Help! I've Been Accused of Unemployment Fraud!

Let me tell you a story.

After you lost your job, you applied for unemployment benefits, and a week later you started getting checks (or direct deposits). You used that money to pay your bills while you searched for work. You kept a diligent diary of your work search; you interviewed, you went to job fairs, and when you were finally hired by a new (and no doubt better!) company, you promptly stopped claiming benefits. Unemployment insurance did what it was supposed to do—it was the safety net that paid your rent and bought you groceries while you got back on your feet. And now you're done.

At some point while you were unemployed, you may have gotten a follow-up letter from the Department of Labor asking for more information about your situation. It may have said at the top that "The Department of Labor has received information that you may have quit your former employment," or "may have been discharged for misconduct," or something like that, and asking for more information. You may not have thought much of it at the time—you're pretty sure you answered, gave them the information they asked for—after all, you didn't quit, or maybe you had good reason to quit, or you weren't discharged for misconduct, or maybe you didn't do the thing your boss accused you of. What could be the problem?

Weeks or months later, an official-looking letter from the State of New York turns up in the mail. You open it and your heart sinks. The first page reads: NOTICE OF DETERMINATION OF INELIGIBILITY OR DISQUALIFICATION. But I already got benefits, you think, what gives? The worst is yet to come. The real shock arrives when you turn the page and read: NOTICE OF DETERMINATION OF OVERPAYMENT AND REQUIREMENT FOR REPAYMENT. The state wants thousands of your dollars. I already spent that money, you think. I thought it was mine. Why didn't anyone tell me about this sooner? Your heart is pounding as you think about your bank account balance and how you're going to afford this.

As you read on, the letter piles insult onto injury. You learn that you're being accused of a "willful misrepresentation," which you realize quickly is a four-dollar phrase for "unemployment fraud." Now you're not just scared, you're incensed. I'm not a liar, you think. Why am I being called a liar?

Stop and take a breath.

You're not alone.

This happens, by my estimation, to thousands of New Yorkers every year. Also by my estimation, only a small percentage of the New Yorkers receiving these letters actually got caught committing deliberate unemployment fraud. Like you, most of them are shocked and appalled at the accusations in this little piece of paper, the cavalier way that it says you stated something in your certification "when in fact you knew" that wasn't true.

Most importantly, you have a right to defend yourself.

What do I do first?

There are two equally important first steps.

You should talk to a lawyer experienced in unemployment insurance hearings.

And you need to timely request a hearing.

Try to talk to a lawyer first, if you can. But under the law, you must request a hearing within 30 days after the notice of determination is mailed. If you are getting anywhere close to this deadline, request a hearing yourself, even if you don't have a lawyer yet. It is extremely difficult or even impossible to protect your rights if you miss the deadline to request a hearing. In your hearing request, you are not required to make a complicated factual or legal argument. If the Notice of Determination said you quit and you didn't, you can say "I didn't quit." If the Notice of Determination said you were fired for misconduct and you weren't, you can say "I didn't commit misconduct." You will have an opportunity to flesh things out at the hearing.

(A note on timeliness. The Board's rules (Rule 461.1(a), to be exact) says you have 30 days from when you received the determination to request a hearing, which is always a few days after when the determination was mailed. If you are a couple days (up to 5 days) past the deadline as measured from mailing, this rule can save you. Don't put yourself in the position of needing to be saved. Request a hearing within 30 days of mailing.)

Why is this happening now if I already got my benefits?

When you submit an application, the Department of Labor takes a look at your responses and decides if you're eligible. If you told the Department that you lost your job through no fault of your own—most importantly, that you didn't voluntarily quit and weren't fired for disqualifying misconduct—and if you tell them that you're currently not working, they're likely going to start paying you.

However, after you start getting paid, the employer will typically have an opportunity to object. The employer might tell the DOL you quit, or were fired for misconduct—these are the most common issues leading to notices of overpayment. The DOL might also learn, from one source or another, that you've been working while claiming benefits and inaccurately reporting your time.

The DOL's investigation isn't always thorough. Often it takes the employer's statements at face value instead of yours. It makes a decision that, even though you got paid benefits, the you weren't actually entitled to them. And that means you received an overpayment.

Why does the DOL pay first and ask questions later? Well, your landlord and grocery store weren't going to extend you credit while waiting for the DOL's final decision; you needed money and you needed it right away. The DOL pays, even when an employer objection is pending, because they don't want people who are eligible to go without, just because there's been an objection. That's laudable in principle, and it helps a lot of people. But it also leads to the unfortunate situation where you're now being asked to repay benefits you already received.

