Baker administration loses attempt to waive $2 billion in overpaid federal unemployment claims

Massachusetts is the only state seeking a blanket overpayment waiver for all participants in federal programs, including Pandemic Unemployment Assistance for self-employed and gig workers, as long as the benefits are not derived from fraudulent unemployment claims.

On Friday, a Labor Department official told the Globe that the state’s request could not be granted under federal law. But the official, Michele Evermore, deputy policy director for the Office of Unemployment Insurance Modernization, said in an interview that the state could forgive one category of overpayments: PUA recipients who didn’t respond to requests for proof of previous employment.

Failure to provide work history, a requirement Congress belatedly established after the PUA program was underway, it was the most common reason unemployment claimants in Massachusetts were retroactively declared ineligible for federal benefits, according to the DUA.

But blanket forgiveness will be limited to PUA payments made before March 23, 2021. That’s when the state notified recipients that they must prove their work history; Subsequent benefits can still be waived, but only after the DUA reviews each case individually.

It is too early to know how many people may qualify under the general partial exemption.

While the DUA administered the pandemic programs, Congress provided the money. Overpayments on state-funded unemployment claims were not part of the state’s application, which was made to the Labor Department in February.

Massachusetts’ offer to forgive all non-fraudulent overpayments was an unlikely request, but Governor Charlie Baker had he said he was hopeful that a deal could be struck with the Labor Department, which is headed by former Boston Mayor Martin J. Walsh.

But Congress limits how generous Walsh can be. States can grant overpayment waivers under two conditions: the recipient was not at fault and forcing a refund would go against what is known as “equity and good conscience”. The trick is to determine when the payment would violate the soft concept of fairness and good conscience.

The Labor Department determined that PUA recipients were not at fault for benefits paid before the state submitted requests for employment records, and that requiring reimbursement would not be fair, Evermore said.

“Those people didn’t know they were going to have to prove their employment,” he said.

But for benefits paid after notification, Evermore said, “it was just hard to defend someone who didn’t respond. . . . Absence of fault is a strict standard.”

The Baker administration said it appreciated the “initial relief” provided by the Department of Labor. The state is “reviewing the decision and will soon have more to say about plans to provide more opportunities for relief to claimants with overpayment problems,” said a spokesman for the Executive Office of Labor and Workforce Development.

Overpayment notifications arose after Congress passed new unemployment aid legislation in December 2020. The bill included a requirement that state employment agencies like DUA obtain documented proof of prior employment from PUA recipients. Initially, those people were able to self-certify their eligibility. PUA was created for self-employed and gig workers who are not covered by state unemployment.

The rule change piled more work on an already overloaded DUA.

The DUA has about $2.33 billion in outstanding overpayments, the agency said in a report to the Legislature last month. that includes a separate category of overpayments involving benefits provided directly by the state government, worth about $375 million.

Many of the overpayment recipients had returned to work and were no longer checking their DUA accounts for emails, the Globe reported. the notices they were sometimes confusing, especially to people with limited English skills, and DUA service agents were often impossible to contact. Many people had long ago spent the money the state now said they owed.

More than three-quarters of overpayments are linked to federal benefits, including PUA. The state had 29,000 pending waiver applications, including 13,700 linked to federal benefits.

According to their report, about 55,400 people with state benefit overpayments and 7,800 PUA applicants have fully or partially paid DUA, or are on a payment plan. The recoveries total $183 million in federal benefits and $39 million from state unemployment.

The DUA said earlier this year that it had either given up the appeal or waived $1.8 billion in overpayments using its current procedures.

Globe staff member Jon Chesto contributed to this report.


Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.

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