NJ urging Congress to forgive overpaid unemployment benefits to 250,000 workers

More than 130,000 workers in New Jersey who collected unemployment benefits under COVID pandemic federal assistance programs later received a letter from the state Labor Department saying they weren't actually eligible for jobless benefits — and must give the money back.

And that's just the number of overpayment letters that have gone out so far. New Jersey estimates it paid 250,000 workers who aren't eligible for unemployment after federal rules changed. 

New Jersey's labor commissioner is urging Congress to waive these overpayments as long as they weren't fraudulent. Commissioner Rob Asaro-Angelo signed on to a Jan. 7 letter to congressional leadership written by the National Association of State Workforce Agencies, a nonprofit representing 50 state agencies that administer unemployment insurance.

“Millions of unemployed workers deemed eligible for federal pandemic unemployment benefits later found out that the rules had changed, and, through no fault of their own, were no longer considered eligible — months after they had spent the money on necessities like food and housing,” said Asaro-Angelo.

“To try to recover these funds after the fact stresses these workers and their families, strains the system of resources with little chance of success, and is counterintuitive to our mission of helping people in their time of need,” he said.

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Asaro-Angelo and the association want Congress to let states tell these workers they don't have to pay back the money, and can still collect unemployment in the future. Currently, until workers pay back what the Labor Department determines they owe, they are ineligible for future jobless benefits. 

As an unprecedented number of workers lost hours or jobs due to pandemic-related business closures, Congress passed expanded unemployment programs that gave workers more money and paid people who were not normally eligible for jobless benefits, such as freelancers, the self-employed and gig economy workers. 

But as time passed, certain federal rules about administering the programs changed, said New Jersey Department of Labor spokesperson Angela Delli Santi. For instance, federal guidance first allowed self-employed workers to self-certify their earnings and unemployment history, but later required documentation. 

"Workers later had to provide documents of an earnings history or tax returns, and quite frankly, many could not pass muster," Delli Santi said. "They received benefits for what was legal at the time, but these new rules made them ineligible. They didn't lie, but the rules changed."

For instance, a waitress or hairdresser paid primarily in tips may not have reported all of these payments to the IRS, and there isn't a paper record of their true wages. 

"Individuals receiving [pandemic unemployment] spent these funds months ago to help preserve their own economic stability," the association letter said. "The likelihood of recovering these funds is low and the cost of states’ efforts to secure repayment far outweighs any monetary returns."

The letter said that not all states have a "current and consistent waiver process" and "federal action is necessary to prevent further hardships on these individuals."

Workers who receive an overpayment notice currently have a right to appeal the determination. People who owe the Labor Department benefits can set up a monthly payment plan, and state income tax refunds or rebates could be withheld and applied to the debt. 

For more information about unemployment overpayments, visit tinyurl.com/unemploymentoverpay.

Ashley Balcerzak is a reporter covering affordable housing and its intersection of how we live in New Jersey. For unlimited access to her work, please subscribe or activate your digital account today.

Email: balcerzaka@northjersey.com 

Twitter: @abalcerzak