New York’s Labor Department Wants Your Unemployment Benefits Back

In New York, unemployment recipients can be found guilty of fraud even if they thought their information was true. The state demands repayment at the highest rate in the country.

Maxwell Parrott   ·   May 9, 2024
The New York State Department of Labor office in Brooklyn, New York.
The New York State Department of Labor office in Brooklyn, New York. | Maxwell Parrott

One unemployment recipient couldn’t read the application instructions in her native language and didn’t realize she had to report part-time working hours. Another got too much money due to a government miscalculation. A third, who has a physical disability, certified that she was available to work remotely from a hospital bed.

All three committed fraud in the eyes of the New York state Department of Labor, which has tried to claw back unemployment benefits from each of them — and hundreds of thousands of others.

No state pursues unemployment overpayment cases as zealously as New York. The state reported that it had overpaid state-funded benefits to the tune of $425 million between 2020 and 2023 — and found nearly two-thirds of that amount to be fraudulent. That’s a higher share than any other state, and five times the national average, according to data analyzed by labor researchers at the Cornell Industrial and Labor Relations School. When their claims are found fraudulent, unemployment recipients are forced to repay their benefits, even when it could send them into financial ruin.

Many didn’t know they were committing fraud in the first place. States can forgive the obligation to return certain overpayments if they find that recipients have not “willfully misrepresented” their cases, but how they make that determination varies. Many states have a definition of the phrase that requires them to prove a claimant knew they were making false statements. New York has no statutory definition at all, so its labor investigators don’t have to consider whether recipients made an honest mistake in applying for benefits.

“You can have committed fraud, according to the court, even if you believe the information you gave to be true,” said Ciara Farrel, an attorney with the New York Legal Assistance Group.

Legal advocates argue that the Department of Labor takes a punitive approach to overpayment cases under Commissioner Roberta Reardon, who has ignored calls to issue a concrete definition of fraud. Claimants can appeal the department’s rulings to the five-member Unemployment Insurance Appeals Board, but advocates say that the board most often takes an aggressive, prosecutorial approach that presumes individuals to be at fault.

Nicole Salk, an attorney with Legal Services NYC, described the Labor Department’s mindset bluntly: “Wherever you can find a way not to pay the benefits, don’t pay them. Whenever you can recover an overpayment, recover it.”

“You can have committed fraud, according to the court, even if you believe the information you gave to be true.”

—Ciara Farrel, New York Legal Assistance Group

New York is strict with the waiver even in cases where it won’t see the money it claws back. President Joe Biden’s administration has encouraged states to forgive erroneous payments made in the chaos of the pandemic, which pushed record numbers onto unemployment rolls. Nearby states like Massachusetts and Connecticut forgave 28 percent and 19 percent of state and federal cases from 2020 to November 2023, respectively. Deep red Texas forgave 34 percent.

New York forgave just three percent. Most of the cases — totaling over $1.8 billion, across the four years — are repayments of expanded pandemic-era benefits, which go straight to the federal government.

“Even though there’s not a fiscal impact in a great many of these waivers,” said Anjana Malhotra, a senior attorney with the National Center for Law and Economic Justice, the Labor Department operates like “a private insurance agency that presumes that the claimant is at fault.”

A Department of Labor spokesperson said the department is in ongoing discussions with advocates on the issue of overpayments. “We follow the law as written and as it has been interpreted by the courts and the Unemployment Insurance Appeals Board,” they added.

When the Unemployment Insurance Appeals Board determined that Hameeda Bano had committed fraud, she found it “completely baffling.”

Bano, a single mother from Pakistan who lives in Flushing, Queens, doesn’t speak much English. After losing two teaching jobs at separate childcare centers during the pandemic, she filled out an English language application for unemployment benefits to the best of her ability. The Labor Department does not publish applications in Urdu or Pashto, the languages she speaks, but she managed to get approved.

There were no Urdu or Pashto instructions on the department’s website, either, nor phone operators who could speak either language. So Bano enlisted a neighbor to help her undertake the weekly process of proving her eligibility. (The Labor Department spokesperson said the department will provide a translation of any vital document using a vendor when asked.)

Shortly after Bano got her first round of benefits, one of the childcare centers offered her a few hours of work a week. She didn’t certify those hours to the Labor Department because her neighbor had told her not to report part-time work, she told New York Focus in an interview translated by her English-speaking son, Waleed. The benefits helped keep her financially afloat during a time when she lived “hand-to-mouth,” with little savings and while supporting Waleed through college.

“Even if I don’t have a roof over my head, I’m not going to ask for unemployment benefits ever again.”

—Hameeda Bano

A year and a half later, after she had returned to full-time work and ended her benefits, she came home to a notice from the Labor Department. It was seeking nearly $30,000 in overpayments and penalties for fraudulently misreporting her hours.

“That number just caused me a lot of anxiety, a lot of stress, disturbed my sleep patterns,” Bano said. “It really took a toll on my mental health.”

