Broadly speaking, the Department of Labor guidance letter appears to clear thousands of workers who marked they were not "able and available" for work because of the COVID-19 pandemic but were paid unemployment benefits anyway.
The guidance also absolves others who received a higher rate of weekly pay than they were supposed to get because of a state error. Those individuals, the department noted, would be eligible for waivers.
"As demand soared, the U.S. Department of Labor provided instructions to states to administer payments under several programs authorized by the Coronavirus Aid, Relief, and Economic Security Act," the department said in its press release. "As guidance evolved, states paid benefits — in some cases — to individuals who were not entitled to receive them, although the individuals were not at fault."
The Department of Labor stressed the new guidance does not absolve agencies from pursuing fraudulent overpayments.
The federal guidance appears to resolve overpayments made to thousands of Michigan residents who believed they qualified for unemployment under expanded federal rules during the pandemic, only to be told months after being paid that they were ineligible and owed money back to the state.
Kellie Saunders, a Metro Detroit wedding photographer who went on unemployment during the pandemic and was flagged for overpayments, welcomed the federal guidelines issued Monday.
"This could be great news, and I'm glad that the leaders have listened to our pleas for help," Saunders said.
Michigan Gov. Gretchen Whitmer said the guidance is in part a response to her request for waivers for Michigan claimants left in the lurch.
"Michiganders should not be penalized for doing what was right at the time they applied for federal pandemic benefits," Whitmer said Monday.
U.S. Labor Secretary Marty Walsh, in a statement provided by Whitmer's office, on Monday thanked the Democratic governor for "sharing the challenges Michiganders were facing."
"We're hopeful the guidance issued by DOL today will enable states like Michigan to prevent any further undue hardship for claimants," Walsh said.
The Michigan agency is not sure how many state residents would qualify for the waivers announced Monday, said Julia Dale, director for the Unemployment Insurance Agency. But as the agency evaluates overpayments, it will notify those eligible through letters and messages in their MIWAM accounts, she said.
"We ask that claimants remain patient and reply to any correspondence from UIA in a timely manner so we can get through these cases and provide relief to those facing repayment," Dale said in a statement.
BLANKET WAIVERS
Monday's letter added five "blanket waiver" criteria — for a total of seven — that would automatically exempt overpayments related to a federal CARES Act unemployment program.
If an individual's circumstances fall outside of the seven "blanket waiver" criteria, states must decide each person's eligibility for a waiver depending on whether the overpayment resulted through no fault of the claimant or whether demanding repayment would be "contrary to equity and good conscience."
The seven blanket criteria are:
- Anyone who answered "no" when asked whether they were "able and available" for work, but were paid pandemic unemployment assistant (PUA) or pandemic emergency unemployment compensation (PEUC) by the state anyway.
- Anybody who was given a higher weekly benefit amount of PUA or PEUC than they were eligible for through no fault of their own.
- Any individuals paid a higher weekly PUA amount than they were eligible for because the state mistakenly set the amount based on Disaster Unemployment Assistance rather than the most recent guidance from the U.S. Department of Labor.
- Anyone paid a higher amount of PUA or PEUC because of a state's miscalculation of dependents' allowance.
- Anybody who was paid PUA by the state after answering "no" to a question asking if they were unemployed, partially unemployed or unable to work because of listed COVID-19 reasons.
- Any individuals who were paid a higher amount of PUA than they were eligible for because the state's instructions for proof of earnings were inadequate or because the state incorrectly calculated their weekly benefit, using gross income instead of net income or tax documents from an incorrect tax year.
- Anyone overpaid Mixed Earners Unemployment Compensation (MEUC) because of inadequate instructions on proof of earnings from the state or because of a mistake made by the state while assessing eligibility or calculating benefits.
The new categories of blanket waivers, the Department of Labor said, recognize "the enormous challenges of implementing new federal programs while also handling a volume of unprecedented claims filed by the millions of workers."
"There was a significant number of state errors and inaccuracies due to these fast-changing circumstances," the department said in its letter.
MICHIGAN IMPACT
Some of those Michigan residents still appealing their overpayments include individuals who identified as part-time or gig workers and were allowed under federal law to get aid. But the state later said they were ineligible because they marked they were not "able and available" for full-time work.
Another group includes self-employed claimants whose benefits were set based on their gross income rather than their net income. The mistake artificially inflated what those individuals were paid, prompting the state months later to ask for the money back.
Others were caught up in the problem because of an agency error while computing what they were owed in federal and state benefits that led them to be overpaid.
As recently as November, the Michigan Unemployment Insurance Agency was unable to quantify how many individuals fall into those categories. But the number of appeals at that time were in the thousands and clogging up the appeals process in Michigan.
The unresolved appeals led to a class-action lawsuit being filed in the Michigan Court of Claims last month alleging a violation of their due process rights and unauthorized collections. The individuals involved in the suit said they relied on the agency's determination that they were eligible for jobless aid, but now are facing overpayment assessments.
Saunders, one of the individuals involved in the lawsuit, was alerted more than a year after she received jobless payments that she owed $30,000 back to the state because she'd been overpaid. The overpayment appeared to stem from confusion over whether self-employed individuals should list their gross or net income for the state to use to calculate weekly benefits.
Saunders provided her gross income along with tax information that listed both gross and net income. The agency based her weekly benefit on the higher gross income before reversing course a year later.
"This affects so many people," said Saunders, who is part of a growing social media group facing the same issue.
David Blanchard, the lawyer who filed the class-action suit, was encouraged by the federal guidance but said it doesn't necessarily resolve the money already taken back from dozens of individuals who were paid unemployment because of an agency error.
"If the agency takes every opportunity it has from the Department of Labor to consider broad waivers, it does provide an opportunity to waive overpayment notices that have been coming out," Blanchard said.
"There are many people who are waiting for benefits that the agency has decided not to pay for various reasons, and the waiver doesn't fix that problem."
OTHER WAIVERS
The situations addressed in the U.S. Department of Labor letter are separate from a state of Michigan error that led to thousands of other waivers last year.
The state inaccurately listed four eligibility criteria in its application for federal Pandemic Unemployment Assistance and ignored pleas from the federal government to correct it until a department audit forced the issue in early 2021.
The state in June 2021 sent out 648,100 notifications informing those who marked the four ineligible criteria that they'd have to reattest or face potential overpayment notices.
Gov. Gretchen Whitmer later said in July she would grant waivers to anyone caught up in the error, but the rollout of those waivers has been anything but smooth.
Those people who did reattest to their qualifications were pushed into additional review processes and delays, while those who didn't respond were automatically granted waivers. In all, a recent audit found, at least $3.9 billion in ineligible payments were made to about 340,000 people because of the state error.
Another state audit found Michigan's unemployment agency lost more than $8.5 billion to suspected fraudulent payments amid record claims and persistent attempts at fraud during the pandemic.
The U.S. Department of Labor made clear Monday that those payments were not to be waived.
"Under no circumstances may a state waive recovery activities for a fraudulent overpayment," the department said in its letter. "States must make every possible effort to recover fraudulent overpayments using available resources."
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