Unemployment Insurance: Overpayment

An “overpayment” of unemployment insurance (UI) benefits occurs when the Employment Development Department (EDD) believes that a “claimant”—the person claiming UI benefits—has received UI benefits when the claimant was not legally eligible to receive them. Overpayments can happen for a number of reasons. Some common reasons include:

• an employer reports earnings or employment information to the EDD that differs from the information given by the claimant;
• a claimant untruthfully or inaccurately filled out a certification for benefits;
• a claimant is originally granted UI benefits but then loses a later appeal; or
• EDD mistakenly sends a claimant benefits.

If an overpayment was caused by the loss of an appeal or a simple mistake on the part of the EDD or an employer, it does not necessarily create a large problem for the claimant. If, however, the EDD believes the claimant was lying to the EDD, the overpayment can cause significant financial problems for the claimant.

A Notice of Overpayment is a document that EDD sends to claimants when EDD believes the claimant received benefits incorrectly. The notice will tell you how much EDD thinks that you need to pay back.

If you do not appeal the Notice of Overpayment and get the decision reversed, you will have to pay this money to the EDD. The EDD may attempt to collect the money you owe by taking money out of your paycheck or tax refund. If the EDD believes you made a willful false statement, you may be penalized by not being able to receive UI benefits in the future when you are otherwise eligible, for example the next time you become unemployed.

Even if you agree with EDD that you received benefits incorrectly, you may still want to appeal if EDD is penalizing you for making a “false statement”, and you did not intentionally give EDD information that caused the overpayment. It is possible to get the false statement penalties reversed, even if the overpayment itself is correct and you need to pay back EDD for the overpayment amount. (See below for more information on false statement penalties.)

Sometimes, the EDD will send a Notice of Potential Overpayment if it thinks you might have been overpaid. The Notice of Potential Overpayment will list all of the weeks the EDD believes you have been overpaid benefits. The Notice will also tell you the reason the EDD thinks the overpayment happened.

The EDD’s Notice of Potential Overpayment gives you 10 days to respond with information that would prove to the EDD you were not actually overpaid benefits or that, if an overpayment did occur, it was caused by some simple mistake or confusion, or was not your fault. If you have any information that would help show the EDD that you were reporting your eligibility as accurately as possible, you should send this information to the EDD immediately.

For example, if the Notice of Potential Overpayment says you received benefits while also receiving unreported earnings from an employer, it would be helpful to send the EDD a photocopy of your final check or any other document that clearly indicates you reported to the EDD all earnings from that employer. Or, if the Notice of Potential Overpayment says you received benefits while you were unable to search for or accept potential employment because of an injury or disability, it would be helpful to send the EDD a photocopy of a note from your doctor clearly stating you actually have been able to search for and accept potential work. Likewise, if the Notice of Potential Overpayment says you untruthfully reported that you were looking for work when you actually were not, it would be helpful to send the EDD a copy of a list of all of your job contacts and interviews during the weeks in question.

If you do not respond to the EDD’s Notice of Potential Overpayment, or if the EDD is not satisfied with your response, you will be sent a Notice of Overpayment. This means the EDD still believes you received UI benefits at a time when you were not legally eligible to receive them. The Notice of Overpayment will again list the weeks the EDD believes you were overpaid benefits and the reasons the overpayment occurred.

Under California law, the EDD can make a claimant pay a penalty if the claimant makes a “willful false statement” to the EDD in an effort to obtain benefits. This penalty can be up to an additional 30 percent of the amount the EDD believes was wrongfully paid to the claimant. The EDD also usually penalizes a claimant for an alleged false statement by making the claimant ineligible for benefits they would otherwise receive in the future. The claimant could not be able to receive benefits for between 5 and 15 weeks, either during the claimant’s current period of unemployment, if they are still unemployed, or years later when the claimant becomes unemployed again. These penalties are intended to punish claimants who are trying, through fraud, to get benefits they are not entitled to. But in practice, the EDD regularly imposes false statement penalties when a claimant accidentally made a mistake on one of the many complex forms sent by the EDD—and sometimes even when the claimant was telling the truth!

Almost all claimants should appeal EDD’s decision in the Notice of Overpayment by filling out the appeal form that was sent with the Notice of Overpayment, and sending it to the address on the top of the Notice of Overpayment. You can also access the Appeal Form (de1000m) at EDD’s website. Because of the additional “false statement” penalties, it is often worth it to appeal a Notice of Overpayment even if you agree that you were overpaid some amount. (If you completely agree with the EDD about the amount of overpayment and its cause, you should contact the EDD to arrange for repayment of the overpaid amount.)

If the Notice of Overpayment was sent along with a Notice of Determination, you should also appeal the Notice of Determination, which is the document that informs you of EDD’s decision that you were not eligible for Unemployment Insurance benefits, and the reasons for that decision.

The Appeal Form has a section called “Appellant Statement” that asks you to “Explain the reason for your appeal and why you disagree with the decision(s).” Legal Aid at Work recommends that you keep your written statement very brief; you can simply write: “I disagree with EDD’s decision. I believe I am eligible for benefits and should not have been assessed an overpayment.”

If you cannot find the Appeal Form and cannot access it online, send a letter that includes your name, contact information, and social security number, saying that you would like to appeal the decision in a Notice of Overpayment sent to you by the EDD. In the letter, provide the date that the Notice of Overpayment was sent to you.

You should appeal the decision as soon as possible, and within 30 days from the mailing date on the Notice of Overpayment. But even if you have missed the 30-day deadline to appeal, you should still appeal the Notice of Overpayment; you can make an argument that you had a good reason for missing the deadline.