Waleed helped her appeal the decision. After six months of hearings, an administrative law judge found Bano did not “willfully misrepresent” the number of hours she worked, because she did not understand the English-language instructions. With the fraud determination reversed, the Department of Labor waived the overpayment based on financial hardship.

She breathed a sigh of relief. But it was too soon. The commissioner’s office challenged her case before the appeals board, which overturned the judge’s decision.

“We are not persuaded by the claimant’s testimony,” wrote board member Michael Greason in his decision. “Each week’s certification referred to the handbook and advised the claimant that she was required to read it.”

The question Bano failed to answer accurately was written “in plain language,” he added.

Unlike many states, New York does not explicitly define willful misrepresentation in its statute. Instead, Labor Department employees have used decades of case law from the appeals board and longstanding norms to guide decisions.

“Where there’s no definition of fault, that’s where these more conservative and anti-claimant perspectives have crept in to deny folks who should be eligible for waivers for repayment recoupment,” Malhotra said.

The Labor Department has found fraud even in cases where the department itself was responsible for the error.

In one recent case, Labor Department employees prescribed too much federal pandemic assistance after confusing an applicant’s gross and net income.

Over six months later, the state realized the error and tried to claw back $10,000 in overpayments. The applicant, who asked to go by her initials, MS, applied for a hardship waiver. The department denied her, saying her retirement savings were too high to qualify for forgiveness — a threshold that the federal government leaves up to states to decide.

“Basically I would’ve had to take money out of my retirement that I of course had carefully saved for and calculated to have enough to retire on,” MS told New York Focus.

When MS enlisted the help of legal advocates, the department incorrectly found in a second review of her case that she had misrepresented her income — a move that would have stopped her waiver dead in its tracks.

“The whole situation was just like one disaster after another,” MS said.

It wasn’t until the advocates directly contacted the department’s Deputy General Counsel Laura Campion that the department rescinded the fraud determination and finally approved the waiver.

“There are hundreds if not thousands of [people like MS] throughout the state that give up,” said Victor Brito, a Legal Services paralegal who worked on the case. “They say, ‘I don’t have time to go to these hearings. I don’t have time to call this advocate and wait for them to call me back.’”

DOL Commissioner Roberta Reardon (red jacket, left) with Governor Kathy Hochul at a Women's Equality Day event in Albany on August 26, 2022.
DOL Commissioner Roberta Reardon (red jacket, left) with Governor Kathy Hochul at a Women's Equality Day event in Albany on August 26, 2022. | Mike Groll / Office of Governor Kathy Hochul

Alarmed by the flood of benefit clawbacks, a group of legal advocates began meeting regularly with Labor Department representatives. At one meeting, Reardon, the Labor Department commissioner, assured the group that language access rights, inclusivity, and equity were important to her, attendees said.

Her words rang hollow. Advocates have urged Reardon to direct her staff to take a more lenient approach to overpayment cases and to issue a formal definition of fault. She has not done so.

“If they have a commissioner who really cares about workers, they’re gonna make policy that’s pro-worker,” Salk said.

Farrell urged the importance of training unemployment program staff, whom she said are often unaware of regulations that have been on the books for nearly a decade. “We’ve had people testify on the record with no idea of what the language access rights or laws, both state and federal, are,” Farrell said.

Another change in direction could come from Governor Kathy Hochul, who appoints the members of the UI Appeals Board — three of whom are serving on expired terms and are slated to be reappointed or replaced this session.

“There are hundreds if not thousands throughout the state that give up.”

—Victor Brito, Legal Services NYC

A bill proposed by state Senator Brad Hoylman-Sigal would also offer relief by creating a waiver program to forgive state unemployment. (The federal waiver pushed by Biden can only be used for the expanded pandemic-era programs, not regular state benefits.) The bill would also establish a concrete definition of unemployment fraud, and it would direct the Labor Department to evaluate whether clawing back benefits would be against “equity and good conscience.”

“I think it would set off a cascade shift in the state appeals board rulings, and it would result in a much more humanitarian and lenient approach,” Malhotra said.

The bill was first proposed last year, when it passed the Assembly but did not get a floor vote in the Senate. According to Hoylman-Sigal, there was a “lack of advocacy,” and neither lawmakers nor advocates prioritized the issue.

The bill wouldn’t retroactively help people like Bano, whose case has been closed. A legal advocacy coalition has filed a civil rights complaint with the federal Department of Labor on her behalf, arguing that she and two other claimants were denied equal access to federally mandated benefits because they do not speak English.

Regardless of the outcome, Bano said she’ll never look at the government program the same way.

“One thing is for certain, I don’t want anything to do with them,” she said. “Even if I don’t have a roof over my head, I’m not going to ask for unemployment benefits ever again.”

Correction: May 10, 2024 — An earlier version of this article stated that New York found nearly two-thirds of overpayment cases from 2020 to 2023 to be fraudulent. In fact, it found nearly two-thirds of the total amount of money overpaid in those cases to be fraudulent.

Maxwell Parrott is a freelance journalist based in New York City.
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