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Pulling Back the Curtain on Unemployment Compensation Fraud


The unemployment compensation system is designed to provide temporary financial support to Texans who are unemployed through no fault of their own. Sadly, some people abuse the system.

You can protect your schools and your employees if you know what to look for and how to address fraud.

What are the most common types of fraud?

Unemployment compensation 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, your 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 wages earned each week and deducts them from the claimant’s weekly benefit amount.

Wage offsets help 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 works full time for you and part time 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’re paying them.

Because the employee is still working full-time hours for you, the TWC does not consider them unemployed under the Texas Labor Code.

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 schools protect against claims involving failure to report wages?

Review your quarterly statements for suspicious activity, and cooperate with the TWC by completing the Request for Earnings Information form timely and accurately. The 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 website, and follow the instructions. You may also receive a Wage Verification Notice – Reimbursing Employer Base Period Wages Only form. The form could indicate 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.

What if we suspect a claimant failed to report wages?

Contact the Fund 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
  • Incorrect district addresses
  • Claims for people who never worked for you

Identity theft victims typically have no idea they’ve been targeted, so review every claim carefully. It is perfectly acceptable to call an employee and ask if it was, indeed, them who filed the claim.

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?

Notify the Fund as soon as possible. We can advise you on what information the TWC needs to stop a fraudulent claim.

Have Unemployment Compensation Questions?

Members with Unemployment Compensation coverage can request training and support from TASB Unemployment Compensation Attorney James Ezell at 800-482-7276, x2857 or

James Ezell

James Ezell serves as TASB unemployment compensation attorney. Ezell supports Fund members in preparing for TWC appeals and hearings, protesting claims, and getting fraudulent claims voided.

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