Lansing – Gov. Rick Snyder and lawmakers are looking to create a state fund to compensate thousands of people who were falsely accused of fraudulently collecting unemployment benefits.
The proposal was not included in changes to the Unemployment Insurance Agency that won approval on the last day of legislative voting in 2017. But legislators, who a week before had begun negotiations on adding the compensation proposal to the bills at the request of the Snyder administration, plan to revisit the issue in January.
The compensation has long been demanded by Democrats in the GOP-led Legislature. It would help claimants who were refunded penalties and interest but have faced other financial hardships because of the fiasco that occurred between October 2013 and September 2015, when the state mostly relied on a computer system to determine that people collected excessive benefits based on discrepancies in reported earnings, hours worked and other information.
Some people had to hire lawyers to fight false findings. Others had to file for bankruptcy, saw their wages garnished, suffered worse credit ratings or had trouble finding a job and housing, according to an attorney for people who are suing for economic damages.
Rep. Joseph Graves, who helped spearhead the reform legislation and was involved in late-night talks on the compensation plan, said the concept needs pursuing but cautioned it may not make people whole. More study is needed of the mechanism and if it is feasible, he said, citing legal and other questions that were raised.
“To just really quickly bum rush this through didn’t seem like the right thing to do,” said Graves, a Republican from Genesee County’s Argentine Township. “We need to slow down and say, ‘What can we offer and what does that look like?’”
While legislators involved in the discussions said the compensation would total $30 million, Snyder’s office declined to confirm that amount. To qualify, victims would have to agree not to sue the state.
“The intent is just to compensate people above and beyond their refund — to make things right for those who were unfairly treated,” said spokeswoman Anna Heaton. She said the governor will seek to reopen the negotiations in conjunction with work on the next budget, which he will propose in February.
The Unemployment Insurance Agency said of the nearly 67,000 cases in the two-year period in which claimants were found to have committed fraud and did not appeal, there were reversals for slightly more than 40,000 people. Nearly 20,000 of them had collections processed for restitution, penalties and interest. About $21 million has been or is being refunded.
Lawmakers’ decision to wait on the compensation fund was welcomed by Jennifer Lord, a lawyer who has been leading a lawsuit against the state that seeks class-action status for 46,000 residents. She questioned if $30 million would be enough to pay back what was improperly seized from claimants, let alone their related financial losses.
“It’s not enough money. I encourage the Legislature to really spend a lot of time with a lot of different stakeholders and understand the depths of the losses that people have suffered,” Lord said. “The concept needs a lot of work.”
She credited government officials for “trying to do the right thing” but said they must ensure that “someone is not asked to take $200 when they lost $10,000 and had to file bankruptcy. We just can’t get this done for political expediency and kind of hurt people one more time.”
Victims’ ability to sue has been in doubt since the state Court of Appeals tossed the suit in July, saying the three plaintiffs waited too long to file it. An appeal is pending with the state Supreme Court.
Snyder will soon sign the bills to overhaul the jobless benefits agency, which stopped “auto adjudicating” cases solely with the Michigan Integrated Data Automated System in 2015. The legislation is designed to prevent such a mess from occurring again and to help claimants navigate the system. Changes include cutting the nation’s highest financial penalties except for “impostor” claimants and easing employers’ ability to flag fake claims filed by identity thieves.
Rep. Kevin Hertel, a Democrat from St. Clair Shores, said “the biggest remaining piece and I think the most important out of all of this is to ensure we’re taking care of the individuals who were impacted by the MiDAS failure.”
He said he is “extremely glad” that Snyder now supports paying damages, and the Legislature should immediately consider the compensation fund upon returning in January. He opposed linking it to the multi-month budget process.
“If we’re going to do this, I think we need to do it right away,” Hertel said. “These people have waited too long.”
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