The COVID-19 pandemic greatly impacted unemployment in Wisconsin. Brenda Lewison discusses that impact and offers practice tips for attorneys who represent clients with unemployment overpayment investigations.

Brenda Lewison, U.W. 1995, is a staff attorney at Legal Action of Wisconsin in Milwaukee, where her practice is concentrated on representation of claimants and former employees in their unemployment claims.

Unemployment rates are down – way down. In April 2020, Wisconsin’s unemployment rate was 14.1%1 and the U.S. unemployment rate was 14.7%.2 In May 2022, Wisconsin’s rate was 2.8%, a record low, while the U.S. unemployment rate was 3.6%.3

The Department of Workforce Development’s processing of unemployment claims today shows vast improvement as well. A year ago, it was not uncommon for the average amount of days between an appeal of an adjudicator’s determination to a hearing on the merits in front of an administrative law judge to be 54 days or more. Currently, that period is only 16-17 days.4

The current logjam is at the Labor and Industry Review Commission (LIRC), the appellate body that reviews administrative law judge (ALJ) decisions for which a party has filed a petition for review.

In 2020, Wisconsin’s LIRC was slightly slower that the U.S. Department of Labor’s (DOL) standard for such an appellant body, with only 38% of decisions issued within the 45 days after the petition for review is filed.

The guideline from the DOL is for 100% of the decisions to be issued within 40 days after a petition for review is filed. The commission typically issued 80% of its decisions within 75 days of when the petition was filed.5

Today, it takes roughly six months for the commission to develop a hearing synopsis and a briefing schedule after a petition is filed; decisions are generally issued within two to four months of briefs being filed.

Hot Topic: Overpayments, Fraud, Concealment

As the DOL’s workload has slowed down, it now has time to go back and reexamine some of the cases where benefits were allowed during the height of the pandemic.

Some cases involve benefits received two or more years ago. The department has been known to allege overpayments in excess of $30,000. Overpayments occur when a claimant receives benefits for which they were not eligible.

A claimant can have an overpayment issue through no fault of their own. For example, one of the most common areas for errors is with part-time workers. Part-time employees who receive unemployment benefits (based on the loss of a different job or a significant reduction in hours in their current job) must report their gross weekly earnings. Workers frequently do not understand that they are to report their weekly gross earnings, not their net earnings. It is also not uncommon for workers to report their gross hourly rate, rather than their gross weekly wages.

Another common mistake is for employees to only declare the receipt of wages (or the lack thereof) from the employment that prompted the unemployment claim. Thus, claimants who have regular full-time employment and a part-time job on the weekends or evenings interpret the question “did you work” as “did you work at the full-time job that laid you off,” and fail to declare their wages from the part-time employment.

Whenever there is an overpayment, there is an investigation as to whether there was fraud or concealment of wages. Adjudicators will sometimes make a determination in favor of the claimant and note that fraud or concealment are not issues. Other times, it seems adjudicators are reluctant to find in the claimant’s favor, and enter a determination against the employee leaving the employee to appeal the fraud/concealment determination.

Practice Tips When Clients Investigated for Overpayments

  • Beware the double-determination conundrum. Where there is an overpayment and the adjudicator concludes that the overpayment might be the result of fraud or concealment, the adjudicator will issue two determinations – one for the overpayment issue, and the other for the fraud/concealment issue – both of which must be appealed.
  • The ALJ must find that a claimant intended to engage in fraud or concealment. By and large, if the advocate can convince the ALJ that the claimant did not intend to make a mistake on their claim, the ALJ will find that there is an overpayment that needs to be repaid but that there was no fraud or concealment. As examples, an ALJ will probably not find that a claimant engaged in fraud or tried to conceal income if the part-time employee consistently misreported their wages in the same fashion every week (e.g., reporting net versus gross income) or convincingly testifies that they did not understand a question about reporting wages.

However, for a claimant who lost their job and thus was eligible for benefits, but then gets a job and fails to report any income, the ALJ will likely find that the claimant committed fraud and concealed income from the department.

The penalties for fraud and concealment are substantial. In addition to repaying all of the benefits that were improperly paid, the claimant will have to repay an additional 40% of those overpaid benefits as a penalty, and will be ineligible for benefits for up to six years.6 The claimant may also be charged with a felony, fined, and imprisoned.7

  • Friends and relatives are not always helpful. Recently at Legal Action of Wisconsin, we are seeing not only an increase in overpayment and fraud/concealment allegations, but instances where the client has not received money that was allegedly overpaid. Rather, a relative or someone else close to the claimant has set up and made the weekly claims such that the money is diverted to the other person’s account. Typically, these clients are older, with disabilities and/or a lack of computer literacy, and they have no idea how they could have an overpayment for money they never received. They also are reluctant to allege that their relative or friend engaged in fraud or concealment.

In Wisconsin, Pandemic Unemployment Assistance Funds Were Unevenly Issued According to Race

The U.S. General Accountability Office recently issued the results of its audit of four states’ records regarding the issuance of Pandemic Unemployment Assistance (PUA) funds.8

The PUA program was created to provide economic relief necessary during the height of the pandemic, and the funds were distributed through states’ unemployment programs. In Wisconsin, only 21.9% of Black applicants for PUA were awarded benefits and only 27.2% and 24.8% of American Indian and Latinx claimants were awarded benefits, respectively. By contrast, 43.3% of white Wisconsin applicants received PUA benefits.9

The Milwaukee Journal Sentinel recently reported that, when asked, the Department of Workforce Development did not know why there were racial and ethnic disparities in the receipt of benefits.10

Legal Action Welcomes Volunteers

Legal Action is a nonprofit civil legal services organization. Its Volunteer Lawyer Project provides free training and continuing legal education for its volunteers in a variety of areas, including unemployment cases.

The cases rarely take more than a few hours of an attorney’s time. Generally, preparation for hearing may take two to three hours, and the hearing itself would likely take less than an hour.

If you have an interesting in volunteering, please call (414) 662-4227 or email [email protected] for more information.

This article was originally published on the State Bar of Wisconsin’s Labor & Employment Law Section Blog. Visit the State Bar sections or the Labor & Employment Law Section webpages to learn more about the benefits of section membership.