Raleigh, N.C. — What was at first a tussle over how quickly unemployment records should be released to the public has turned into a fight over whether the state is risking $57 million in federal funding by releasing them at all.
"There was a breach of confidentiality that could result in a loss of grant money," state Assistant Commerce Secretary Dale Folwell said in court Tuesday.
This fight erupted late last month when Folwell announced the Division of Employment Security would end the practice of providing to the public a daily list of those denied unemployment claims. Runners for a handful of law offices pick up the lists from the department's mail room so their firms can send letters advertising their services to those whose claims were denied.
Instead, Folwell said, the state would provide the documents at least three times a month by mail.
This prompted Durham lawyer Monica Wilson to sue, saying the delay would harm her business and deprive people who needed legal help from getting assistance. Often, unemployment appeal cases are heard barely two weeks after being set. When she had to rely on mail service 10 years ago, people would get her letters after their cases were heard.
"People would call us and say, 'I wish I had gotten your letter before my hearing,'" Wilson told the court Tuesday.
Wilson and her lawyer, Jim White, asked Superior Court Judge Paul Ridgeway to issue a preliminary injunction, forcing the state to continue providing the daily lists until the case was heard at trial. Ridgeway did not rule immediately on the preliminary injunction, although he did order the state to continue providing the lists as specified in a restraining order issued two weeks ago. He said he expects to rule on the case Wednesday.
Folwell and lawyers for the state told the court they were ordered by the federal government to cease the practice entirely because information in the records was "confidential" under federal rules.
They pointed to several items of correspondence from Gay Gilbert, administrator of the federal Office of Unemployment Insurance, which said the administrative funding used to pay state workers who process unemployment claims could be at risk. Gilbert said she found out about the daily lists from news reports about the lawsuit.
Gilbert wrote in a letter dated March 7 that the state "must immediately cease the practice of selling or providing notices of appeals hearings to attorneys who do not already represent a claimant or an employer, comply with the provisions of state and federal laws on confidentiality of UC information, and provide assurances that the practice has stopped and will not be resumed."
Tom Hodges, a lawyer for the state who was involved in some of the decisions to release the records, said the state may have been correct to release the records in 2004. But in 2006, new federal rules prohibited the release of information contained in the appeal letters. The federal government, Hodges said, had pointed out that North Carolina made a mistake.
"We don't feel like we have any choice but to correct it," Hodges told the court Tuesday.
But White said the state was in no immediate risk of losing its administrative funding.
"In the period of time that it will take to hear this case, nothing is going to happen in Washington, but a lot is going to happen to Ms. Wilson," White said.
The federal Department of Labor letter was not at issue when Folwell first ordered the change. He said he wanted to change the way records were accessed due to security concerns at the Division of Employment Security's Wade Avenue building and that it took state workers away from their assigned jobs. In addition, he said, the change would provide equal access to lawyers everywhere across the state.
Immediately after Folwell made those decisions, Wilson challenged him by email and during a phone call. A recording of the phone call played in court Tuesday. She asked what security issues caused the problems and repeatedly asked Folwell why daily pickup was no longer an option.
"I was not aware our phone conversation was being recorded," Folwell told the court.
Although the exchange was tense at times, neither Wilson nor Folwell raised their voices. Still, Wilson was frustrated in her attempts to get Folwell to say exactly why he would no longer make records available daily. At one point, after she pressed the issue, Folwell paused for 38 seconds.
"Are you still with me?" Wilson asked.
"Yes. I don't have a response for you,” Folwell replied.