Unemployment payments that looked like a lifeline could now become their ruin for many.
Pandemic Unemployment Assistance, a federal program that covers gig workers, part-time workers, seasonal workers, and others who are not eligible for traditional unemployment benefits, has kept millions afloat. Established by Congress in March under the CARES bill, the program has provided over $ 70 billion in aid.
In implementing the hastily designed program, states overpaid hundreds of thousands of workers – often due to administrative errors. Now the states are demanding this money back.
The notices come out of the blue and contain instructions on how to repay thousands or even tens of thousands of dollars. Those who are billed and already living on the fringes are told that their benefits will be cut to make up for the errors – or that the state can even put a lien on their home, come after future wages, or withhold tax refunds.
Many who have collected payments are still unemployed and may have little chance of getting one. Most of them had no idea they were being overpaid.
“When someone receives a bill like this, it terrifies them,” said Michele Evermore, senior policy analyst for the National Employment Law Project, a not-for-profit labor rights group. Sometimes the letters themselves are flawed – citing overpayments when the benefits are properly paid – but either way, she said, the stress will “cost people’s lives”.
The hastily designed Pandemic Unemployment Assistance program has raised other issues, including widespread fraud programs and processing challenges. As a result, states only recently had sufficient resources to send out overpayment notifications. In the meantime, people have sometimes raised thousands of dollars and spent what they have understood to be legitimate benefits.
Olive Stewart, a 56-year-old immigrant from Jamaica, worked part-time as a sous-chef in a cafeteria at a Jewish school in Philadelphia, earning about $ 16 an hour for about 25 hours a week. But when the pandemic hit and schools closed, she was fired.
Ms. Stewart applied for pandemic unemployment benefits and was paid $ 234 per week. It wasn’t enough to cover the rent of $ 650, utility bill of $ 200, and internet bill of $ 200 for the house she shares with her 12-year-old daughter, retired mother, and sister who has a disability that prevents them from working. To make ends meet, Ms. Stewart began delving into her savings.
Then on October 6, she received a message that Pennsylvania unemployment insurance company Geographic Solutions had accidentally overpaid her. The overpayment included funds from the Pandemic Unemployment Assistance and a $ 600 grant to unemployment insurance. In total, she was told, she would have to repay nearly $ 8,000.
To collect the debt, the state began withholding more than half of her unemployment benefits, leaving her with only $ 105 a week. In early November, the state began to take all of her unemployment benefits so she had no income. She has not yet paid her December rent.
“The state should be careful about what they send out,” Ms. Stewart said. “It was her mistake, and I’ve already spent all the money on food and rent. How am I supposed to pay it back? “
Geographic Solutions made double payments for 30,000 claims in Pennsylvania because of a system problem, a $ 280 million error, the State Department of Labor and Industry said. (The company states the problem was due to a one-day error that was reported immediately.) Overpayments can also occur when a claimant makes a mistake on a form, as reported by ProPublica, or when a state determines that a recipient is shouldn’t be justified.
By September 30, approximately 27 percent of those eligible for Ohio Pandemic Unemployment Assistance had been overpaid, approximately 162,000 claims. In mid-November there were about 29,000 in Colorado; in Texas there were over 41,000.
Many states forego regular unemployment insurance overpayments if there is no fraud or if someone would have significant difficulty paying back the money. However, federal regulations on pandemic unemployment assistance prohibit forgiveness. Even if the status is incorrect, the recipient is on the hook.
States often automatically begin collecting the overpayment by withholding a portion – from 30 to 100 percent – of future unemployment benefit payments.
Many overpayments have arisen because state unemployment schemes are designed to calculate benefits using W-2 forms, employer records, pay slips, and other documents related to traditional jobs. With gig workers and part-time workers having different documentation, states had to quickly adapt to a new way of processing and approving claims.
Adoption errors are inevitable, said Behnaz Mansouri, senior attorney for the Unemployment Law Project, a nonprofit legal aid organization in Seattle.
Economy & Economy
Apr. 10, 2020, 4:09 pm ET
“For a new system to have such a punitive reaction when the system itself fails seems too harsh and draconian,” said Ms. Mansouri.
29-year-old Gina Jones was on leave in March from her part-time job at a breakfast bar at a Quality Inn in Spokane, Washington, and was paid $ 750 a week from the pandemic program, which allowed her to pay 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 for $ 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 garnish her wages to collect the debt.
“I’ve already used this money to support my family,” said Ms. Jones. “It’s all gone and I can’t afford to pay it back.”
Demanding unemployment benefits can undermine the aim of the unemployment system to stabilize the economy, said Philip Spesshardt, branch manager of benefit services for the Colorado Division of Unemployment Insurance.
When a person’s unemployment checks are reduced each week due to an overpayment, the recipient has less cash to pay bills and patronize local businesses. “Ultimately, this has a cascading effect on many of these small businesses, causing them to close permanently and further increase the unemployment rate,” said Spesshardt.
While overpayments cannot be waived under the federal program, applicants can apply for reimbursement after notification has been issued. However, the deadline for appeal can only be seven days. After that, the process can be slow, confusing, and cumbersome.
Colorado has taken steps to address the reimbursement difficulty. After discovering the large number of overpayments in October, the state found that the application form was confusing as it did not specify whether the person being submitted should be providing gross or net income. It was decided to write off cases where the recipients had submitted income and tax documents that could be used to calculate the correct benefit.
When asked how the policy was compatible with the federal ban on forgiveness, a Colorado Department of Labor and Employment spokeswoman cited “the administrative burden it would put on us to collect these overpayments on competing priorities.”
House Democrats have called for renewed pandemic aid to include a provision that will allow states to forego overpayments if workers cannot repay them without great difficulty. The provision would apply to past and future cases. A separate house bill with cross-party sponsorship provides for forgiveness if the overpayment is not the fault of the recipient and “such repayment would run counter to justice and a good conscience”.
But the possibility of a remedy is of no great comfort to those who are wondering how they are going to pay rent and put food on the table in the meantime.
William and Diana Villafana, 55 and 34, who operated a car rental company in Henderson, Nevada prior to the pandemic, learned in late October that they had been overpaid by more than $ 7,000 between them. To cover this debt, the state is taking full advantage of Mr. Villafana and giving Ms. Villafana $ 73 per week. They use credit cards for their $ 2,000 monthly rent as well as utilities, groceries, and other necessities.
“I don’t think they understand that unemployment benefits are vital,” said Villafana. “Or if they understand, they don’t care.”
Mr. Villafana is concerned about how he will continue to care for her son and daughter aged 6 and 7. When his daughter recently asked for a brush set and an easel, he didn’t know what to tell her.
“It’s pretty hard to tell them,” Look, you can’t “or” I can’t buy this for you, “he said,” I have no idea what we’re going to do with Christmas. “
Sheelagh McNeill contributed to the research.