Once you send EDD the appeal form, EDD will process your appeal, and send your case to the California Unemployment Insurance Appeal Board (“CUIAB”), an independent agency. Your case will be assigned to an Administrative Law Judge (“ALJ”) who will reassess your case independently, and determine whether EDD made the right decision in the Notice of Overpayment.

You should look out for a large packet in the mail from the California Unemployment Insurance Appeals Board. Inside the packet will be a Notice of Hearing, which is usually printed on yellow paper. The Notice of Hearing will tell you when and where the hearing for your case will be heard. If you cannot make the hearing, you should immediately call the number of the Office of Appeals listed on the Notice of Hearing, to see if the hearing can be rescheduled.

At the hearing, which will either take place in person or over the phone, you will have the chance to tell your side of the story and explain why you believe you were eligible for benefits and should not be assessed an overpayment.

Most claimants who have been assessed an overpayment can make three types of arguments to either remove the overpayment entirely or lower the amount they will owe to the EDD:

1. Argue that you were eligible for benefits, so there was no overpayment. Often times, the EDD will incorrectly decide that you were not eligible for benefits. For example, the EDD may decide that you quit your job without a good reason, even though the reason you quit was the type of reason that allows you to access UI benefits. If you were eligible for UI, then you should not have been assessed an overpayment.
2. Argue that you did not make a willful false statement. If you were assessed a false statement penalty, you should argue that you did not make a willful false statement. It is important to get false statement penalties reversed for a few reasons. First, getting this decision reversed will mean you do not have to pay a false statement penalty. Second, if you don’t get this decision reversed, you may have to serve “penalty weeks” in the future where you will not be able to receive UI benefits. Finally, you have to show that you did not make a willful false statement to be eligible to have the overpayment “waived,” or forgiven.

In some cases, you may want to argue that you did not make a false statement at all. The EDD sometimes believes you made a false statement merely because it heard a different story from your employer or somebody else, even though the employer’s version of the story was not accurate.

In some cases, you might have made a statement that was false or inaccurate, but you didn’t make that statement “willfully,” or knowingly. You may have made an incorrect statement on a form, not because you knew the statement was incorrect, but because the question was confusing, you did not understand the question, or you believed your answer was accurate.

1. Argue that the overpayment should be waived, because the overpayment was not your fault and it would be unjust for the EDD to require you to pay back the overpayment. The EDD is required to waive an overpayment—that is, forgive the overpayment—if the overpayment was not your fault and requiring you to pay the overpayment back would be “against equity and good conscience.”

The overpayment is not your fault if you did not know, and could not reasonably know, that you were not eligible for benefits, or if you received benefits because of an error made by the EDD, and relied on the EDD’s decision in good faith.

You also need to prove that repayment of the “overpayment would be against equity and good conscience,” which means that asking you to repay the benefits would be unfair and would cause you great hardship. You can prove that an overpayment would be inequitable in a few ways.

One factor EDD and CUIAB consider is whether you “changed positions” because of the benefits you received. If you relied on the unemployment insurance benefits you received because you had limited savings, and you spent that money on necessary expenses that you would not have purchased if you did not have benefits, then making you pay back those benefits would be wrong.

Another factor EDD and CUIAB consider is whether you would suffer “extraordinary hardship” if you had to pay back the benefits. When making this assessment, the judge at your hearing will consider your family’s income and certain property, as well as any special circumstances, to determine whether it would be financially unfair to make you pay back the benefits. To make this point to the judge, it helps to bring to the hearing information about your monthly budget, detailing your income and expenses.

If the ALJ finds that you were at fault in causing the overpayment or refuses to waive your overpayment, you can further appeal the decision to the CUIAB and, if necessary, to your county’s Superior Court, using the same procedures as in any other appeal (we recommend that you consult with an attorney if you are considering an appeal of the ALJ’s decision.) If you do not appeal further, or you lose further appeals, the EDD will ask you to repay the overpaid amount. As mentioned earlier, if the EDD believes you were not at fault in causing the overpayment, the EDD will usually send you a Financial Statement form.

This Financial Statement helps the EDD decide how much money to ask you to repay. You should complete this Financial Statement and return it to the EDD as soon as possible, because the EDD may use this information to reduce or forgive the repayment amount. If the EDD does not send you a Financial Statement form, you can expect the EDD to attempt to collect from you the entire overpaid amount.

The EDD usually collects overpayments in one or more of the following ways:

• arranging with you to make monthly payments;
• taking it from future UI or disability insurance benefits;
• taking it from state tax refunds; or
• filing a lawsuit in order to get authority to take it from other income and assets.

The EDD can collect the overpayment amount by taking it from future UI and disability insurance checks or state tax refunds for a period of time that can last up to 6 years. If the EDD wants to use more severe methods, like garnishing your other income or seizing assets, the EDD must file a lawsuit against you within 1 year of the final overpayment decision. Otherwise, if the EDD takes no action and you do not file any new claims for UI or disability insurance benefits, your overpayment will automatically be waived after a period of 3 years.

If you choose to arrange to make monthly payments to the EDD, you may be asked to sign a written agreement to confirm this. You do not need to sign this agreement and, in fact, signing it can work against you because signing an agreement will give the EDD additional time to file a lawsuit against you for failing to repay the amount as planned. If you do not sign an agreement, the EDD has only 1 year to file a lawsuit against you to collect repayment through more severe methods. If you do sign a repayment agreement, the EDD has 4 years from the signing of that agreement to file a lawsuit against you for repayment.