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Unemployment Fraud: What to Know and What to Do

iconUnemployment Fraud icon2 min read
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Stay aware and mitigate the risks of unemployment fraud

Unemployment benefits were expanded under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and some state unemployment agencies shortened or suspended waiting periods before someone can receive unemployment benefits. While the increase in unemployment benefits surely helped those affected by COVID-19 layoffs, it also led to an increase in fraudulent unemployment activity.   

What happens when a fraudulent claim is filed?

A fraudulent unemployment claim includes cases when applicants use another person’s information to apply for federal or state benefits - even if they were never employed or are still employed by a given company. An employer typically receives a notification once an unemployment claim is filed by an employee. If a fraudulent claim is filed, employers should be notified, and the individual whose name is on the false claim should also receive a similar notification to confirm the filing and possibly an electronic benefit transfer (EBT) card in the mail to access unemployment funds. 

How do fraudulent unemployment claims affect employers?

Unemployment fraud drains both money and time away from individuals who need it. If the person filing a fraudulent claim is successful, it hurts employees who are laid off or furloughed and who actually need the assistance. Employers face federal and state unemployment tax obligations. Many states have eased this tax burden in response to COVID-19, but fraudulent claims can potentially create a problem in the taxation process. If the fraudulent claim goes unnoticed, it could increase employer taxes because employers pay unemployment benefits. 

What should employers do?

Employers should be diligent about all unemployment claims. If you have laid off or furloughed employees, keep an eye out for an increase in claims. Your organization should have a clear communication process in place about what to do if they suspect they’ve received a fraudulent unemployment claim. Managers and employees should be made aware, especially if a fraudulent claim is filed on behalf of an individual still employed by your business. 

If you suspect an unemployment claim is fraudulent, you should also contact your state’s unemployment agency and report it. Typically, this will resolve the problem, but be sure to keep a record of the report in case any bureaucratic error causes a later charge for the claim. Dominion partners with several vendors offering specific expertise in different areas:

  •  The Work Number® from Equifax provides employment and income verification in real-time, in addition to other services; this service is no extra cost for all Dominion clients. 

  • Unemployment Cost Management takes the burden off the employer’s shoulders and lowers their unemployment costs through claims and tax management, benefit charge audits, and hearings support. 

  • Enquiron is a valuable resource for HR questions; we offer HR Premium access to all Dominion clients free for six months.

If you’d like to see how these services work with our payroll and HR software, request a demo below!

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