesota’s Office of the Attorney General, which ran what experienced business leaders reportedly called a “sham task force” on employee misclassification—a task force whose SEIU member, when challenged by yours truly about the need to protect independent contractors from overly restrictive policymaking, said that union busting is real, but freelance busting is “bullshit”

• Kevin Pranis of LIUNA Minnesota and North Dakota, with LIUNA being among the unions pushing for harsh restrictions on independent contractors nationwide

• Ben Baglio of the Minnesota Nurses Association, who presented research by Katie J. Wells, a Ph.D. in the field of geography who testified before Congress that independent contractors should be reclassified as employees against their will

• Melissa Hysing of the AFL-CIO, a longtime and major driver of freelance busting nationwide

• Aaron Rosenthal of North Star Policy Action, a union-backed think tank whose founders include the Minnesota AFL-CIO, LIUNA Minnesota and IBEW Local 292 (the IBEW is also pushing freelance busting nationwide)

Indeed, this Minnesota hearing was yet another example of what I described in my recent “Extremism vs. Entrepreneurism” report like this:

“Many of these same groups that descended upon New Jersey in 2025 had spent years issuing research reports, filing public comments and testifying against independent contracting not only in the Garden State, but also in other states and in Washington, D.C. They’re like a traveling road show from the days of the Old West, only instead of pushing snake oil as medicine for personal ailments, they often push mischaracterized data, antiquated research and limited anecdotes, urging policymakers to believe there is a problem of rampant employee misclassification, and then making widespread independent-contractor restrictions seem like the cure.”

The gang was all in Minnesota on March 5, where Atakpu kicked off the witness testimony by uttering the word “fraud” no less than a half dozen times in his first two minutes of being at the mic:

Now, to be sure, this isn’t the first time we’ve heard the term “misclassification fraud.” Groups like the Economic Policy Institute (whose chairwoman is the head of the AFL-CIO) have been using this term on occasion for years.

But what Atakpu did at this Minnesota hearing was different. The repetition of the term so many times, in so few minutes, was planned. You can see him reading from prepared notes. Repetition of this nature is a technique that is intended to frame a narrative.

Trust me: As a journalist, I’ve been interviewing people for more than 30 years. Atakpu’s repetitive testiomony is how it sounds when someone is trying to get me to write what they want, exactly the way they want it written.

To a layman—or, say, to a legislator who doesn’t know any better about attempts to impose overly restrictive independent-contractor policy that threatens our fundamental freedom to earn a living—“misclassification fraud” would be a whole lot easier to understand than “employee misclassification.”

And given everything else that’s going on with fraud in the State of Minnesota right now, it just might be the perfect time to try and attack independent contracting by using that particular language.

Notable Construction Detail

Another witness who included the word “fraud” numerous times in his testimony was Pranis, from LIUNA:

Interestingly, though, Pranis also said something that I haven’t heard before with regard to the construction industry.

He testified that employee misclassification is only a significant problem in specific segments of the construction industry, not across the industry as a whole:

That’s notable testimony coming out of Minnesota, especially when it’s paired with what we can see in the public comments that are now on file with New Jersey’s Department of Labor & Workforce Development. Those public comments, and their source material, reveal what I describe in my “Extremism vs. Entrepreneurism” report like this:

“It is possible, based on underlying research from several public comments filed in support of the proposed rulemaking, that undocumented immigration is a key reason for this disconnect between a perceived misclassification problem and a more widespread, different problem that requires targeted focus in the construction industry. Per the aforementioned ICERES study, researchers commissioned by the carpenters and joiners union found that they could not distinguish between misclassified employees and off-the-books cash schemes. Significantly, those researchers strongly indicated that off-the-books schemes appeared to be the larger problem in construction. That finding matches underlying research from the supportive public comment filed by the nonprofit Dēmos, which documented a connection between undocumented immigrants, off-the-books cash schemes and construction.

“Indeed, even going back a quarter century to the federal ‘Planmatics’ report that numerous supportive public comments cited as underlying research, findings have noted a correlation between undocumented immigrants and construction-industry problems in New Jersey. That federal report specifically describes immigrants from Poland, Russia and other Eastern Bloc nations, as well as Hispanic immigrants, and their involvement in the Garden State’s construction-industry problems.”

