Like thousands of other Pennsylvanians, Steve Pellegrino collected unemployment benefits last year when he wasn’t working, early on in the COVID-19 pandemic.
A contractor who lives in Pittsburgh, he didn’t feel safe working in people’s houses, and he was also home taking care of his wife, who was recovering from cancer surgery. Because he was self-employed as a contractor, he collected PUA, Pandemic Unemployment Assistance, a special type of unemployment that was set up last year for people who were gig workers or self-employed.
And like many others who used unemployment to stay afloat during the pandemic, he’s since gotten an unwelcome surprise — he’s been told by the state Department of Labor and Industry he shouldn’t have gotten the funds and should pay thousands of dollars back.
“It's threatening. It’s threatening. … they were threatening, threatening emails like, ‘You better do this man or you're in trouble,” Pellegrino said.
He’s not sure why the state says he shouldn’t have been paid; he’s appealed and is waiting on a hearing. Pellegrino's are among the close to 200,000 non-fraud overpayments the state estimates were in the PUA program and more than 63,000 in the regular Unemployment Compensation program. (Because a person can have more than one overpayment, it’s not totally clear how many people this includes.)
Misleading messages
Advocates aren’t happy with how the state Department of Labor and Industry is notifying people like Pellegrino of these accidental overpayments. The notifications are scary and intimidating, they say, and don’t make it clear that people with non-fraud situations aren’t actually legally required to pay the money back.
Here’s a portion of a what’s being sent to some formerly unemployed claimants:
“Depending on your overpayment, the department can take actions to recover the amount due, including taking your future UC benefits, intercepting your federal income tax refund, filing a lien against you and/or pursuing criminal prosecution. Please read this notice carefully for additional information about your overpayment. If you are unable to repay your debt in full immediately, partial payments are accepted. The department recommends a minimum monthly payment of $40.”
This is misleading, advocates say.
“Individuals with non-fraud overpayments do not need to be concerned about any of the threats on that notice, and that is why it is so problematic,” said Julia Simon-Mishel, an attorney with Philadelphia Legal Assistance and unemployment compensation expert.
State law says Pellegrino and others in his situation don’t have to pay the money back. His were “non-fraud overpayments” — in other words, he didn’t commit fraud, the government made a mistake.
In cases like this, the funds can only be recouped by the state if someone with an overpayment applies for unemployment benefits again in the next three years, the state can take a third of their weekly benefits to re-pay the overpayment.
State officials said under their new computer system, all overpayment notices — fault and non-fault — have been combined into one, so claimants with at least one fault overpayment will get the billing notice listing all the potential penalties. If they only have non-fault overpayments, it won’t list the penalties, according to the department.
But advocates say that isn’t true and contend people with only non-fault overpayments are getting these notices.
The communication from the state “really is unnecessarily threatening for people, especially as most individuals do not have the financial ability to repay this money now. And many of these not-fault and non-fraud overpayments resulted from mistakes by the department, or the fact that there was mass confusion during the pandemic about what program people should be in and when,” Simon-Mishel said.
Beth Glah, a Chester County resident, and steering committee member for advocacy group the Mon Valley Unemployed Committee, said she often hears from people worried about non-fault overpayment notices.
She’s also dealing with an overpayment situation herself – more than $21,000.
“They want it all back,” she said.
Her overpayment issue stems from if the pre-pandemic income she earned running an Airbnb qualified her for unemployment or not.
Officials at the state Department of Labor and Industry say they aren’t trying to upset formerly unemployed claimants. They say they are providing information required by federal rules about all possible penalties.
“While it is never L&I’s intent to scare or intimidate a UC claimant, the US Department of Labor requires states to provide certain information, including all possible penalties that a person might encounter if they do not comply. L&I takes seriously its responsibility in handling unemployment funds and works to assure they are distributed appropriately,” a spokeswoman wrote in an email. “Overpayments occur for many reasons; an example is whenever a person received benefits they were not eligible to receive. Department error does happen but is not as common as claimant error.”
Department officials have said they don’t know how many people they’ve sent overpayment notices to. But many formerly out-of-work individuals are dealing with overpayment issues now, particularly in big states like Pennsylvania that were more cautious in their COVID-19 policies, according to Andrew Stettner, an unemployment expert at The Century Foundation.
PUA was a totally new program, started from scratch at the beginning of the pandemic, he points out. It was important for getting benefits out to people, but a new program added to some confusion.
“The rules for the PUA program really did change over time,” Stettner said. “So, individuals who may have been deemed eligible for PUA may have later been determined to have gotten that benefit in error. They also may have been put on the PUA program in the rush and crush of claims in 2020, when they really should have been in a state benefit program.”
State Rep. Sara Innamorato, D-Lawrenceville, a member of the House Labor and Industry committee, said she has heard from constituents alarmed about the notices and has raised the issue with the department. The issue particularly stings, she said, because so many people waited so long to even receive unemployment benefits in the first place.
“I don’t think anyone’s getting rich off unemployment payments,” she said.
For more information: Pennsylvania Department of Labor and Industry overpayments page or Philadelphia Legal Assistance overpayments information
