UIA questions pause on unemployment overpayment collections

Beth LeBlanc
The Detroit News

The status of collections activities on alleged overpayments of unemployment insurance is unclear once again as the Michigan Unemployment Insurance Agency has urged a judge to clarify an order pausing collections on overpayments. 

The confusion stems from a June 13 order in a class action lawsuit in which Michigan Court of Claims Judge Brock Swartzle issued a preliminary injunction, halting state unemployment collections activity in cases where a claimant is appealing the agency's determination that he or she was overpaid. 

In its Tuesday motion for reconsideration — filed three weeks after Swartzle's initial order — the state Unemployment Insurance Agency asked the judge to "clarify the parameters of the preliminary injunction" but did not challenge the injunction itself. 

Brock Swartzle

The agency said in its filing it seeks to understand the scope of "who the injunctive relief applies to, whether collection suspension applies to untimely or late appeals, and what collection activity must be suspended."

Swartzle on Wednesday called for further briefings on the matter to be submitted by Aug. 3 since "the court believes that proper resolution of the questions would be aided by application of the adversarial process."

It's unclear whether the agency stopped collections after Swartzle's initial June 13 order or if it will pause them through August while awaiting briefings and a final order on the issue. The agency did not immediately respond when asked Wednesday whether it ever paused its collections after Swartzle's June order. 

David Blanchard, a lawyer for the plaintiffs in the case, said he doesn't believe the agency ever complied with Swartzle's order to stop collections.

"I’ve tried my best to confer with the agency's lawyers and pursue the administration of the judge’s order," Blanchard said. "Sadly and ironically, the agency’s press releases ... don’t really match up with what they’re actually doing, whether it's collections against individuals or the argument they’re making in court.”

The agency's hesitance to stop collection doesn't ring true since both state and federal law allow the agency to grant waivers for overpayments made due to an agency error, Blanchard said.

The January class action lawsuit challenging the state Unemployment Insurance Agency alleged the agency violated the due process rights of claimants by collecting money from them while their appeals were still pending.

The lawsuit was filed as the agency sought to claw back benefits it said were erroneously paid to countless claimants during the rushed rollout of expanded unemployment aid during the early days of the COVID-19 pandemic. 

The agency has confirmed the authorization of at least 55,000 overpayment waivers and had paused collections briefly between April and May with permission from the U.S. Department of Labor. 

In his June 13 order requiring the agency to pause collections, Swartzle noted the agency had already agreed in a separate 2017 federal settlement that it would not recover overpayments until the individual had gone through the full administrative appeals process. 

"To say that the agency’s efforts at identifying and recouping erroneously paid benefits have been uneven and challenging would be an understatement," Swartzle said.

In its Tuesday filing, the unemployment agency asked Swartzle to clarify whether his injunction order should be limited to the named plaintiffs in the suit or all similarly situated individuals fighting overpayment decisions. 

The agency argued Swartzle's order should be limited to the named plaintiffs because the class hasn't been certified in the case. 

The agency also bucked at the order's requirement to pause all collections without detailing how that would interplay with laws that bind the collection process or whether those who had filed untimely protests or appeals were also included in the injunction.

"Defendants are legally required to intercept tax refunds in certain cases, and therefore, defendants asks that these tax intercepts be excluded from the injunction due to the confines of federal law," the filing said.