Among the many challenges brought on by the COVID-19 pandemic, one issue facing employers has proven to be more difficult to face than others. Unemployment fraud has become an excessive problem for many – one that, until now, many employers haven’t had to concern themselves with. Unemployment claims are being processed in numbers that have never been seen before, and many state unemployment departments are doing so with insufficient controls and outdated systems.
We hope to provide employers with the information they’ll need to understand and address this growing issue by offering a set of best practices and action steps for both employers and employees that have been affected by fraudulent unemployment claims.
A Case of Unemployment Fraud
The Illinois Department of Employment Security or IDES is the agency responsible for processing unemployment claims in the state of Illinois. They receive claims, verify them using data reported by employers, and then process payments if employees are found to be eligible – a rather straight forward process under typical circumstances. However, due to COVID-19 and the impact it has had on the workforce, they have seen a tremendous increase in the number of claims being processed. In addition, there is a demand to process claims more quickly. In meeting this demand, the level of scrutiny used to process claims has decreased. With heightened demands, less scrutiny, and the use of insufficient controls, the result has been excessive fraud.
The IDES reports receiving approximately 14,000 claims of identity theft in only five months. A dramatic increase compared to just a year ago, reporting just 651 in the same time frame. There have been several reports from employees of other instances indicative of fraud as well, such as IDES debit cards unexpectedly arriving in the mail, letters for deceased spouses, and claims for children who have never been employed.
Multiple stories from Illinois and national news stations revealed several cases of fraudulent activity in both the state of Illinois and nationwide. You can view them here:
- Illinois Attorney General [Kwame Raoul] Received a Fraudulent Unemployment Card
- Unemployment Fraud Claims Soar 2000% for Illinois Department of Employment Security
- Widespread Unemployment Fraud is Overwhelming State Systems
What Does It Mean For Employers?
Unemployment benefits function similarly to health insurance. In most instances, the employer will pay into an unemployment fund which is handled by the state and determined by their tax rate. Unemployment claims are granted based on the eligibility of the employee (despite how much the employer has paid into the fund). In the case of Illinois, the tax rate is determined by the dollar amount of claims paid by the employer in the previous year as a portion of total payroll. This creates a big issue the more claims there are to be paid. The tax rate increases as the number of claims paid out rises. Therefore, fraudulent unemployment claims have a direct impact on the amount paid in unemployment taxes. The difference, based on the current minimum and maximum tax rates, could be as much as ten times more than what is normal.
How Employers Can Take Action
Regardless of legitimacy, when an unemployment case is filed, employers will receive a notice of claim. As the employer, if you receive a notice of claim, and the employee is still employed, you should immediately dispute the claim according to the process of your state. Additionally, you should take the opportunity to alert the department responsible for processing claims that there is suspected fraud on the claim. You should also notify the employee that the claim is filed for that there is suspected fraud in their name.
How Employees Can Take Action
As an employee, if you receive notice of a fraudulent unemployment claim from an employer or a notification of unemployment benefits when you haven’t filed, it is likely due to some form of identity theft. Identity theft can be a very serious issue so it is imperative that you follow these steps:
- DO NOT cash any checks or use any debit cards received
- Contact IDES to notify them of suspected fraud (submit online here OR call 800-814-0513)
- Contact the Illinois Attorney General’s Identity Theft Hotline (call 866-999-5630)
- Contact their Identity Theft provider (i.e. LifeLock, Experian, Identity Guard)
- Place a Credit/Security Freeze on your credit report.
- Contact the Federal Trade Commission for additional information and guidance
The Importance of Unemployment Fraud Awareness
Unemployment fraud is an incredibly serious matter and it deserves the attention of every employer. Failing to be aware of unemployment fraud is a failure to protect your company’s interests and the interests of your employees. For assistance with communicating this information to your employees, contact your HR manager or HR advisor. If you’d like more information on the topic of unemployment fraud or other human resources topics, please contact us at Launchways.