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Unemployment fraud adds to employer costs

Idaho employers facing high unemployment insurance costs can, in part, blame those who get fraudulent benefits.

Getting that money back can often prove fruitless. The Idaho Department of Labor has clawed back some $24.8 million since 2007, but more than $20 million is still being pursued.

Idaho’s unemployment trust fund was already under pressure as the 2008 recession pushed the jobless rate north of 9 percent, forcing the state to borrow from the federal government, then sell bonds to repay the debt.

The rate at which employers pay into the fund is now at its maximum.

The Labor Department sought more leverage to limit overpayments in the 2012 Legislature by penalizing employers who don’t report new hires to the agency, a move that could have saved $5 million annually. House lawmakers balked.

“We’re trying to stop people from stealing,” said Michael Johnson, the agency’s compliance chief and top fraud fighter, disappointed by the bill’s failure. “It’s unfortunate, because ultimately it costs the employers.”

Since 2009, the agency has had 10 criminal unemployment fraud prosecutions. On Sept. 4, a 42-year-old man who pocketed $18,000 in fraudulent benefits was sentenced to prison for up to five years.

For fiscal year 2012, the agency discovered $14.2 million in overpayments, a bit down from the $16.3 million high in 2011, near the apex of some 32,000 Idaho unemployment claims.

For the current year, $13 million is forecast – well above the five-year average of $9.8 million.

Another barrier to recovery: At least 460 bankruptcy filings in U.S. District Court since 2007, by Idaho residents who list overpayments among their liabilities. It’s unclear how many resulted from fraud.

Johnson said some simple overpayments are dischargeable, while others survive bankruptcy as liens.

The reality is the money is tough to recoup, given unemployed people’s often precarious finances. “Recovering money from the recently unemployed is a bit like that blood and a turnip thing,” he said.

A 1997 law requires Idaho employers to report new hires to the Labor Department within 20 days. In theory, once the agency knows someone is again working, it can quickly limit unemployment fraud.

In practice, however, about 70 percent of employers – largely from the ranks of smaller companies – don’t report new hires, in part because there’s no penalty. Absent consequences, it’s easy to forget.

In the 2012 Legislature, the Labor Department proposed levying a $25 fine per reporting failure, with a maximum of $2,500 per quarter per employer.

The Senate unanimously passed the bill, before things got difficult: It cleared the House on a 36-34 squeaker, but an hour or so later House Assistant Majority Leader Scott Bedke, R-Oakley, got cold feet and recalled the bill.

It just seemed too harsh on employers, Bedke said. “It seemed like we were going after the wrong person,” he said.

Rep. Steve Hartgen, R-Twin Falls, said he’s had preliminary talks with the agency over replacing the proposed penalty with an incentive for businesses that report – they might get an insurance break, for following the law.

Absent an incentive, however, any new measure is a non-starter, Hartgen said.

After the bill failed, Johnson’s agency took to Idaho’s radio airwaves in April and May, to remind employers of their reporting requirements. “I hope it’s going to get employers on board,” he said.

About The Associated Press