State lawmakers may be eager to wrap up work in Lansing and head home for the holidays, but one item belongs at the very top of their lame duck to-do list: passing House Bill 4982, legislation addressing the Unemployment Insurance Agency’s automated fraud detection system and policies.
Beginning in 2013, the Michigan Unemployment Insurance Agency (UIA) implemented a computer system that was pitched as a way to dramatically increase the agency’s efficiency while reducing the incidence of claimant fraud.
While the decision to switch to an automated system was good in theory, in practice, the state bought into a $47 million computerized system that falsely accuses thousands of formerly unemployed individuals of unemployment fraud.
The Michigan Integrated Data Automated System or “MiDAS,” makes criminals out of innocent former employees, or claimants, by assuming that every discrepancy is an intentional act of fraud committed only by claimants. On top of that, claimants are provided inadequate information that shows what they are accused of or how to respond. These accusations are all generated by a computer – without confirmation from any human.
Many of these individuals are completely unaware of the fraud charges leveled against them until their wages and tax returns are garnished. The agency can make fraud charges up to six years after a claim and the agency simply sends the fraud determination to the last address on record. This creates a challenge in many cases, as claimants have moved and, without receiving notice of the fraud determination, miss their 30-day appeal deadline.
The UIA computer routinely imposes the maximum penalty of 400 percent of benefits paid, along with a 12 percent monthly interest charge, leaving many laid off workers with tens of thousands of dollars in penalties and interest for crimes they likely did not commit. A February report by the state Auditor General shows a consistent pattern of the UIA falsely accusing laid off workers of fraud when applying for UI benefits. The report shows that UIA fraud accusations were only upheld on appeal 8 percent of the time. Even though the U.S. Department of Labor has instructed the UIA to stop computer-only adjudications, MiDAS has now made approximately 62,000 fraud determinations.
In just three years after the new UIA computer system went online, the contingent fund balance skyrocketed from $3 million to nearly $70 million. That fund is now at a high of $135 million.
Corrective action is addressed in HB 4982, legislation sponsored by Rep. Roger Victory (R-Georgetown Township), and co-sponsored by 50 Republicans and 29 Democrats.
In July, the House Oversight and Ethics Committee unanimously reported a strong version of HB 4982 that does the following:
- Requires increased notice requirements to claimants, including use of certified mail if a claimant doesn’t respond to an initial notification with an additional 30 days to appeal.
- Prohibits computer-only generated fraud determinations and assessment of penalties, requiring an independent examination of the facts by a UIA employee or agent.
- Reduces the “look back” period of time for the UIA to charge fraud from 6 years to 3 years.
- Prohibits income averaging of workers’ income in a quarter. Under this practice, the UIA creates a non-existent “average” wage over a 13-week quarter and uses it to file fraud charges against workers with frequent layoffs, like members of building trades unions.
- Allows employers and claimants accused of fraud to use the advocacy assistance program, which provides counseling to help deal with the UIA appeal process. Those ultimately convicted of fraud would have to pay back the cost of the advocate.
- Requires two mailings to claimants detailing their rights and responsibilities under the law. The first mailing would be sent two weeks after a claim was initiated with the second going out six months later.
With very little time left this session, lawmakers need to act swiftly to end the UIA’s aggressive robo-fraud system and policies by passing HB 4982.