States ask people to return mistaken pandemic relief payments. Is it fair?
Crystal Farrington learned early on that hard work was her only option. Her parents, blue-collar workers raising nine children, took whatever odd jobs they could find. By the time she turned 15, she did the same, first at Burger King and later in retail and hotels.聽
Now, a single mother in her mid-20s caring for a 7-year-old daughter, money is tight for Ms. Farrington. But she鈥檚 always managed to make ends meet.聽
So when she woke up one morning in January to a message that she owed the state of North Carolina $15,056, her heart sank.
Why We Wrote This
What鈥檚 the fair way forward after the government makes a mistake? State agencies are grappling with how to handle millions of cases of overpaid pandemic unemployment benefits.
The 鈥渘otice of overpayment,鈥� as it鈥檚 called, explained that the pandemic unemployment benefits she鈥檇 received for six months in 2020 had been a mistake 鈥� and needed to be returned.
Ms. Farrington is one of millions of Americans who have received similar notices during the pandemic, demanding sums reaching beyond $30,000 in some cases. In North Carolina alone, around 117,000 people have been affected by overpayments 聽$350 million. In larger states the numbers are higher: California had sent 1.4 million overpayment notices by November of 2021.聽聽
鈥淚f I had to make payments on this, it would put me under, and quickly,鈥� says Ms. Farrington.聽
And the unemployment money? Long gone.聽
鈥淚t was my only source of income, so of course I spent it on bills,鈥� she says.聽
Two years into the pandemic, state agencies are grappling with the aftermath of a necessarily hasty rollout of an unprecedented distributed in emergency unemployment assistance during the pandemic. The system wasn鈥檛 prepared to handle the onslaught of new claims, and mistakes abounded. Yes, there was fraud, but many of the errors were honest, caused for example by claimants鈥� confusion about eligibility and states鈥� not having enough time to verify information. Now, agencies are scrambling to recoup funds that should never have been approved.聽聽
Underneath the mayhem lie questions about what constitutes 鈥渇airness鈥� when it comes to the distribution 鈥� and clawback 鈥� of government benefits.
On the one hand, errors were bound to occur. 鈥淲e were building the plane as we were flying, in terms of creating these brand-new, desperately needed pandemic relief programs,鈥� says Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth.聽
On the other, she adds, 鈥淭here are people across the country who have been doing their best faith effort to access benefits and then made an unintentional error 鈥� and they鈥檙e facing these really disastrous consequences.鈥澛�
What went wrong?
Normally, states have about two years to comply with new federal programs, which lets them address the inevitable technical or logistical questions that arise, says Michele Evermore, deputy director for policy at the Department of Labor鈥檚 Office of Unemployment Insurance Modernization. But there wasn鈥檛 time for that.
When the pandemic began in March of 2020, unemployment claims from 211,000 to 6.6 million a week. Lawmakers jumped into action and designed the most extensive emergency unemployment safety net in history under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Three new pandemic unemployment programs supported 53 million workers, before they ended less than two years later in September 2021.
Some level of improper payment is normal, generally hovering around for regular unemployment insurance. It鈥檚 too soon to know what the overpayment rate was during the pandemic since states are still working through backlogs, but the Employment and Training Administration has estimated an improper payment of 18.1%, for a total of $163 billion potential payments made by mistake.
