TASB Risk Management Fund
INSIDERM

Pulling Back the Curtain on Unemployment Compensation Fraud

January 21, 2021 James Ezell

Benefit fraud

The unemployment compensation system is designed to ensure eligible Texans get the benefits they are entitled to under the law. Sadly, criminals are cheating the system during the pandemic. You can protect your Unemployment Compensation account and your honest employees if you know what to look for and how to address fraud.

Which common types of fraud has the Fund seen during the pandemic?

The federal government has increased unemployment benefits because of the pandemic. Texas Workforce Commission (TWC) data shows suspicious claims skyrocketed from 1,142 in 2019 to 234,268 in 2020.

Fraud falls largely into three buckets:

Identity theft

This criminal fraudulent activity occurs when a thief steals your employee’s identity and files an unemployment compensation claim with the Texas Workforce Commission (TWC). Often, the employee has no idea that his or her identity has been stolen.

Part-time employee fails to report wages

This activity is fraudulent but may be the result of a misunderstanding on the claimant’s part.  It occurs when an employee works part time for the district and part time at a restaurant, for example. If the employee loses the restaurant job but continues working part time for the district, they must report those wages to the TWC each week of their claim period.

The Fund can ask the TWC to audit the claim and see if the employee is reporting their part-time earnings. This is important because while the claimant may be considered partially unemployed, the TWC offsets any wages earned each week and deducts them from the claimant’s weekly benefit amount. This helps prevent a school district from being unnecessarily billed for the claimant losing a job that had nothing to do with their ongoing employment with the district.

Full-time employee fails to report wages

Suppose a district employee is working full time for you at the district, as well as part time for someone else, such as driving a car for Uber. If they lose the part-time job and file a claim for lost income from that part-time job, they must still report the wages you are paying them. To the TWC, this person is not considered unemployed under the Texas Labor Code because they are still working full-time hours for you.

The Fund works with the TWC to have these claims voided because benefits are not payable to a claimant who is still working their normal, full-time hours, even if their part-time job paid more than the full-time job. In fact, the TWC can assess civil and criminal penalties if the claimant purposely withheld information about their continued income or otherwise attempted to fraudulently obtain unemployment benefits. As in the previous example, this activity is fraudulent but may be the result of a misunderstanding on the claimant’s part that should be corrected.

How can members protect against claims involving failure to report wages?

Review your quarterly statements for suspicious activity. Employees who continued to receive their normal paychecks, especially during school closures due to the pandemic, are not entitled to full benefits if they continued to receive partial pay from you. If they received their full-time pay, they may not be entitled to benefits at all.

Cooperate with the TWC by completing their Request for Earnings Information form timely and accurately. This form is sent quarterly to employers so they can verify how much a claimant continued to earn from them while filing claims. Do not visit your employer portal to complete the request. Instead, go to the Unemployment Benefits Earnings Verification webpage, and follow the instructions. You may also receive a Wage Verification Notice – Reimbursing Employer Base Period Wages Only form. These may be an indicator that a current employee filed a claim but named another employer as their last place of work, such as our hypothetical restaurant or Uber employee.

Pro tip: If your organization typically identifies multiple fraudulent claims per week, streamline your reporting by sending them to the Fund in batches instead of one at a time.

What if we suspect a claimant failed to report wages?

Email James Ezell, the Fund’s Unemployment Compensation attorney, and report your suspicions to the TWC. There is no deadline for asking that a full-time district employee’s claim be voided if they continued to work for you when it was filed. If the claim is proven invalid, the TWC will stop future payments and require the claimant to repay the benefits. The claim will appear on your statement, but you will be credited the amount as the benefits are paid back. If the fraud is found to be willful, the TWC can assess a 15 percent penalty to the claimant, payable to the TWC. If there is criminal intent in the case of identity theft, separate criminal charges could be filed.

Can you share red flags for fraud involving identity theft?

The biggest giveaway is when you receive a claim for someone who is still working. Other red flags include misspelled names, maiden names used instead of married names, incorrect employer account numbers or Social Security numbers, use of incorrect district addresses, and claims for people who never worked for you. Identity theft is rampant during the pandemic. Victims typically have no idea someone stole their identity, so review every claim carefully. It is perfectly acceptable to call an employee and ask if it was, indeed, them who filed the unemployment claim. The Fund has seen cases again and again where the employee had no idea their identity had been used fraudulently to file a claim. This obviously leads to a distraught employee, so there are steps they may want to take.

How should we advise identity theft victims?

If you suspect a claim is fraudulent, ask the victim whether they filed it. Advise victims to follow these TWC tips for reporting identity theft.  The tips include filing a report with the Federal Trade Commission. Victims might receive an overpayment decision from TWC as it tries to collect the money that was advanced to the thieves, but victims are not responsible for repaying the benefits.

When should we report identity theft claims to the Fund?

Email James Ezell as soon as possible. He can advise you what information the TWC needs to stop a fraudulent claim.

Need expert support?

Fund members with Unemployment Compensation coverage benefit from expert support at no additional charge. We encourage you to reach out for assistance with issues such as understanding your coverage, responding to fraudulent claims, preparing for TWC appeals and hearings, and complying with other legal requirements.

Tagged: benefits, fraud, "wage reporting"