States Refine Unemployment Benefits Eligibility, Go After Fraud

Unemployment insurance eligibility and benefit amounts remain topics of interest for state policymakers, even as states move past the historically high unemployment rates of the COVID-19 era.

Unemployment insurance, or UI, is a state-federal program that provides temporary cash benefits to eligible workers. Each state administers a UI program with its own eligibility requirements, but all states follow the same federal guidelines. UI payments are intended for workers who are unemployed through no fault of their own.

At least 26 states enacted changes to their UI systems in 2023, according to NCSL tracking. Key legislative activity included tweaking UI eligibility requirements and addressing improper payments.

Benefits Eligibility

States that extended or increased benefits used an array of tools. The Delaware Legislature raised the cap on weekly benefits to $450 from $400. In Kentucky, workers are now eligible for an additional five weeks of benefits if they participate in an approved job training and certification program. Meanwhile, New Jersey extended its partial unemployment program, set to expire in 2023, through 2025.

Conversely, Montana lowered the maximum number of benefits to 24 full weeks, down from 28. In Arkansas, the Legislature changed the maximum benefit amount to either 12 times a worker's weekly benefit amount or one-third of the wages during the base period, whichever is lower. This is down from the lesser of 16 times the weekly benefit or one-third of covered wages. Another enactment will now block claimants from accessing UI benefits if they fail to show up for a job interview or accept an offer within five business days.

Some claimants can still receive benefits even if they voluntarily leave work, as long as they can demonstrate they left their position "for good cause." The Idaho Legislature expanded its definition of "good cause" to include instances of domestic violence as well as relocating military spouses.

All states, however, require claimants to actively seek work. But what that looks like, and how it is defined, varies. Both Tennessee and Washington enacted bills to clarify what it means to be looking for work.

Improper Payments

Ever since the strain placed on state UI systems during the COVID-19 pandemic, improper payments have been a flashpoint. Improper payments can result from fraudulent and willfully misrepresented claims, as well as nonfraudulent claims that were processed or approved erroneously.

Legislative action to find, prevent and respond to improper payments is ongoing.

Illinois enacted two bills addressing improper payments. In one bill, the Legislature expanded the definition of "newly hired employee" to include independent contractors, who must now be reported as new hires along with all other employee hires. And the other bill, the state required prosecution of COVID-related fraud to commence within five years of its discovery by a person required to report it.

In Arkansas, the Legislature strengthened penalties for fraudulent claims; anyone who receives $1,000 or more in fraudulent overpayments shall be disqualified from receiving benefits for 10 years.

The Connecticut Legislature directed its Labor Department to conduct a study on false unemployment claims and data breaches. The Virginia General Assembly required the state employment commission to study efforts to identify, prevent and recover payments, including an explanation for any recovery exceptions. And Idaho required its Labor Department to run routine assessments and report back to the Legislature.

Although federal law allows states to waive repayment of nonfraudulent claims, it is up to states to determine how to proceed. Delaware enacted a bill prohibiting its Labor Department from attempting to reclaim nonfraudulent payments after more than five years. The department may waive recovery entirely if, among other things, the overpayment was a department error or if recovery would be against equity or good conscience.

Zaakary Barnes is a senior policy specialist in NCSL's Employment, Labor and Retirement Program.

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