Employers: Expect little help from the state in battling phony U/I claims

Article courtesy of SBAM Approved Partner ASE

By Joe DeSantis  

An apparently chastened Steve Arwood, head of Michigan’s Unemployment Insurance Agency, has assured the state Senate that the agency would once again show up at hearings to support employers who contest fraudulent unemployment comp claims over $3,500. The question remains, however, as to how the now-much smaller agency plans to pull it off. Last fall, the agency laid off 450 of its workers—about one-third of its entire manpower—due to budget cuts.

According to The Detroit Free Press, a Senate committee in Lansing put Mr. Arwood through a “harsh grilling” for signing off on an internal memo, apparently without the knowledge or approval of the Snyder Administration or the Legislature, that directed agency employees not to show up at hearings on fraudulent claims unless the amount of money being contested was at least $15,000. The agency’s decision came after the state passed a law (in 2011) lowering the threshold for making U/C fraud a felony from $25,000 to $3,500.

Sen. Jack Brandenburg (R—Harrison Twp.) scolded Mr. Arwood for the decision, asking, “Do you make it a habit of interpreting legislation for your own convenience? . . .  You changed the legislation’s intent; don’t tell me you didn’t.” Arwood said that he signed off on the directive because he saw it as a temporary expedient forced on the agency by all of its layoffs. But “it was not a good decision,” he confessed.  Within days of his admission, a new internal directive reportedly went out to agency employees saying simply that the earlier directive “is rescinded effective immediately.”

The agency’s decision to effectively stop fighting fraudulent claims first came to light when an administrative law judge ordered a former employee of St. John’s Hospital to repay almost $3,000 in benefits she collected while she was still working. But he threw out civil penalties of up to $12,000 and reinstated her eligibility for future benefits. He gave as his reason that the state “abandoned its fraud findings by its decision not to appear and prosecute.”

Realistically, how much help can employers fighting fraudulent claims expect from the state in light of Mr. Arwood’s promise to again lend that help? Many of the 450 employees the agency laid off last fall had been brought on during the Great Recession as temporary (“limited term”) employees to help with the flood of claims that hit the agency at that time. As the current economic recovery took hold it meant fewer claims, thus lowering the agency’s manpower requirements.

Lynda Robinson, a spokesperson for the agency, told everythingpeople.™ This Week! in an email that the agency has not called back any of those laid off. However, it will do some internal restructuring that will free up more time for employees to attend hearings. In addition, the agency is in the process of finalizing and installing a new computer system which will accurately track both employer taxes and individual claims. The tax side, said Ms. Robinson, has been up and running since last October. The claim side, which she said will enable the agency to better monitor individual claims, is expected to be in place sometime this coming fall. In the same email Ms. Robinson said, “All fraud hearings involving restitution that is equal to or exceeds $3,500 will be attended by a dedicated agency fraud adjudicator.”

As any employer who has been forced to lay off staff knows, you can do more with less if you put your mind to it. However if your workforce shrinks by one-third or even more, as the UIA’s workforce apparently has, the challenge is daunting and some compromises on products or services are probable if not inevitable.

Employers want to keep their unemployment insurance costs from burgeoning, as they automatically do with each new claim. However, they would be wise to not expect robust support from the state in battling fraudulent claims for the foreseeable future.