Michigan jobless agency pauses collections in alleged overpayment cases

Michigan on Friday temporarily paused beginning new collections for 398,000 residents awaiting word from the state about whether they’ll have to repay unemployment benefits received during the pandemic. 

New wage garnishments are on hold until at least May 7, after the U.S. Department of Labor agreed to the request from Gov. Gretchen Whitmer, state officials said.

During the same time, the state also will not seize state tax refunds in order to collect restitution.

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The move comes as the Michigan Unemployment Insurance Agency continues to review cases — once as many as 700,000 — involving jobless workers who received federal benefits but were later ruled ineligible for the money.

The state paid at least $5.7 billion in benefits to people who’d applied for them in good faith but didn’t meet federal eligibility standards. It learned in February that it could award repayment waivers after the Department of Labor expanded eligibility, but had to review their cases.

In the meantime, people awaiting waivers were notified they had to repay the benefits — and collections activity continued.

That wasn’t fair to people who received the benefits then were told to repay them, said State Sen. Jeff Irwin, a Democrat from Ann Arbor. 

“Every person caught up in this overpayment mess has a legal right to due process and nobody should be garnished unless the agency can prove fraud,” Irwin told Bridge Michigan.

With the temporary pause, the UIA will complete its claims review and test system processes to identify who qualifies for a waiver. The state already applied for an extension, UIA spokesperson Nick Assendelft told Bridge Michigan Friday, which would allow it to continue the pause beyond May 7.

UIA Director Julia Dale said in a statement on Friday there could be “more good news in the weeks to come.”

“This is part of my commitment to restore public confidence in the UIA’s ability to efficiently and effectively serve Michigan’s workers and our business community,” she wrote. 

Collections actions that are already underway will not be stopped, the UIA said. That could include wage garnishments, intercepting federal tax returns or deducting a percentage from current unemployment benefits payments. 

However, if a worker whose money is being collected by UIA  later receives a repayment waiver, the money will be refunded.

Since March 2020 when the pandemic first hit Michigan, the agency has paid nearly $40 billion in lost wages to nearly three-fourths of the state’s workforce.  Of that money, about $6.2 billion was from the state’s Unemployment Trust Fund, with the rest of it from federal sources.

Problems have plagued the agency since March 2020 as the pandemic forced workplace shutdowns, sending the state’s unemployment to about 23 percent by April.

As the $1.9 trillion federal CARES Act opened unemployment benefits to people who normally would not have been eligible — including part-time, self-employed and “gig” workers — the state’s unemployment system was overwhelmed. 

This past November, an audit of the agency found that the state had made about $3.9 billion in improper payments and likely wouldn’t be recouped. That included about $2.8 billion in imposter fraud, with criminal investigations launched by both federal and state officials.

Dale has led the UIA since October, the third director within a year.