States Overpaid Unemployment Benefits and Want Money Back

States Overpaid Unemployment Benefits and Want Money Back

Unemployment payments that looked like a lifeline may now, for many, become their ruin.Pandemic Unemployment Assistance, a federal program that covers gig workers, part-time hires, seasonal workers and others who do not qualify for traditional unemployment benefits, has kept millions afloat. The program, established by Congress in March as part of the CARES Act, has provided over $70 billion in relief.But in carrying out the hastily conceived program, states have overpaid hundreds of thousands of workers — often because of administrative errors. Now states are asking for that money back.The notices come out of the blue, with instructions to repay thousands or even tens of thousands of dollars. Those being billed, already living on the edge, are told that their benefits will be reduced to compensate for the errors — or that the state may even put a lien on their home, come after future wages or withhold tax refunds.Many who collected payments are still out of a job, and may have little prospect of getting one. Most had no idea that they were being overpaid.“When somebody gets a bill like this, it completely terrifies them,” said Michele Evermore, a senior policy analyst for the National Employment Law Project, a nonprofit workers’ rights group. Sometimes the letters themselves are in error — citing overpayments when benefits were correctly paid — but either way, she said, the stress “is going to cost people’s lives.”The hastily conceived Pandemic Unemployment Assistance program has presented other troubles, including widespread fraud schemes and challenges with processing. As a result, states only recently had enough resources to start sending out overpayment notices. In the meantime, people have been collecting — and spending — sometimes thousands of dollars in what they understood to be legitimate benefits.Olive Stewart, a 56-year-old immigrant from Jamaica, worked part time as a sous-chef at a cafeteria at a Jewish school in Philadelphia, earning $16 an hour for roughly 25 hours a week. But when the pandemic hit and schools shut down, she was laid off.Ms. Stewart applied for Pandemic Unemployment Assistance and began receiving $234 a week. It was not quite enough to cover the $650 in rent, $200 electric bill and $200 internet bill for the house she shares with her 12-year-old daughter, her retired mother and her sister, who has a disability that prevents her from working. To make ends meet, Ms. Stewart started dipping into her savings.Then, on Oct. 6, she got a notice saying that Pennsylvania’s unemployment insurance vendor, Geographic Solutions, had overpaid her by accident. The overpayment included funds from Pandemic Unemployment Assistance and from a $600 federal supplement to unemployment insurance. In total, she was told, she would have to pay back nearly $8,000.To collect the debt, the state began to withhold more than half of her unemployment payments, leaving her just $105 a week. In early November, the state began taking all of her unemployment benefits, leaving her with no income. She has yet to pay her December rent.“The state should be paying attention to what they are sending out,” Ms. Stewart said. “It was their mistake, and I’ve already spent all the money on food and rent. How am I going to pay it back?”Geographic Solutions made duplicate payments for 30,000 Pennsylvania claims because of a system problem, a $280 million mistake, the State Department of Labor and Industry said. (The company says the problem arose from a one-day error that was immediately reported.) Overpayments can also occur if an applicant makes a mistake on a form, as ProPublica reported, or if a state determines that a recipient should not have been eligible.As of Sept. 30, about 27 percent of those approved for Pandemic Unemployment Assistance in Ohio had been overpaid, about 162,000 claims. In mid-November, the figure in Colorado was about 29,000; in Texas, it was over 41,000.Many states waive overpayments on regular unemployment insurance when no fraud is involved, or when paying the money back would cause someone significant hardship. But the federal rules for Pandemic Unemployment Assistance prohibit forgiveness. Even if the state is at fault, the recipient is on the hook.States often start collecting the overpayment automatically, by withholding a portion — from 30 to 100 percent — of future unemployment benefit payments.Many overpayments arose because state unemployment systems are designed to calculate benefits using W-2 forms, employer records, pay stubs and other documents associated with traditional jobs. But because gig workers and part-timers had different sorts of documentation, states had to adapt quickly to a new method of processing and approving claims.Mistakes in the rollout were inevitable, said Behnaz Mansouri, a senior attorney for the Unemployment Law Project, a nonprofit legal aid organization in Seattle.Business & EconomyUpdated Dec. 11, 2020, 10:11 a.m. ET“For a new system to have such a punitive response when the system itself fails seems overly harsh and draconian,” Ms. Mansouri said.Gina Jones, 29, was furloughed in March from her part-time job at a breakfast bar at a Quality Inn in Spokane, Wash., and began receiving $750 a week from the pandemic program, which allowed her to pay for rent, food and necessities for her two daughters, ages 1 and 5. She was called back to work in July, and now works about 28 hours a week at $13.50 an hour.Then, in mid-November, she checked her unemployment portal online and saw a message that she had been overpaid by nearly $12,500. She fears that the state will start garnishing her wages to collect the debt.“I already used that money to support my family,” Ms. Jones said. “It’s all gone, and I can’t afford to pay it back.”Asking people to pay back unemployment funds can undermine the unemployment system’s goal of stabilizing the economy, said Philip Spesshardt, branch manager for benefits services at the Colorado Division of Unemployment Insurance.If a person’s unemployment checks are reduced each week because of an overpayment, the recipient will have less cash to pay bills and patronize local businesses. “Ultimately that has a cascading effect on many of those small businesses, causing them to close permanently and further adding to the unemployment rate,” Mr. Spesshardt said.While overpayments under the federal program cannot be waived, applicants can appeal demands for reimbursement after the notice is issued. But the time allowed for appeal can be as little as seven days. After that, the process can be slow, confusing and cumbersome.Colorado has taken steps to address the hardships of reimbursement. In October, after the state noted the large number of overpayments, it determined that the application form was confusing because it did not specify whether the person filing was supposed to provide gross or net income. It decided to “write off” cases where the recipients had submitted earnings and tax documentation that would have allowed the correct benefit to be calculated.Asked how the policy squared with the federal prohibition against forgiveness, a spokeswoman for the Colorado Department of Labor and Employment cited “the administrative burden that it would create for us to collect on these overpayments given competing priorities.”House Democrats have called for renewed pandemic relief to include a provision allowing states to waive overpayments when workers cannot repay them without severe hardship. The provision would apply to previous and future cases. A separate House bill, with bipartisan sponsorship, provides for forgiveness if the overpayment was not the recipient’s fault and “such repayment would be contrary to equity and good conscience.”But the possibility of a remedy is not much consolation to those wondering how they will pay rent and put food on the table in the meantime.William and Diana Villafana, 55 and 34, who before the pandemic ran a car rental business in Henderson, Nev., were told in late October that between them, they had been overpaid by more than $7,000. To cover that debt, the state is taking all of Mr. Villafana’s benefits, and giving Ms. Villafana $73 a week. They are using credit cards for their $2,000 monthly rent, as well as utilities, food and other necessities.“I don’t think they understand that unemployment benefits are for survival,” Mr. Villafana said. “Or if they do understand it, they don’t care.”Mr. Villafana worries about how he will continue to provide for their son and daughter, ages 6 and 7. When his daughter recently asked for a paintbrush set and an easel, he didn’t know what to tell her.“It’s kind of hard to explain to them, ‘Look, you can’t do this’ or ‘I can’t buy you that,’” he said. “I have no idea what we’re going to do about Christmas.”Sheelagh McNeill contributed research.


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