The Orange County Register: Why California’s COVID unemployment mess isn’t over yet

The biggest logjam of contested unemployment cases lies in a state appeals process

By Lauren Hepler | CalMatters

It’s been 22 months and three unemployment appeals since Nicolas Allen’s last job in Fresno.

In the time it has taken the 44-year-old graphic designer to win a fraction of the benefits that he applied for, his wife has weathered a high-risk pregnancy, his youngest son was born and his family has been pushed to the financial brink.

Now, Allen is one of thousands of Californians who say they lost jobs due to the pandemic but are still fighting lengthy legal battles over unemployment money that state and federal relief programs were designed to provide. It’s a ripple effect of earlier benefit backlogs that ensnared some 5 million people at the state Employment Development Department, which officials have said was unprepared and overwhelmed by mass job losses.

Those caught up in payment disputes say they have struggled with debt, housing and necessities like food or health care. Meanwhile, no one is publicly tracking how many appeals cases and lawsuits might end up costing workers or taxpayers in a state that still owes the federal government nearly $19 billion in unemployment debt.

“It’s easier to not think the money’s there,” Allen said. “Because if I worry about it too much, it’s too painful.”

The EDD has paid out $188 billion in unemployment benefits since the first pandemic shutdowns. State and federal officials waived many ordinary application requirements as millions of claims flooded in, and the agency has acknowledged that up to $31 billion was paid to scammers in the rush to distribute money quickly.

Along the way, state watchdogs say up to 1 million workers were wrongly denied benefits — many mistakenly flagged for committing fraud themselves.

“Accusing people of fraud is a big deal,” said George Warner, director of the Wage Protection Program at San Francisco’s Legal Aid at Work. “And the EDD does it very casually, very frequently.”

The biggest logjam of contested unemployment cases lies in a state appeals process, where more than 1 million workers have asked for a review of EDD’s decisions in their cases since March 2020. About 880,000 of those cases have already been transferred and heard by a lesser-known state labor agency, the California Unemployment Insurance Appeals Board, where the average case is still languishing for 139 days before a hearing with a judge, federal data shows.

Dozens of workers who have exhausted this state process have elevated their claims even further, to appellate or superior courts. Finally, advocacy groups and hundreds more workers have joined proposed class-action lawsuits against the EDD or its debit card contractor, Bank of America.

Both the EDD and the Appeals Board refused requests for interviews to discuss workers’ concerns and state efforts to respond. The agencies also referred some inquiries to one another or offered conflicting answers, raising questions about how delays and associated costs are being tracked.

Gregory Crettol, assistant director of the California Unemployment Insurance Appeals Board, told CalMatters in a statement that the Appeals Board has hired and trained 105 judges and 100 new support staffers since the onset of the pandemic. The board is also rolling out a new online system for workers to track their cases, and officials said at an April meeting that judges are now closing almost twice as many cases per month as pre-pandemic.

Still, “Given the historic backlog of appeals,” Crettol said in a statement, the Appeals Board “anticipates it will likely take several more years to completely resolve before workload returns to normal levels.”

Unemployment cases are complex and vary widely, but workers awaiting disputed funds have faced similarly dire challenges. A 33-year-old video editor in Burbank had to create a GoFundMe to restart her life during a gender transition. A security guard In L.A. County worried whether fellow workers still seeking unemployment would end up in the homeless camps he once patrolled. A 62-year-old temp worker in Sacramento spent months terrified she’d lose her car, and a legal office manager in Southern California filed for food stamps and MediCal to survive an appeal with no end in sight.

“I really feel like I’m a hostage,” said the office manager, who asked to be identified only as Carole M. and has been awaiting an appeal hearing since November. “I had no money, and I kept saying: ‘How long is this going to take?’”

Fraud fury

Like many of California’s COVID-era unemployment challenges, slow and unwieldy payment disputes aren’t new. But the pandemic did two things: unleash an unprecedented flood of 29 million jobless claims, and supercharge anxiety about a new generation of online fraud.

Rival politicians have seized on jobless claims filed in the name of death row inmates and YouTube rappers bragging about EDD-fueled spending sprees. Investigators attribute the bulk of pandemic unemployment fraud to organized identity theft. Unemployment attorneys, meanwhile, say they’re seeing regular workers who thought they were eligible for benefits disqualified — and sometimes charged with lying — in cases that can sometimes be explained by confusion about state forms, clerical errors, language barriers or disagreements between workers and employers.

“It’s so wrong,” said Assaf Lichtash, founding attorney of Los Angeles-based Pershing Square Law Firm. “The way I see it, the EDD is punishing regular civilians that are just filing for benefits who make honest mistakes — they’re punishing them for their failure to safeguard the money from fraudsters.”

State reports have also highlighted a disconnect between the EDD’s ham-fisted approach to large-scale fraud and what some say seems like a hair-trigger impulse to flag individual workers. Organized scammers evaded the agency’s automated application systems early in the pandemic, one September 2020 report by a governor-appointed EDD Strike Team found, while the vast majority of individual workers scrutinized in manual reviews appeared to be innocent.

