The majority of contested NC unemployment benefits cases we handle involve the following situation:
1) The Claimant (former employee) files for unemployment benefits.
2) The Employer gives the Division of Employment Security information showing that the Claimant should be denied benefits.
3) The Division of Employment Security denies the Claimant unemployment benefits.
4) The Claimant appeals.
5) The Claimant hires our office to represent them in attempting to overturn the decision and have benefits paid.
However, an also frequent fact situation occurs where:
1) The Claimant (former employee) files for unemployment benefits.
2) The Employer either ignores the claim or gives the Division of Employment Security insufficient information.
3) The Division of Employment Security grants the Claimant unemployment benefits.
4) The Employer realizes they should have done a better job the first time and files an appeal.
5) The Claimant hires our office to represent them in attempting to keep benefits they are already receiving.
Prior to June 30, 2013, people that would ultimately lose on appeal in that second fact scenario would not have to repay benefits they already received. This makes sense. Unemployment benefits do not exactly sit in the Claimant’s bank account, being used for various investment opportunities. They get used right away to stay slightly less behind on pertinent bills and necessities until the Claimant can find a job. They are not really in a position to repay benefits because of the Employer’s failure to prosecute their case on their first opportunity. Most do not have it.
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For people who apply for benefits after June 30, 2013, the law radically changed. Claimants who receive benefits pursuant to a decision by the DES determining they are qualified, but on appeal are denied benefits are not only cut off from receiving further benefits, but must repay, in full, the total amount they received to that point. How does the DES recover these benefits? One need only look at the letter they send to Claimants who have been overpaid to discover that:
1. “The amount of the overpayment due may be collected by civil action … and the cost of such action shall be taxed against “the Claimant.”
2. A judgment can be entered “against any property which you own”
3. “The overpayment may be deducted from any future benefits.”
We have also seen Claimants have their state tax refunds intercepted by the Division. A common legal principle is that liability should be carried by the party most able to bear such liability. However, Claimants are now assuming all the risk of error. Each time a Claimant learns they are qualified for unemployment benefits, the Claimant must now concern themselves with whether they can actually use the funds they receive at the risk that the Employer will appeal and in four months when a hearing is scheduled, they will have to repay the funds.
The policy behind unemployment benefits is that “[i]nvoluntary unemployment … requires appropriate action by the legislature to prevent its spread and to lighten its burden which now so often falls with crushing force upon the unemployed worker and his family.” N.C. Gen. Stat. 96-2. The unemployed worker and his family must worry about paying bills and finding suitable work. Now they have the added burden of potentially having to repay the little bit of money they do receive to aid them in this difficult time.
Are there ways out of this? A little known process is that a waiver may be requested. However, this process is largely unadvertised by the Division. Our office handles a substantial number of waiver requests. The process is completely discretionary on the part of the Division and there are no appeal rights. Two cases with the exact same facts could be presented to the Division for a waiver request, and two different outcomes could be had, with no substantive right to challenge the decision to any higher authority or to the court system.
Who should have to pay this money back? The real question to answer this dilemma should be: “Whose fault is it?” If it can be shown that the Claimant made intentionally false statements to deceive the Division of Employment Security, perhaps it is appropriate to assign repayment to the Claimant. However, the vast majority of cases this office has observed tend to show that incorrect decisions are typically the fault of the Employer. Should the Employer be off the hook for failing to respond to claims or failing to provide supporting documentation? If it results in the Division overpaying benefits to Claimants, perhaps it should be. If the Employer has 50 pages of documents showing that the Claimant did something so atrocious they should not receive benefits, but failed to provide it, and that failure resulted in the Claimant being awarded benefits, then doesn’t it make sense to assign repayment to those at fault?
Another issue comes up as well. What if both parties did what they were supposed to but the Division incorrectly applied the law? This happens fairly frequently. The Division processes a massive number of claims and seems to stay backlogged fairly frequently. In almost every other area of law, when the government makes a mistake and pays someone money, the person paid the funds has to repay the government. In our office, we call it the “government always wins” scenario. However, unemployment is a different animal. We are talking about people who are fairly destitute, transient, and are relying heavily on the DES to make a correct determination from the outset. There’s not an easy answer to this question, and it is doubtful that the government would (or necessarily should) eat the cost of their mistakes. An equitable solution would be to assign repayment down the middle between the parties or to have the government, as a matter of equity, eat some of the repayment due to their failure to apply the law correctly.
The Division of Employment Security also has another issue to consider: they exist to administer unemployment benefits because “[e]conomic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this State.” N.C. Gen. Stat. 96-2. Is taking money from people who are dealing with economic insecurity in the worst way really accomplishing its mission of providing “protection against this greatest hazard of our economic life?” Id.
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