Fraud is an obvious reason to recoup funds from those, within the U.S. and abroad, who on systemic weaknesses in unemployment infrastructure. In one case, someone used a single Social Security number to apply for unemployment across the country, $222,532 from 29 states.聽
These problems were most serious at the start of the pandemic; over time, state agencies figured out how to make the programs safer, says Ms. Evermore.聽
The bigger issue is the large number of overpayments that occurred due to innocent mistakes. Those errors were caused by a number of issues, including outdated information systems, inadequate staffing, and unclear guidance from the Employment and Training Administration, to the Department of Labor鈥檚 Office of Inspector General.聽
In responding to those who were overpaid, the majority of state agencies are trying to act with compassion, says Ms. Evermore. In fact, unemployment offices across the country, represented by the National Association of State Workforce Agencies, the federal government in January to allow them to issue more waivers for nonfraudulent overpayments. In , the Department of Labor updated its guidance, adding five new scenarios where blanket waivers can be granted, as long as the claimant was 鈥渨ithout fault in the creation of the overpayment鈥� and repayment would be 鈥渃ontrary to equity and good conscience.鈥�
The latter is a concept Ms. Evermore admits is subjective, but still useful. 鈥淚n general it means that recouping the overpayment would cause serious harm to someone,鈥� she says.聽
It鈥檚 reasonable and necessary to reclaim the money 鈥渋f recovery of the overpayment isn鈥檛 going to hurt the claimant, and the claimant was legitimately overpaid,鈥� she adds. 鈥淏ut what we鈥檙e seeing is the amounts that were overpaid are very frequently going to amount to a violation of 鈥榚quity and good conscience.鈥� ... I personally don鈥檛 know anybody for whom a $20,000 bill is an easy thing.鈥澛�
Looking for help outside the system
The problem is trickiest when the source of the error isn鈥檛 clear.
When Kristi Rudisill began to receive an added sum of $600 per week in Pandemic Unemployment Assistance, she was grateful for the extra cash during a difficult time, but she had only applied for regular unemployment.
鈥淭hey just automatically started giving it to me. They determined that I was eligible to receive it, but they determined it without even speaking to me or finding out any details,鈥� she says. Now, she owes North Carolina more than $9,000.聽
After many hours on the phone, Ms. Rudisill had her appeal denied and her case classified as fraudulent. She thinks it was because of the two days she accepted work making face masks before learning the salary was half of what she had been promised. She says she鈥檇 be happy to pay back benefits she received for that week, but that doesn鈥檛 explain why she received Pandemic Unemployment Assistance聽in the first place 鈥� and it doesn鈥檛 help that it鈥檚 so difficult to talk to a real human on the other end of the line. She continues to get payment requests in the mail and is at a loss as to what to do next.
Ms. Farrington also suspects her claim was judged fraudulent at first, most likely due to an error on her employer鈥檚 part.聽
Both women turned to a Facebook group called 鈥淣C unemployment Overpayments鈥� for help. Equilla Johnson Hawkins created the group back in 2020, her frustration mounting as she fought having to repay overpayments for herself and her 70-year-old mother. Their debt was eventually waived, and now she spends her free time counseling others facing the same problem, most of whom she says feel lost and scared.聽
鈥淣o one knows where to go or what direction to take,鈥� she says. She pushes people to be persistent in explaining their situation to the unemployment office. 鈥淚 tell them to be honest. Be honest.鈥�
Not everyone who comes to her manages to clear their overpayments, but she says the network offers a sense of solidarity. (Because of this experience, she hopes聽to start a nonprofit one day to help people navigate聽things like聽benefits, taxes, and job training.)聽聽
Ms. Farrington hired a lawyer to help her appeal her overpayment, thanks to a recommendation from the Facebook group. In late March, she learned with relief that her appeal had been approved. But when she checked online, her overpayment had dropped only a few thousand dollars to $11,712. Perplexed and frustrated, she鈥檚 asked the group for help submitting a waiver request, and is even considering taking out a loan to clear the balance.聽
There鈥檚 one thing she knows for sure: 鈥淚 would rather go out and DoorDash, Instacart, deliver newspapers before I ever, ever think about applying for unemployment again.鈥澛犅犅�
For Dr. Gould-Werth, stories like that are 鈥渉eartbreaking,鈥� because the whole purpose of the unemployment system is to catch people when they fall, not kick them when they鈥檙e down. And that matters for everyone, she says, because when people don鈥檛 access needed benefits, unemployment insurance fails to act as a macroeconomic stabilizer to help buoy the economy.聽聽
鈥淲hen you have a program where there鈥檚 a lot of information and experiences that are negative, 鈥� then it can鈥檛 do its job and it harms all of us.鈥�
