Unemployment is at an all-time high in the United States. While January’s unemployment rate was previously reported at 6.3%, a recent statement from Federal Reserve Chairman Jerome Powell revealed that the numbers had been distorted and that the unemployment rate in January had nearly reached 10%. With millions of Americans applying for and receiving unemployment benefits, and a lack of oversight from state and federal unemployment agencies, criminals have found a lucrative business in unemployment benefit fraud.
What is Unemployment Benefit Fraud?
While there are several ways that criminals can use the unemployment system to scam people out of information and money, this particular form of fraud can often go completely unnoticed by both the victim and their current or former employer. Using widely available personal information and targeting states with weak verification processes, criminals can apply for and collect unemployment insurance (UI) benefits on behalf of the victim – even if they aren’t unemployed.
One couple in Brentwood, California realized they had fallen victim to this scam when they received a tax form in the mail claiming they owed income taxes on over $25,000 that a scammer had claimed in the husband’s name. The Employment Development Department (EDD) had not only approved the scammer’s unemployment claim, but the department also later increased the benefit amount from the initial claim of $167 per week up to $450 per week. While this couple was able to locate the money and hope to return it to the EDD, many victims are left without as many answers.
The implications of UI fraud include more than just outstanding tax debt for the victim; it can lead to other forms of identity theft and fraud and can even negatively affect their employer as well. In addition to the absenteeism that occurs while employees try to navigate how to handle the fraud, employers’ State Unemployment Tax Act (SUTA) rate can be adversely affected too.
Identifying and Responding to Unemployment Benefit Fraud as an Employee
Many victims are unaware they are involved in a case of fraud until they go to file taxes or they receive a notice of outstanding taxes in the mail, but often there are some early signs that can be easily missed:
- Receiving communications via mail or email regarding UI forms when you haven’t applied.
- Unauthorized transactions on your bank or credit statements related to UI benefits.
- Notice of any fees involved in filing for or qualifying for UI benefits.
- Employers receiving a notification from their state unemployment commission on behalf of active employees.
If an employee discovers that they are a victim of UI benefit fraud, there are a few important steps they should take in order to protect themselves from further theft and resolve the fraudulent claim:
- Place a fraud alert with each of the three major credit bureaus to stop any further action being taken with the compromised personal information.
- Notify the IRS by filing an Identity Theft Affidavit (IRS Form 14039).
- Report the fraud to law enforcement and state unemployment insurance agencies.
- Notify and keep in communication with the human resources department if you are currently employed.
Addressing Unemployment Benefit Fraud as an Employer
Be alert and keep employees informed. Share resources with employees regarding the spike in fraudulent UI benefits claims and other common unemployment scams so that they know the signs to look for ahead of time.
Notify former and current employees quickly about claims. Before responding to a UI benefits claim, contact the former or current employee and ensure that the claim was submitted by them. (If they are currently an employee, it’s more than likely that the claim is fraudulent.)
Report the fraud to the state UI benefits agency and local police. The U.S. Department of Labor’s website provides resources to employers on how to report unemployment fraud in each state.
Address the identity theft that may have contributed to the fraud. While the employee’s information may have already been in the hands of criminals for months if not years, it could also have been recently stolen. Remind employees to file a report with the Federal Trade Commission (FTC), notify the major credit bureaus, review their credit report, and set up fraud alerts. Employees can visit http://www.identitytheft.gov to get step-by-step help.
Review internal IT security to ensure a compromise has not occurred. It’s never a bad idea to check on your company’s internal security measures and ensure employee and client data is safe and secure.
Ask employees to participate by reporting unemployment fraud immediately to HR. It’s crucial for the HR department to diligently monitor and confirm the legitimacy of any UI claims that come in, but employees can help these efforts by reporting any and all suspicious UI activity.
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Since 1995, Emplicity has provided a smarter, more secure, and integrated platform of employer services to its 300 business clients and their 8,500 employees. As a Professional Employer Organization, or PEO, the California-based HR outsourcing firm simplifies the compliance, administration, and support businesses need in the areas of employee benefits, payroll, and human resources technology.
NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of its clients.