Unemployment Compensation Fraud – What’s an Employer To Do?

McNees Wallace & Nurick LLC
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McNees Wallace & Nurick LLC

As legitimate unemployment compensation claims have spiked in the wake of the COVID-19 pandemic, so too have fraudulent ones.  Just yesterday, Maryland’s Department of Labor announced that the state has detected over 508,000 new, potentially fraudulent unemployment claims since May 1, 2021.  Last year, a $650million unemployment fraud scheme rocked Washington state.  In April 2021, the Pennsylvania Treasury and Department of Labor & Industry announced that they had recaptured nearly $800million in unemployment benefits targeted by scammers.

Many employers are searching for solutions to rampant unemployment benefit fraud. What can be done when a worker reports that a fraudulent claim was filed in their name?  Fortunately, there are some answers available to Pennsylvania employers and workers.  Several steps should be taken to address suspected fraud.

If an employee suspects that a fraudulent unemployment claim has been made in their name, they should:

  • Not accept any paper check payments or debit cards received;
  • Monitor their bank account for direct deposit of unemployment benefits (and return any benefits that were wrongly deposited);
  • Immediately report the suspected fraud to the local police department that serves the area where they live;
  • Report the suspected fraud to the Department of Labor & Industry either electronically or by telephone by following the steps listed here; and
  • Report the suspected fraud to their employer.

If an employer suspects that a fraudulent unemployment claim has been filed on behalf of a current or former employee, they should:

  • Contact the employee to notify them of the potentially fraudulent claim;
  • Verify that the worker did not file the claim;
  • Share this link with affected employees and encourage reporting to the Department of Labor & Industry and the employee’s local police department;
  • Investigate whether employee data has been breached if there are multiple fraudulent claims;
  • Ensure that only legitimate claims on the weekly unemployment claims report; and
  • Report suspected fraud to the Department of Labor & Industry as indicated at the link above.

Unemployment claim volumes have yet to return to pre-pandemic levels.  While claims remain high, employers are well-advised to remain alert and develop an action plan to address possible unemployment fraud.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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