Change in Law of Unemployment Overpayments: If You Snooze, You Lose

Jill Jensen-Welch Iowa Employment & Labor Law Dickinson Law Firm Des Moines Iowa

Posted on 07/01/2013 at 10:26 AM by Jill Jensen-Welch

Raise your hand, Iowa employers, if you recently received this letter from Iowa Workforce Development. If not, you should be advised that, effective July 1, 2013, Iowa's law on unemployment payments changes in the following two ways: 1. Overpayments Effective on July 1, 2013, employers who do not participate in the initial fact finding interview will be charged for any benefits paid to the claimant, even if the employer later appeals the award of benefits and it is ultimately determined that the employee was not eligible for the benefits that were paid. Previously, this harsh rule applied only to agents of employers who were hired to handle unemployment claims, and not when employers handled the claims themselves. Now, it is the rule for all. This applies equally to contributory employers (those who pay a percentage of payroll to the state each quarter) and reimbursable employers (nonprofit companies who have chosen to pay nothing until unemployment benefits are awarded). So, by way of analogy, if you hit the snooze button when the fact finding interview alarm goes off, you will be penalized, even if you get to work on time and succeed in successfully challenging the unemployment claim. If you're scratching your head to understand this, let me back up and explain it in more detail. When a person makes a claim for unemployment benefits in Iowa, the employers who paid wages to that person in the previous 5 quarters (the base period), and the claimant's most recent employer are supposed to be notified of the claim. Then, each employer has a 10 days from the date the Notice was first mailed to submit a protest of the claim. If protested, a quick fact finding interview is scheduled, by phone, for the employer and claimant to discuss the claim. At times, based on the information disclosed by the claimant in the initial filing, a fact-finding interview will be automatically scheduled. The fact finder issues a quick determination, and if benefits are awarded payments begin immediately. Benefits are not paid out until the fact finder says so. If the employer disagrees with the fact finder's determination to pay benefits, it can appeal. If it is determined, after all appeals are exhausted, that the claimant should NOT have received benefits, any payments already made are considered an 'overpayment.' Iowa Workforce Development, in theory, attempts to collect the overpayment from the claimant. As you might imagine, that is difficult, and the IWD does not have the resources to prioritize collections. In the past, employers were not penalized for that, and the employer's unemployment account was not charged for overpayments (whether the overpayment was collected or not). Apparently, the lack of a penalty for non-participation in the early fact finding interview led some to skip that step in the process and just appeal if benefits were awarded. The July 1, 2013, change in the law is designed to discourage employers from engaging in this kind of 'sandbagging,' and also to comply with federal unemployment requirements. Employers who used agents to handle their unemployment claims have been subject to this same penalty several years. The penalty now applies to employers who represent themselves in unemployment matters, too. 2. Fraudulent Payments Also effective July 1, 2013, there is a new penalty for claimants who fraudulently obtain unemployment benefits. Claimants always had an obligation to repay benefits fraudulently obtained, but now they are also assessed a mandatory 15% penalty on top of that. Unemployment benefits fraudulently obtained include those (1) obtained by nondisclosure or misrepresentation of a material fact to IWD by the claimant or anyone else, such as a witness for claimant; (2) received while any conditions for receipt were not fulfilled (such as contacting 2 employers per week); and (3) received when the claimant was disqualified from receiving benefits for any reason. When a claimant has fraudulently obtained benefits, IWD can recoup those benefits by either seeking repayment, or deducting it from future benefits owed to the claimant. If IWD seeks repayment, it is allowed to file a lien with the county recorder in the county where the claimant owns any real or personal property. The IWD may use these same means to collect the new 15% penalty. If the penalty amount is collected, it goes to the general unemployment trust fund, and is not credited to the employer's unemployment account. Bottom Line for Employers: If you plan to protest an unemployment claim, do not ignore the fact finding interview and fully participate in it. Also, let IWD know if you think a claimant or a claimant's witness has omitted or misrepresented a material fact, or if the claimant has otherwise failed to comply with requirements for the receipt of unemployment benefits.      

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Jill Jensen-Welch


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