Copyright M Live Michigan
LANSING, MI - In the past month, more than 350,000 Michigan workers were told they must pay back their unemployment benefits, mostly from the COVID-19 pandemic, with some getting bills for thousands of dollars. The Michigan Unemployment Insurance Agency (UIA) says it’s required by law to recollect $2.7 billion in what are called “overpayments,” or when someone got benefits and it was later determined they didn’t qualify. But this effort has caught people by surprise, baffled lawyers and prompted frustrated state lawmakers to probe for answers. Related: ‘It’s so confusing’: Woman gets $16K bill as Michigan demands unemployment money back Michigan UIA Director Jason Palmer addressed the confusion during a Thursday, Oct. 30 hearing held by the Oversight Committee on State and Local Public Assistance Programs. “Anytime we overpay, we have a duty to collect,” he said. Collections on overpayments had been paused for the past three years because of a court order stemming from a 2022 lawsuit that accused the state of illegally demanding money back during the pandemic. Collections started again on Sept. 29. But lawyers, who have been fielding hundreds of panicked calls, are still confused about why people must pay back these pandemic-era benefits. They also say there hasn’t been a clear path for people to challenge the bills, raising questions about due process. David Blanchard, an attorney who represented workers in the lawsuit, says he’s shocked the state agency decided to “wholesale turn on the collections machine” without warning. “A lot of confusion, a lot of concern, a lot of panic,” he said. “And I fear it’s only going to get worse as the agency’s collections machine ramps up toward garnishment and tax return seizure.” Why are people getting collection notices? The Michigan UIA says it’s required by a patchwork of state and federal laws to collect overpaid benefits. Overpayments can occur if someone did not submit the right paperwork, they were unable to work or they gave false information when filing a claim, among other reasons. Palmer said it is “a feature of the unemployment system,” which aims to balance paying benefits on time with program integrity. “To balance those two things is part of my job,” he told lawmakers on Thursday. “I jokingly say to people that I can pay everybody on time, but a lot of times will be wrong. I can also pay nobody on time but will never be wrong.” Related: Unemployment agency demanded money back from 1.8M Michiganders before court order The U.S. Department of Labor requires states to reclaim at least 68% of overpaid benefits, according to Palmer, and Michigan is currently hovering around 5% because of the pause in collections. Of the $2.7 billion in overpayments, about 20% are state dollars and 80% are federal pandemic benefits. “They do not necessarily reflect mistake. It’s not always fraud. The system is designed to pay benefits quickly while information is still being verified,” Palmer said. The state agency says anyone with an overpayment should have been told previously that they needed to pay the money back. “We fully acknowledge and recognize that people may have forgotten about those letters,” Palmer said. “They may have forgotten about the debt. They may have assumed that we forgot or that it was resolved.” Related:350,000 Michigan workers must repay $2.7B in pandemic unemployment benefits But lawyers have questioned why many workers were allowed to get benefits for months without the state catching it. In some cases, people had stopped collecting payments when the agency redetermined their claim. “It’s not unheard of for people to get paid and for the agency to learn at some point in the process that they shouldn’t have been paid. That’s not abnormal,” said attorney Cristine Wasserman. “What is abnormal is the agency shouldn’t pay people until they’ve made a determination that the person is eligible for benefits.” Kelli Johnson, 43, a self-employed business owner, got hit with a $15,150 bill on Sept. 15. “I did everything right, did all my paperwork, got all the approval letters, then all of a sudden, I get a bill for $15,000,” she said. It landed in her mailbox more than five years after the pandemic forced Johnson to shut down her Muskegon County daycare. Without work, she applied for unemployment benefits for the first time in her life and got approved in March 2020. For months, Johnson relied on the money to pay her mortgage, cover bills and buy groceries for her husband and three sons. But a string of confusing letters from the Michigan Unemployment Insurance Agency followed. An October 2021 letter told Johnson she’d been given too much money. In December 2022, another letter said, “the prior determination is reversed” and the state agency decided she did qualify for benefits. She didn’t hear anything for years until Michigan sent her a collection notice last month. And now Johnson, like others facing unexpected steep bills, is figuring out how to fight the collection notice. “They’re not getting it from me. I can tell you that. I’ll fight it tooth and nail,” she said. ‘It’s déjà vu’ This is not the first time Michigan has tried to get benefits back from workers. From 2013 to 2015, the unemployment agency’s computer system, known as MiDAS, falsely