Bills unveiled to fix unemployment benefits system
LANSING — Michigan would no longer assess extraordinarily high fraud penalties on people who receive unemployment benefits, and those accused of wrongdoing could get help from an advocate instead of having to represent themselves or hire a lawyer under bipartisan legislation unveiled Thursday.
The eight-bill package was proposed in the wake of a scandal at the state Unemployment Insurance Agency. It has reversed at least 44,000 unemployment benefit fraud cases covering a two-year period and is refunding nearly $21 million after a computer system wrongly accused people of collecting excessive benefits.
A law enacted earlier this year prevents the agency from adjudicating a claimant’s case as fraud without human verification and reduces the statute of limitations so it can pursue fraud three years back instead of six. But legislators said other improvements are needed. The state Unemployment Insurance Agency is supportive of the new proposals developed by Republican and Democratic leaders of the GOP-led House Oversight Committee, business officials and other experts.
“It really will create a more fair process for individuals accused of fraud,” Democratic Rep. Curtis Hertel of St. Clair Shores said at a Capitol news conference.
In many cases between 2013 and 2015, claimants did not commit fraud and — to compound being forced to pay restitution — were hit with interest along with penalties above the overpayment.
Under the legislation, penalties would be 100 or 150 percent instead of 200 or 400 percent. The 400 percent penalty is the highest in the U.S.
Claimants could not be charged interest due to the government’s mistakes. Those accused of fraud, who are now prohibited from getting help through an advocacy program, could qualify for help making their case at a hearing.
“We don’t want to ruin people financially for the rest of their lives,” said Steve Gray, director the University of Michigan Law School’s Unemployment Insurance Clinic, which helps 300 families navigate the system annually. The bills, he said, would strengthen notification requirements so it is more likely that claimants actually know of potential overpayments and can defend themselves.
The smaller financial penalties would still be at the high end compared with other states, Gray said.
People filing for benefits would have to give additional proof of identity. The agency would be required to verify identities to the best extent possible before making payments.
Also, employers and past employees could alert a newly created investigative officer of identity theft cases.
Delaney McKinley, senior director of government affairs and membership for the Michigan Manufacturers Association, said impostor claims are a “huge issue” for employers. The legislation would better prevent payments from being made to identity thieves and create a clearer process for employers to report suspicious activity, she said.
Hertel and other Democrats said while the bills would help prevent a similar debacle in the future, they would not do enough to assist those who were wrongly accused. They proposed a nine-bill package last month to reimburse the accused for litigation and bankruptcy expenses, restore the maximum duration of benefits to 26 weeks instead of 20, lessen wage garnishments and change the statute of limitations to sue.
In July, the Michigan Court of Appeals tossed a lawsuit filed by people who were wrongly accused of defrauding the system. The judges said the plaintiffs should have sued sooner — a ruling that their lawyer blasted as “ridiculous” and “nonsensical.”
“Until the state remediates all of the damage these families have suffered, we haven’t done our job,” said House Minority Leader Sam Singh, an East Lansing Democrat.