Why do they say I have to pay it back?

Under N.Y. Labor Law § 597.4, you generally get to keep benefits you've already been paid, even if it's later found that you weren't entitled to them, unless you made a "false statement or representation... in connection with [your] claim for benefits." If you make a factually false statement, even unintentionally, the Department can try to recover those benefits from you.

However, "a mistake of law... is not a factually false statement." It's often possible to characterize mistakes as mistakes of law, especially where the facts lend themselves to multiple interpretations.

Why am I being charged a penalty?

A penalty is charged if you make a "wilful false statement or representation." These are legal terms of art (and yes, the statute only uses one "L," but I'll use two). They require a lesser burden of proof than the government would need to charge you with criminal fraud. Unfortunately for claimants the Board and the courts have not always been careful to distinguish a "willful" false statement (which results in a penalty) from an unintentional false statement (which can still result in a recoverable overpayment, but no penalty by itself). Indeed, the Appellate Division has effectively read "willful" out of the statute by holding that "there is no acceptable defense to making a false statement." The Board has sometimes followed the Appellate Division's mistake in a truly Orwellian manner, stating that

...Labor Law § 594 requires willfulness, which means "knowingly, intentionally and deliberately making a false statement"... Although the claimant contends that it was an unintentional mistake, the court notes that "there is no acceptable defense to making a false statement and a claim that the misrepresentation was unintentional is not sufficient".

So does it have to be intentional or not? Are you kidding me? This obviously makes no sense.

It's also in direct conflict with higher authority. In the Valvo case, the Court of Appeals (New York's highest court) clearly held that whether someone makes a false statement, and whether they did so willfully, are two distinct questions. Yes, the Court says, "section 597 permits recovery of benefits received within the past year when the claimant has made a false statement of fact even though unintended." But the law is "designed to provide relief to claimants," by eliminating penalties, "when an overpayment or erroneous payment of benefits resulted from an honest mistake". The more recent cases holding that an "unintentional mistake" still constitutes willful misrepresentation are blatantly in conflict with the Court of Appeals' holding in Valvo.

That started to sound like legalese.

I can't help it.

So what arguments can I make?

It depends on the individual facts of each case, of course, but for many claimants the best strategy to defend against accusations of willful misrepresentation has two components.

The first is to prove you are actually eligible for benefits. If the facts show you're actually eligible, then there was no overpayment to recover and you generally won't have made a willful misrepresentation. Burdick Law PLLC has successfully helped claimants to prove their eligibility for benefits and defeat accusations of fraud

For example, if the employer says you were fired for misconduct, you can show that you didn't actually commit misconduct. Although the employer was probably allowed to fire you just because it suspected misconduct—or even because it found misconduct after an internal investigation—you can't be denied benefits unless the Board concludes you actually committed the misconduct. Think of it as the chance to clear your name that the employer didn't give you. Sure, at the first level of decisionmaking, the Department of Labor simply bought the employer's story; but on review before an administrative law judge, the Board will need some actual evidence of wrongdoing. If the employer can't provide that, you'll hopefully have your benefits reinstated. And even if they provide evidence, you'll have the opportunity to rebut it.

The second is to prove that, even if you're not technically eligible, you didn't make any factually false statement. If you gave the DOL completely accurate information and they mistakenly gave you benefits, that's not your fault. For example, during the early days of the pandemic, many employees applied for benefits because they weren't working, but the employer was still paying them. (Remember, a lot of people thought the shutdowns would last a week or two!) Those people weren't eligible—because they were still employed and earning money—but the DOL paid some of them benefits. The Board held that where the employees truthfully said they weren't working, they weren't responsible for repaying money the DOL improperly paid them.

Finally, even if you made a factually false statement, you can argue that you didn't do so wilfully—that it was an honest mistake. This is a last-ditch argument for two reasons. First, as noted above, if you prevail, you'll still have to pay back your benefits—you just won't have to pay the penalty. That's something, but of course you'd rather not pay anything. Second, as also noted above, the Board has not always been receptive to this argument, improperly (but persistently) treating all false statements as willful.

Can you help me make those arguments?

Burdick Law PLLC offers free consultations in unemployment cases. If we offer you a retainer, you pay only a $600 deposit to start representation. When the case is over, the Board reviews our fee before you're charged anything, and if we don't get you results, your deposit is refunded. Submit our contact form today to start fighting your unemployment fraud case.