When you file an unemployment claim, you’re certifying that the information you provide is true to the best of your knowledge. In an effort to prevent unemployment overpayments, your state verifies applications for eligibility during the initial claims process and during the weekly certification claims process. It also performs routine claims audits to catch mistakes.
If you made a mistake filing an initial or weekly claim, the penalty varies depending on whether it was intentional and on the laws of your state.
All unemployment filing mistakes that result in an overpayment requires repayment to the state. Normally, you get a notice in the mail explaining that you received more money than you deserved from unemployment with the amounts. Most states have a payment plan option. If you don't pay the money within 90 to 120 days, your state usually sends the debt to a collection agency, and it may affect your credit rating. The state may garnish your future paychecks, lottery winnings and tax refunds.
In California, for example, the Employment Development Department can do the following if you do not repay the state:
- Reduce or withhold other money the State owes you.
- File a claim against you in court.
- Charge you court costs and interest.
- Record a lien on your property.
Some states use penalty weeks to punish intentional unemployment mistakes. A penalty week is a week of unemployment benefits that you would normally receive but won’t because the state believes you intentionally tried to file a false claim. You file for weekly claims certifications as usual but receive no payment until your penalty weeks are over. Although you may be tempted to not file at all if you have penalty weeks, it’s not a good idea. The only way to get rid of penalty weeks is to serve them.
For intentional filing mistakes that either show a blatant disregard for the law or involve large sums of money, your state may choose to prosecute you for unemployment compensation fraud. This involves a full criminal trial where the state provides evidence that you intended to defraud the government through unemployment compensation. Depending on the state in question, you might receive monetary fines or actually jail time. The maximum criminal penalties vary by state.
In California, you can receive a penalty equal to 30 percent of the overpayment amount for fraud. Additionally, you can be disqualified for 5 to 23 weeks.
If you have demonstrated a blatant disregard for the unemployment laws, you state may ban you from receiving unemployment benefits ever again. This usually occurs after a particularly large or multiple unemployment compensation fraud convictions. The reasoning is you’ve shown you aren’t willing to follow the unemployment laws. Since unemployment insurance isn’t guaranteed, the state doesn’t have to allow you participate. When you’re banned, a flag is added to your social security number in the unemployment agency’s database so if you apply again, the person reviewing your claim knows you can’t collect benefits.