Unemployment agency pausing wage garnishment as it reviews cases for overpayment waivers

Melissa Nann Burke
The Detroit News

The Michigan Unemployment Insurance Agency said Friday it has temporarily paused new wage garnishments and intercepts of state tax refunds for people accused of being overpaid for unemployment benefits.

The pause will last until at least May 7 and apply to approximately 398,000 cases where employees collected federal unemployment benefits during the COVID-19 pandemic, state officials said.

Michigan's Unemployment Insurance Agency

During this pause, the Michigan Unemployment Insurance Agency said it aims to complete its review of claimant accounts that may qualify for overpayment waivers. 

The announcement followed a directive from the U.S. Department of Labor in February for state unemployment agencies to expand waivers for potentially thousands of people who were unknowingly caught up in the expedited roll-out of federal unemployment relief. 

“This pause on collections is one of several steps that will provide relief for many Michigan workers,” UIA Director Julia Dale said in a Friday statement.

“There will be more good news in the weeks to come for those waiting to hear about overpayment waivers.”

The announcement is the latest effort to correct issues that affected thousands of Michigan residents who believed they qualified for unemployment under expanded federal rules during the pandemic, only to be notified months after being paid that they were ineligible and owed money back to the state.

The state UIA said the temporary pause was greenlighted by the U.S. Department of Labor after Michigan Gov. Gretchen Whitmer intervened seeking the legal authority to halt state collections until individuals' cases could be reviewed or issued waivers.  

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The UIA said the collections pause applies to cases where workers were told they must pay back benefits that they received: About 385,000 of the total cases include overpayments under the federal Pandemic Unemployment Assistance program. 

That program was targeted at workers who wouldn't usually qualify for unemployment aid, such as gig workers, self-employed or part-time employees. 

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Officials said the pause applies to overpayments of federal benefits received before Sept. 4, when the pandemic unemployment benefits programs under the CARES Act and its extensions expired.

During the pause, UIA said it won't issue new wage garnishments or intercept Michigan state tax refunds, but that the pause would not stop collections activities such as existing wage garnishments, intercepting federal tax returns, deducting a percentage from current unemployment benefit payments, or recovering overpayments for other states.

The agency said that a decision on who qualifies for an overpayment waiver is pending while it tests its system over the coming weeks to identify potential recipients. Claimants will be notified by letter and through their online accounts if they receive an overpayment waiver. 

If state officials conclude that an applicant's overpayment qualifies for a waiver, any money collected on the overpayment would be refunded or applied toward other outstanding debts, the agency said. If a waiver is not applicable, the pause would be lifted and collections would resume.

The agency said that waivers will not be applied to claims where the UIA determines fraud is involved. 

In January, a group of workers receiving notices that they owed back unemployment money they were paid during the pandemic sued the state in a class-action lawsuit alleging a violation of their due process rights and unauthorized collections. 

mburke@detroitnews.com

Staff Writer Beth LeBlanc contributed.