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Judge orders state to stop seizing allegedly-overpaid unemployment benefits

Launched during the Great Depression, the unemployment insurance system has seen unprecedented strain during the coronavirus crisis.
Olivier Douliery AFP via Getty Images
Launched during the Great Depression, the unemployment insurance system has seen unprecedented strain during the coronavirus crisis.

The state must stop seizing money from all people who are fighting the claim that they collected too many unemployment benefits, a Michigan Court of Claims judge ruled this week.

The Michigan Unemployment Insurance Agency has garnished wages, seized tax returns, and otherwise retroactively taken money from people it says received pandemic-related federal supplemental unemployment they didn’t actually qualify for.

That led to a lawsuit from some people who had money seized. The lawsuit says the state has no right to punish them for its own mistake without due process.

In June, Judge Brock Swartzle ordered the state to stop seizing money from people who hadn’t yet had a court hearing to appeal the state’s determination that they were ineligible. The state had asked the judge to clarify several points, including whether the order applied only to people who had signed onto the lawsuit, or all people retroactively deemed to have received benefits improperly. The lawsuit is in the process of seeking class-action status.

In his ruling, Swartzle wrote that “Putative class members will likely suffer irreparable harm to their constitutional right to due process if defendants seek repayment of unemployment benefits from them before completing the administrative-review process.” Swartzle also rejected the state’s claim that federal law required them to garnish federal tax returns, noting that “the requirements imposed by federal law are limited to certain overpayments that have become final under state law.”

Ann Arbor employment attorney David Blanchard, who is representing plaintiffs in the case, said the judge clarified his order appropriately. “The preliminary injunction, in order to avoid the harm of this kind of collection activity, should cover all the people in Michigan impacted by this practice,” he said. “Until then, what we needed to happen is for these practices to stop, so that the harm doesn't get worse.”

In a statement, UIA spokesperson Nick Assendelft said the agency and the state “are reviewing the judge’s ruling to determine next steps as they relate to a suspension of certain collections announced in July by Director Julia Dale.” The UIA announced then that it would not initiate new collections for nearly 400,000 people, but did not say it would cease ongoing collections. Assendelft said that buys the agency more time to issue overpayment waivers to affected people, in addition to more than 62,000 already approved so far this year.

In this latest order, Judge Swartzle also indicated that he was poised to grant the plaintiffs’ request for class-action status, writing that “plaintiffs appear likely to show that such certification is appropriate.”

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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