During the COVID-19 pandemic, unemployment insurance (UI) fraud has escalated, resulting in a costly number of false reports being filed throughout the United States.

On March 22, 2021, the U.S. Department of Labor (DOL) announced the introduction of its new website, "Report Unemployment Identity Theft," with support for those who may have been victims of UI fraud.  The site includes signs to look out for, as well as resources for reporting fraud.

UI fraud defined.

Under state UI laws, both employers and claimants may commit fraud.

Employer fraud may involve actions like taking steps to avoid paying taxes or creating a fake employer account to make false claims against the account.

According to the DOL, fraud on behalf of the claimant can include the following:

• “Knowingly submitting false information;
• Continuing to collect benefits when knowing oneself to be ineligible;
• Not being able and available to work while certifying for benefits under state law; or
• Intentionally not reporting wages or income while collecting full benefits.”

The DOL also explains that in addition, “identity theft may result in unemployment insurance fraud that is not the fault of the employer or the identity theft victim.”

Note: States are required to enact their own UI laws and are expected to do so.

Penalties for UI fraud.

All states are mandated to assess a penalty equal to no less than 15% of the illegal payment amount.

As outlined by the DOL, other penalties that can be assessed by state UI laws generally include the following:

• “Criminal prosecution with fines and/or incarceration;
• Required repayment of fraudulently collected benefits;
• Forfeiting future income tax refunds; and/or
• Permanent loss of eligibility for unemployment compensation.”

UI fraud can also be prosecuted in federal court by the U.S. Department of Justice under 18 U.S.C § 1341 or other such federal statutes.

DOL guidance.

The DOL's advice on actions employees should take to avoid the illegal payment of UI is summarized below.

How do I know if I may be a victim of unemployment identity theft?

Commonly, most victims are unaware that their identities and/or their benefits have been used to file false claims until they receive a state-issued 1099-G tax form in the mail with incorrect information, or for benefits they have not received.

Signs that you may be a victim of UI fraud are as follows:

• You receive mail from a government agency regarding an unemployment claim or payment, but you did not file.
• You receive a 1099-G form unexpectedly that reflects unemployment benefits.
• You receive a notice from your employer that a request for information about an unemployment claim in your name has been issued while you are currently employed.

Please keep in mind that these notices and forms may be from any state, including those that you don't live in or in which you didn't file for compensation.

What steps can I take to report unemployment identity theft?

The DOL recommends taking the following steps if you have fallen victim to UI fraud:

1. Notify the state where the UI fraud occurred.
2. Only provide income that you actually received while filing your income taxes.
3. Keep a close eye on your credit report for any unusual activity or unauthorized lines of credit opened.
4. For UI fraud committed during the COVID-19 pandemic, report the illegal activity to the U.S. Department of Justice’s National Center for Disaster Fraud.

For additional information on the steps outlined above, as well as a state directory for reporting UI fraud, visit www.dol.gov/agencies/eta/UIIDtheft.

Steps employers can take.

It’s imperative that as an employer, you spread awareness of UI fraud to your employees as necessary. Be sure to provide your employees with the resources that the DOL made available to victims, which are linked above.

How PrimePay can help.

PrimePay’s Unemployment Cost Management solution helps to assist you with:

• Cost Containment
  • A cost-effective way to manage your unemployment claims.
• Improved Administration Workflow
  • Alleviate administration time and increase organization.
• Risk Avoidance
  • A dedicated network of specialists, working alongside you as you navigate the unemployment landscape.

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Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.