Tens of millions of Americans were laid off in the early waves of COVID, and got emergency pandemic jobless benefits authorized by Congress. But the state systems that administer unemployment insurance were outdated and overwhelmed, and in the scramble, some who were eligible were denied benefits. Others got approved for benefits when they shouldn’t have been, or got overpaid. 

Now, states have the right to recover — or “claw back” — those improper payments. And lately they’ve stepped up their efforts, notifying people who thought they were in the clear that they now have to pay the money back. 

And the Labor Department has now ridden to the rescue to provide some relief.

Over the past few months, states have started sending out notices to people who allegedly got pandemic jobless benefits in error, saying they have to pay the money back, in some cases, well over a year after the benefits had been paid out, and spent.  

So the Labor Department has issued new guidance, said deputy director for policy Michele Evermore. 

“We essentially made it easier for states to waive recovery of an overpayment in the case of an honest mistake. So that people won’t end up with massive, tens of thousands of dollars in payments, for something that wasn’t their fault,” she said.

The guidance applies to millions of people who got federal benefits under new rules that massively expanded eligibility: to gig workers, the self-employed, and those who couldn’t work because of COVID.

“The pandemic unemployment programs paid out record sums, quickly,” said Andrew Stettner at the Century Foundation, who said the ramp-up was fast and furious and full of errors. Rules kept changing, and some state computer systems couldn’t keep up.

Which also led to some fraud — something states have to keep investigating – and also lots of unintentional mistakes. 

“Error payments that were made — not because someone was trying to deceive the agency — but a misunderstanding, or a misapplication — really agency error by the state. Should the worker be the one that’s subjected to that?” Stettner said.

Clawback efforts have ramped up in the District of Columbia. Drake Hagner at the Legal Aid Society of D.C. said it has some of her low-income clients in a panic.

With the new Labor Department guidance, “waiving more of these overpayments that are no-fault, non-fraud, will be so helpful for workers, and for states. We don’t have to waste more time trying to claw back money that these workers don’t have anymore, it’s already been spent,” Hagner said.

States aren’t out the money that was overpaid — because pandemic unemployment was fully funded by the federal government. 

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