“Processes intended to block fraud are slowing service delivery without catching fraud,” the Strike Team wrote, since just .02% of the 1.3 million cases flagged that summer appeared to be real fraud. “The cost of finding that small number of imposters is extremely high.”

A separate report last August by the Legislative Analyst’s Office found that, during the pandemic, state appeals judges overturned EDD unemployment denials up to 80% of the time. That report highlighted another sample of 1.1 million unemployment claims stopped due to fraud concerns by an EDD consultant early in the pandemic, where at least 600,000 cases were later “confirmed as legitimate” and workers saw payments needlessly delayed.

Even before COVID upended the job market, the Analyst’s Office estimated that improper unemployment denials cost workers $500 million to $1 billion a year in unpaid benefits. The agency also noted “concerning steps” at EDD in recent years that “suggest that ensuring eligible workers get benefits is not among its top priorities.”

The EDD refused to discuss its approach to appeals during the pandemic. Over the past three years, the agency has invested heavily in new anti-fraud technology and sought federal waivers for some workers who may have received extra federal pandemic unemployment funds “through no fault of their own.”

For workers who still want to fight an unemployment case, the first step is to notify the EDD in writing. The EDD then transfers the case to a local office of the Appeals Board, which schedules a hearing with an administrative judge. If a worker or business still feels that their case is unresolved, they can file another appeal with the state-level office of the Appeals Board, or eventually escalate the case to a superior or appellate court.

As of March, the average first-level appeals case with a judge was taking 139 days — a lag not as extreme as some other states, U.S. Department of Labor data shows, but still roughly triple the federal government’s 30- and 45-day targets for state unemployment appeals.

This kind of surge is predictable after a recession; the Appeals Board heard about 1.6 million cases in the years around the Great Recession, Crettol said. But workers like Allen, the Fresno graphic designer, have seen first-hand how pandemic cases can be complicated by a heightened focus on fraud and differing interpretations of emergency health orders.

In Allen’s case, he told state officials that he quit his job in July 2021, when the Delta variant of the coronavirus was raging and his wife was instructed not to be vaccinated against COVID-19 while navigating a high-risk pregnancy. Since health precautions like masking were not strictly enforced at his in-person job as a sign installer, Allen wrote in a state appeals filing, he quit “to eliminate the risk of bringing COVID-19 home.”

One unemployment payment arrived, but then the money stopped.

“I was told that it had been reported that it was a fraudulent claim,” Allen said. “Because my former employer was claiming that I quit without cause.”

So began an odyssey that involved months of arguing about pandemic protocols, clerical confusion over a brief freelance gig and paperwork ping-ponging between the EDD and the Appeals Board. After the second appeal, a state judge awarded Allen about six weeks out of the six months of benefits he applied for — securing around $3,000 of the $10,000 he sought, not counting potential federal unemployment supplements available during the pandemic — but denied the rest after questioning how actively he was seeking work while caring for two children under age 2.

Across the state, some 170,000 other appeals cases are still pending, according to the most recent data reported by the U.S. Department of Labor. Crettol said the Appeals Board is encouraged that new appeals have started to decline in recent months, and cited a lower state count of 154,000 backlogged cases through the end of March — a discrepancy that he said stems from differences in how state and federal numbers are reported due to funding sources and EDD processing times.

Attorneys like Lichtash add that for those stuck waiting, one challenge is a lack of information about if and when a case has been transferred to the Appeals Board from the EDD, the latter of which he called a “black hole.”

The EDD said in a statement to CalMatters that it sends cases to the Appeals Board in an average of three days. The Appeals Board offered a conflicting number: that it receives about two-thirds of appeals within a week after an appeal is filed, which Crettol said could differ due to how the two agencies track processing times. Neither agency regularly tracks the “monetary value” of appeals cases, or how much the state is being awarded or ordered to pay, spokespeople said.

For workers like Allen caught in the fray, the price of being caught up in the confusion has been high.

His family slashed expenses like cable TV and was able to refinance their house, which they credit with avoiding falling behind on the mortgage. But Allen said they were still forced to borrow money from family and take on credit card debt, putting everyday luxuries like a dinner at a restaurant with their kids out of reach.

“It’s horrible. I mean, we’re living off my paycheck,” said Allen’s wife, Sharon, who works in human resources. “We’ve almost divorced a few times because of it.”

A path for reform?

In many ways, unemployment advocates like Jenna Gerry say the pandemic has shone “a spotlight” on chronic problems with the state’s job safety net, from worker confusion over benefit denials to delays at EDD to inconsistent anti-fraud efforts.

The question she and others are asking now is whether state officials will act to change the system that has once again gone haywire, or whether workers caught up in pandemic disputes will be left to bear the brunt of the confusion.

“It was a perfect storm,” said Gerry, a senior staff attorney with the National Employment Law Project. “Instead of being like, ‘Wow, that was really bad. How do we make reforms now?’ … all people want to lift up is fraud, and not actually look at the systemic issues.”

Read More at The Orange County Register.

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