Payment delays continue as state seeks to curb unemployment claims fraud
Posted February 4, 2014
Updated February 5, 2014
Raleigh, N.C. — The number of unemployed North Carolina workers who waited longer than three weeks for their initial benefit check increased after a new unemployment insurance law took effect last summer.
Leaders with the North Carolina Commerce Department's Division of Employment Security say the delays are largely due to new procedures put in place to cut down on millions of dollars in over-payments to unemployed workers who are ineligible for benefits or are trying to game the system.
"The last thing an unemployed worker needs is for us to send them a letter asking for money back," said Dale Folwell, a former lawmaker who now heads the division.
During a Monday interview at the division's headquarters on Wade Avenue, Folwell acknowledged the backlog even as he touted the agency's successes. The division has reduced the number of appeals regarding initial unemployment claim decisions. Backlogs in its two appellate divisions have been reduced or eliminated. And the agency has cut back on the amount of money it has to demand back from recipients.
But those successes have come at a cost. More work now goes into evaluating an initial claim. While some cases are disposed of quickly and a first benefit payment is issued within a week, other cases where employers and employees differ on the reason a worker lost his or her job take more time to lock down the details.
"We have an obligation to do it correctly, not just quickly," Folwell said.
Dealing with conflicting priorities
Federal standards require that the state pay 87 percent of first-time claims within 21 days.
After being close to that mark every month during the first half of 2013, the number of first-time claims paid in accordance with federal standards dipped to 70 percent in September, according to figures issued by the U.S. Department of Labor. The rate of claims paid began to rebound in the last three months of 2013, but it was still 10 percentage points below what federal law requires.
In July, 81,423 people were collecting unemployment benefits. That's now down to 76,549, according to data from the U.S. Department of Labor. For the week ended Jan. 18, 8,097 people filed for first-time unemployment claims. However, specific data on how many people were in the backlog queue was not immediately available Tuesday.
Folwell said the state is in the process of adding more workers to process first-time claims. At the same time, changes made in response to a new state unemployment law are still being put in place. Once those changes take hold, he said, the state will eventually work its way back up to meeting the federal timeliness standards.
"DOL is aware of the backlog, and we are monitoring the situation," a department spokesman said when asked about the issue in January.
Also monitoring the situation are state lawmakers, some of whom say they have received calls from constituents bewildered by delays in unemployment insurance payments.
"Some of them go back to Nov. 1," Rep. Julia Howard, R-Davie, said of unemployment claim issues with which she has dealt.
Howard is also chairwoman of the legislature's Unemployment Insurance Oversight Committee, which is scheduled to meet Wednesday morning. Committee members are due to hear a report from Folwell on the claims processing backlog.
Not all lawmakers say they have heard from constituents with unemployment payment problems. Rep. Tom Murry, R-Wake, and Sen. Ben Clarke, D-Hoke, said Tuesday they haven't heard complaints.
Still, others say it is a top issue for their constituent service operations.
"It is one of the top four issues my office hears about," said Rep. Tricia Cotham, D-Mecklenburg.
Sometimes, she said, lawmakers find that there are problems with a particular case. Other times, the delays are harder to explain. Cotham shared one recent email from a constituent who had been waiting roughly a month for an initial claim check.
"How much longer will I have to wait?" the constituent asked.
It's a question Cotham said is common among those who are waiting.
Lawmakers are not the only ones hearing about delays in first-time payments.
"We're hearing about clients who are waiting ridiculous amounts of time for a decision on those initial claims," said Bill Rowe, general counsel at the North Carolina Justice Center, an advocacy group that lobbies on behalf of low-income people.
Rowe mentioned one applicant who had applied for benefits in September and still has not gotten a decision.
"They keep being told to call back in two weeks," he said.
Cutting down on over-payments
North Carolina is not alone in its problems. In a 2013 report, the National Employment Law Project found a "chronically under-funded" national unemployment insurance system with many states experiencing "extensive backlogs, jammed phone lines and major interruptions of online claims systems."
At the same time federal law put a premium on expeditious payments, federal regulators have chided the state for paying claims to workers who are ineligible or who are trying to game the system.
"For the annual reporting period ending June 30, 2013, North Carolina had an estimated improper payment error rate of 18.7 percent," U.S. Labor Department Acting Assistant Secretary Eric Seleznow wrote to Folwell in November 2013.
Data on the U.S. Department of Labor's website indicates North Carolina's rate is slightly lower – 17.4 percent – but still the second highest in the nation behind Nebraska.
That error rate translates into some $250 million improperly heading out the door. North Carolina officials dispute that number, saying that it is based on a survey of only a few hundred cases rather than an audit of all their data. They place the actual number of over-payments closer to $65 million per year.
Whatever the number, Folwell said eliminating those payments became even more important when a new state unemployment law took effect July 1.
The division has always sought to recover fraudulent payments, he said. But over-payments in cases when the agency simply made a mistake or reversed an initial ruling were not recovered, he said. Under the new law, the division is required to recover those over-payments.
Efforts to recover that money can take a number of forms, he said, including garnishing wages once an unemployed worker finds a new job, putting liens on property or intercepting state and federal tax refunds. Many of the steps the state is taking – such as filling in gaps in the information employers submitted in response to a unemployment claim – are steps recommended by the U.S. Department of Labor in a 2012 letter.
Rowe agreed that avoiding over-payments should be a priority.
"The law is so strict that you're going after people when they didn't do anything wrong," he said.
However, he could not say whether Folwell's explanation that procedures used to avoid over-payments caused the first-time claim process to slow down.
"It's something we're concerned about and want to hear more about," he said.