accused 40,000 workers of fraud. It automatically garnished wages and seized tax refunds, leading to a lawsuit that accused the state of violating due process. It was settled for $20 million. Then during the pandemic, when the agency was flooded with claims from 3.5 million people, it mistakenly overpaid billions in unemployment due to a miscommunication with the federal government. The state allowed some workers to claim benefits for reasons that were not approved by the feds, and it provided benefits based on gross income instead of net income – two issues that affected 690,000 claimants. Some of those overpayments were waived, but in other cases, the state tried to recover money from workers it retroactively found ineligible for aid. This led to the 2022 lawsuit that accused the state of unlawfully clawing back benefits despite pending appeals. It resulted in a $55 million settlement. Blanchard says it’s been profoundly disappointing to watch the agency “making the same mistakes.” “It feels like déjà vu all over again,” he said. Related: Michigan man owed $25K in pandemic unemployment, class-action lawsuit says What can people do? There are a few ways people can seek relief from these collections. Lawyers like Wasserman are encouraging people to explore their rights and demand an explanation before paying any money back. “Every single person should fight them,” she said. “Don’t make payments because you won’t get them back.” When the state redetermines someone’s eligibility for benefits, they are allowed to challenge that decision. But any protest or appeal must be filed within 30 days, and late appeals can be made with good cause. It will then go before an administrative law judge. But in this collections wave, many of the notices first went out years ago, meaning that deadline has long since passed. “They never should be sending bills without first giving people an explanation of exactly what they owe and why,” Blanchard said. “And allowing them to contest that, it’s kind of a minimum no brainer.” Under the recent settlement, the Michigan UIA cannot automatically collect overpayments until a worker has had the chance to “exhaust any rights to a review or appeal.” The state can also waive overpayments for financial hardship, inaccurate wage information and agency error. Under the law, Michigan is required to waive any overpayments that were the agency’s mistake. That previously occurred during the pandemic when about 350,000 claimants got waivers for the discrepancy between the federal and state. But Blanchard says it’s unclear why that isn’t the case for this latest round of collections. “To a T, every one that I’ve seen is a matter of administrative error on some level,” he said. The Michigan UIA has not provided clarity on why these overpayments are not considered agency error, and when asked, a spokesperson provided a definition for overpayments and a link to an FAQ sheet. The agency also declined a request for an interview. Related: Michigan wrongly took $14K from this single mother. After 8 years, it hasn’t been made right. But Palmer addressed this when speaking to lawmakers this week. “The question that we get is why doesn’t the UIA just waive all of this money? We can’t,” he said. “Waivers are a limited exception to the duty to collect. And there are some provided by Michigan law, with some narrow authority to waive, and federal law also has some limitations on waivers.” The state is encouraging people to request a financial hardship waiver, if they qualify, through their online MiWAM account. Administrative error waivers can only be filed in two ways: by fax or mailing a paper request to a P.O. box in Grand Rapids. About 18,000 waiver requests have been received so far, according to Palmer, and agency staff are working overtime to process them. “It takes time, of course, to do this fact intensive analysis of these cases, but we are working on it,” he said. Lawmakers are also exploring ways to lift the repayment burden from Michiganders. State Sen. Lana Theis, a Republican from Brighton, introduced a bill last week, SB 625 with bipartisan co-sponsors, that would amend the Michigan Employment Security Act to allow the state to waive collections for workers who applied honestly. “For people who acted in good faith, which is the language my bill uses, interacting under the rules that UIA told them existed, this is just fundamentally morally wrong,” she said. Theis said she’s been talking to constituents for the past month who have been slapped with big bills. She even heard from two workers who were approved for benefits through a court ruling, but still never got a cent. And now the state is trying to claw back money they never received. The Michigan UIA has been providing information with workers through an FAQ sheet that’s being updated as questions pop up. And it’s providing ongoing virtual coaching sessions for those facing overpayment collections. Palmer said the agency is also rolling out changes like streamlining the appeals process, redesigning letters and expanding an advocacy program. A new computer system, replacing an old problem-plagued one, is also expected to launch in summer 2026. Despite that, some still plan to fight the collections. “I’ll die before I pay that back,” Johnson said.
