Tracking Unemployment Robo-Fraud

Tracking Unemployment Robo-Fraud

Blanchard & Walker continues the march forward for unemployment claimants who find themselves subject to tax and wage garnishments for baseless fraud determinations.

A new order from Federal Court Judge Robert H. Cleland Zynda ORD 2016-03-29 (Order on MTD ) clears the way for the lawsuit to move forward challenging unemployment fraud accusations, as reported in a recent Metro Times Article. The new ruling in the UIA lawsuit rejects State of Michigan arguments seeking dismissal on immunity and standing grounds. Reforms to the Michigan unemployment system have been under review in the state legislature since 2015, but the legislature has yet to act.  But the proposed reforms still fall short of remedies needed.

Since 2011, the State of Michigan has adopted the most draconian penalties for unemployment fraud of any state in the union (four times the benefits received), often resulting in tens of thousands of dollars in fines to the accused claimant. And the State Agency has adopted a system where fraud is automatically presumed in most circumstances. By the time a claimant gets notice in the mail of a garnishment, they are out of time to appeal.

As alleged in the UIA lawsuit, former UIA Claimants – some who have not received benefits for years – are presumed to have committed fraud simply because they did respond to a vague questionnaire posted to the UIA’s computerized portal (known as “MiWAM”). This fraud presumption has most often been done by a computer without human involvement from 2013 to 2015. It is  unclear how much the Agency continues to rely on the MIDAS computer system. Whether by computer or by UIA applying a flow chart, the fraud presumption seems to continue. Moreover, many claimants still find themselves under threat of tax garnishment or wage garnishment if they do not make monthly payment plans.

The system has resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong. This finding automatically results in a penalty equal to five times the benefits received (the maximum allowed under the state statute). These punitive assessments regularly total $10,000-$50,000 and sometimes up to $100,000. Far more than a typical resident could actually pay. Wrongful practices related to the Agency’s fraud determination include:

  1. Sending “fraud questionnaires” containing self-incriminating questions, without any explanation of the factual basis for the Agency’s fraud allegations or any sufficient information that would provide claimants with a meaningful opportunity to respond;
  2. At times, failing to send fraud questionnaires at all and yet issuing automated determinations of fraud without even having a basis to believe that the questionnaires were received;
  3. Automated determinations of fraud based solely on the claimant’s silence in not returning the fraud questionnaire;
  4. Automated determinations of fraud when claimants return a fraud questionnaire yet the receipt of the questionnaire is not recorded in the Agency’s computer system;
  5. Misallocating income a claimant received prior to unemployment across all 13 weeks in the fiscal quarter in which a claim is filed and thereafter issuing a robo-determination of fraud when a claimant truthfully reports no income in a benefit week.
  6. Automatic robo-determinations of fraud based on differences between the claimant and the employer’s characterization of an employment separation without any investigation into whether the discrepancy was the result of administrative error, good faith dispute, or misrepresentation by the employer;
  7. Sending confusing and defective fraud determination notices that do not inform claimants of the factual basis of the Agency’s determination of fraud and do not provide any information to allow claimants to evaluate or respond to the Agency’s determination;
  8. Automatically assessing the maximum penalty allowed by statute—five times overpayment (base amount PLUS a four times penalty)—without any factual basis to conclude fraudulent intent.
  9. Unauthorized and warrantless seizures of tax returns and wage garnishment without any evidentiary basis or factual finding that would permit the conclusion that fraud has occurred, depriving claimants of their property without due process of law; and
  10. Using unsupported fraud determinations as a basis to impose never-ending payment plans with the State for which the claimant is financially unable to pay.

These practices have resulted in claimants being falsely accused of intentional misrepresentation and assessed onerous financial penalties because of garden variety discrepancies between employer and employee-reported information. Often the claims result in wage garnishment or actions to sweep up tax returns otherwise owing to Michigan taxpayers.  These unlawful practices discourage eligible beneficiaries from claiming benefits they are entitled to under the law and impose substantial burdens on organizations and businesses who regularly deal with the Agency and who are regularly dragged into hearings on baseless appeals.

If you or someone you know has been sucked into the state unemployment fraud system, you should contact an unemployment attorney for assistance.   Despite the Zynda case moving forward and other lawsuits that are pending, there is no guarantee that individual garnishments will be corrected.  Each and every victim of these UIA practices must do all the can to pursue their individual rights in the system.