The Michigan House on Wednesday unanimously approved a bipartisan set of reforms to the state’s unemployment insurance office after a scandal left tens of thousands of residents falsely accused of fraud.
Under the eight-bill package, which is on its way to the Senate after the House’s 107-0 vote, the state’s unemployment insurance agency would charge smaller penalties to benefits recipients who are accused of defrauding the system.
The agency would be able to collect penalties worth the same amount of the benefits collected fraudulently, rather than twice the amount it can collect now. For each additional violation, the penalties the agency could collect would be worth 1.5 times, instead of four times, the amount of benefits collected fraudulently.
If it’s determined that the benefits fraud was the result of identity theft, the unemployment office would be allowed to collect four times the amount of fraudulently obtained benefits.
Other provisions include allowing employers and benefits recipients accused of fraud to work with an advocate to represent their case, and preventing the state from collecting interest on top of penalties if the benefits paid out were the result of a state error.
“There are times when we as policymakers have to learn from mistakes that have happened,” state Rep. Kevin Hertel, D-St. Clair Shores, said on the House floor before the vote. “I firmly believe (these bills) will improve the system as it stands. Currently, we are working in a system where a simple mistake, a simple checking of the wrong box, could lead to a fraudulent charge.”
The Michigan Talent Investment Agency, which manages the unemployment office, has overturned close to 44,000 fraud cases after it was discovered that a computer system was incorrectly flagging benefits payments as improper with no human oversight from October 2013 to August 2015.
The state has said it will repay close to $21 million in penalties to people who were wrongly accused of fraud.
“We appreciate the efforts of the Legislature, and we pleased to be able to be part of the discussions with Rep. Graves and his workgroup to strengthen TIA-Unemployment Insurance,” TIA Director Wanda M. Stokes said in a statement. “We support these bills in concept, and know that we have common goals. This legislation builds on the work we already are doing to make TIA-UI more effective and better serve residents.”
The state stopped using a computer system solely to decide whether someone had committed unemployment insurance fraud in August 2015. The false fraud cases, plus complaints about customer service, have led to a top-to-bottom restructuring of the unemployment agency and the hiring of a new director, Michelle Beebe.
The bills were developed as part of a work group including people representing both benefits claimants and job providers, said Rep. Joseph Graves, R-Argentine Township and chairman of the House oversight committee that considered the bills. The group spent 900 hours working on the issue, he said.