If you combine Pranis’ testimony in Minnesota with information from New Jersey’s public comments, you can see a clear, possible path to targeted enforcement that regulators might want to consider in certain segments of the construction industry, specifically with an eye toward off-the-books cash schemes that involve undocumented immigrants.

That would seem to make a whole lot more sense than continuing down the path of trying to impose regulatory language so strict that attorneys say it now poses an existential threat to independent work of all kinds. Especially when everyone on all sides of this policy debate agrees that the vast majority of independent contractors across hundreds of professions aren’t misclassified at all.

‘Over $8 Billion Each Year’

Yet another witness who incorporated the term “fraud” into his testimony was Rosenthal, from the union-backed think tank North Star Policy Action. And he packed a whole lot of the freelance-busting brigade’s other greatest hits into just a few short sentences, too.

His testimony made clear not only that the unionists are going to keep targeting independent contractors across all industries—including high-earning industries like finance—but also that the unionists are going to continue to claim that their estimates show misclassification is a problem that costs “billions” of dollars:

That’s a big claim, $8 billion each year. Especially since for years now, we’ve seen similar claims at the state and federal levels that didn’t pan out.

In California, as reported by Karen Anderson for The Coast News Group, Assemblywoman Lorena Gonzalez said repeatedly while pushing anti-independent contractor policy that the State of California loses $7 billion a year in payroll tax revenues because of independent contractors. The Coast News Group reported:

“As it turns out, her claim is without evidence and has no basis in fact, according to William Hamm, managing director of Berkeley Research Group’s San Francisco Bay Area office. His team helped lead a study beginning in 2019 about the fiscal impact of independent contracting in California.

“‘Her claim is utter nonsense,’ said Hamm, former head of the non-partisan Legislative Analyst’s Office in California. ‘Anyone who cites this $7 billion number is doing so knowing full well that it is completely bogus.’”

Similarly, in New Jersey, as I documented in my “Extremism vs. Entrepreneurism” report, the former administration’s labor commissioner, Robert Asaro-Angelo, testified that “misclassification costs New Jersey billions of dollars in critical income tax and benefits contributions.”

There is strong evidence from Asaro-Angelo’s own Labor Department press releases, after years of focus on this policy area, that the figure is much smaller.

At the federal level, too, we have seen sitting lawmakers such as U.S. Representative Bobby Scott, D-Virginia, claim that misclassification is a problem that costs workers billions of dollars a year. But the Biden administration, after years of focusing on this purported wide-scale problem, didn’t find nearly that much. Instead, the amount the federal Department of Labor recovered was only about $41 million.

And notably, Congressman Scott’s claim was “nearly $4 billion” each year being lost to misclassification nationwide.

That’s only half of the $8 billion that Rosenthal just claimed is being lost in Minnesota alone.

41% of Their Time

The last clip from the hearing that I’ll share here is one where Minnesota Rep. Isaac Schultz, a Republican, asked how many misclassification cases the Attorney General’s Office has actually handled, given the allegations about how widespread the nature of the problem is.

As you can see for yourself here, Atakpu didn’t answer the question. Instead, he testified that the Attorney General’s Office had spent 41% of its time on the issue of employee misclassification:

What did we learn in that exchange? That instead of focusing more resources on what has turned out to be widespread fraud in programs intended to feed schoolkids, as well as programs involving autism therapy, home health assistance and more, the Office of Minnesota’s Attorney General has been spending 41% of its time on targeting independent contracting.

One could argue that’s evidence of government priorities being misaligned with reality. We’re also seeing something like that here in my home state of New Jersey, where 99% of the public is opposed to what our state government is trying to do with independent-contractor policy.

Here in New Jersey, too, a lawmaker at a hearing questioned our then-Labor Commissioner about why so few cases of employee misclassification were actually being addressed after all the allegations that had been made about the widespread nature of the problem.

It’s enough to make a person wonder if some kind of fraud might be taking place.