A proposal that would halt efforts to claw back millions of dollars in unemployment benefits mistakenly paid to out-of-work Virginians is advancing in the General Assembly — one of the only surviving measures aimed at addressing the state’s struggle to administer jobless benefits amid the pandemic.
The bill would forgive an estimated $18 million in overpayments made since March as a result of errors by the Virginia Employment Commission.
The measure’s sponsor, Del. Sally Hudson, D-Charlottesville, presented the idea as a logical and compassionate alternative to sending already-struggling residents to collections.
“They applied in good faith, they committed no fraud, they received benefits for several months and used them to pay for rent and gas and groceries,” Hudson said. “Then five months later, they got a very scary letter from the state that said you now owe $10,000 back that you don’t have.”
Virginia is one of just 11 states that doesn’t forgive any overpayments, according to the U.S. Department of Labor. The Virginia Employment Commission has taken no stance on the bill, but its staff told lawmakers this week that even if they tried, it was unlikely they would be able to recoup much of the money.
The employment commission said it identified overpayments to more than 26,000 claimants totaling $47 million as of the end of 2020. Overpayments typically occur when the state begins paying benefits to an applicant who is later deemed ineligible, but during the pandemic, the state has also made a variety of errors that have led them to pay out then seek to recoup benefits.
In May, the agency sent letters to nearly 35,000 applicants informing them that they were overpaid between $600 and $1,200 and warning that the agency would be attempting to get the money back.
Another issue stemmed from requirements surrounding the Pandemic Unemployment Assistance Program, which for the first time extended benefits to contract and gig workers. To be eligible, an applicant had to first apply and be rejected for traditional benefits, but in some cases, those initial applications were accepted by the state’s automated system and payments were started.
Because the agency’s phone lines were overwhelmed by callers, applicants had no way to contact the commission and attempt to correct the error. That’s what happened to Daniel Doherty, a 31-year-old marketing freelancer in Charlottesville, who said he was shocked when he began receiving checks the employment commission had linked to a part-time job at a bed and breakfast he’d left voluntarily more than a year ago.
He said he tried unsuccessfully to try to get his benefits transferred to the PUA program for which he was actually eligible, but that he was never able to get through. “I stayed on hold once for six-and-a-half hours just to see how long it could go,” he said.
Three months later, when the commission realized its error, a letter arrived informing him that his benefits had been cut off and he would be required to pay back the $3,750 he’d received. He said he was never able to receive benefits he was entitled to as a self-employed worker.
“The whole purpose of this system being set up is to help those that are going through a hard time and all it’s done for me is given me a hard time,” Doherty said.
Hudson’s legislation would apply only to a portion of overpayments. The state would continue attempts to recoup money paid out due to fraud or errors on the part of an applicant. It would also require people who were overpaid because of an agency error to return the money if doing so wouldn’t create an undue economic hardship.
So far, the measure has won consistent support from Democrats in the General Assembly. It passed the House of Delegates last month and is working its way through the Senate. But many Republicans have opposed the measure because it would likely lead to increased taxes for businesses, who fund the unemployment insurance program through assessments on their payrolls and are facing the possibility of massive tax increases as a result of the record jobless claims that followed the pandemic.
“I really think this sends the wrong message that we’re going to tell someone who got an overpayment that they don’t have to pay it back,” said Sen. Steve Newman, R-Bedford. “If we do, I sure hope it doesn’t come from the trust fund. If it’s going to be assistance to Virginians, we ought to put it in the budget, we ought not do it on the backs of businesses.”
Business groups, including the Virginia Retail Federation and the Virginia branch of the National Federation for Independent Businesses, have also testified in opposition to the bill.
Hudson countered that Virginia is unusual in seeking to recoup overpayments that are the fault of the agency and that the measure would simply bring the state inline with the vast majority of the country. She said the agency should invest its time and money in avoiding errors rather than attempting to correct them through collections efforts.
Virginia’s unemployment insurance program has strained under the massive surge in claims since March, and applicants and recipients continue to report difficulties dealing with the agency. Last year, Virginia’s months-long backlog to review applications earned the state a last-place ranking from the U.S. Department of Labor.
At the end of the year, Gov. Ralph Northam moved to address the issue by ordering the agency to stop cutting off benefits until potential eligibility problems can be adjudicated — an approach Hudson’s legislation would permanently write into state code.
But other legislative efforts aimed at addressing issues with unemployment benefits have faltered.
Lawmakers in the Senate this week voted down a bill approved by the House of Delegates that would have given the Virginia Employment Commission more leeway in approving applications from people who were unable to return to work because of a COVID-19 diagnosis or who had rejected an employment offer because the business that made it was not complying with pandemic safety standards.
“We know people are in a really tough position now,” said Del. Kathy Tran, D-Prince William, who proposed the bill.
Democrats and Republicans on the Senate committee that reviewed the legislation worried that it wasn’t drafted narrowly enough to avoid abuse, questioning how the employment commission would determine whether a business was or wasn’t complying with safety rules.
The committee did, however, approve a bill proposed by Tran that would shift some of the state’s communication with people seeking jobless benefits from the U.S. Postal Service to email. Tran said the state had spent $2.8 million on postage since the beginning of the pandemic.
Correction: An earlier version of this story misstated the name of Daniel Doherty, the claimant who received an overpayment notice from the Virginia Employment Commission.