Is it a case of finders keepers if the state mistakenly overpays you in jobless benefits?

A box of unemployment applications in Hialeah, Fla.Joe Raedle/Photographer: Joe Raedle/Getty I

Just one question: What happened to finders keepers?

The town is buzzing about a story my colleague Larry Edelman broke last week: The state of Massachusetts mistakenly overpaid jobless claims by several billion dollars during the pandemic, and now must go through the painstaking process of clawing back some of that money from hundreds of thousands of people.

These are not people accused of fraud. They were initially told by the Department of Unemployment Assistance that they were eligible for unemployment. In other cases, DUA is saying it miscalculated the amount and paid out too much.

It can be a big oops ― with individual overpayments in the tens of thousands of dollars ― and not so easily returned if you have been unemployed and spent the money to make ends meet. In my book, that describes just about everyone who lost their job during the pandemic.

I reached out to lawyers hoping they might tell me that such mistakes are akin to the game of Monopoly: When the bank makes an error in your favor, you get to collect $200. Too good to be true? How about this real life example: Last year a federal judge in New York ruled that hedge funds got to keep $900 million that Citigroup accidentally wired to them.

But alas in real life, the “little people” always seem to get the short end of the stick. Lawyers tell me people can’t just keep money they weren’t entitled to. Nice try, I was told, but the New York case isn’t legally relevant to what’s happening with botched unemployment claims in Massachusetts.

Recipients can still make the case to keep the money. Overpayments have happened before, and the DUA has an elaborate system of appeals and waivers. So far, about 39,000 people have applied for waiver requests. The state says since March 2020 it has resolved nearly $1.2 billion in apparent overpayments in favor of claimants after receiving information confirming eligibility. The state has also waived an additional $600 million in overpayments.

Still, about $2.6 billion in outstanding apparent overpayments remain from state and federal programs that provided benefits to Massachusetts claimants.

To keep the money, some can claim hardship: If your current income is less than your expenses, you could be off the hook. That seems reasonable, but matters can get messy. If someone used the benefits for an out-of-ordinary expense, like buying a car, the state cannot claw back the money. But if the money was used to help pay the mortgage, you’ll need to return it.

I can already predict what is going to happen in many cases: Those who hire lawyers will get debt relief; those who don’t will be out of luck.

However you slice it, it’s just unfair that people whose livelihoods were upended by the pandemic must endure another economic shock.

Ken Feinberg, the Washington lawyer known for mediating disputes and delicately distributing funds to victims of the Sept. 11 terrorist attacks and the Boston Marathon bombing, called for “rough justice.”

Here’s why: Allowing a patchwork of exceptions will be a nightmare to adjudicate and administer, especially given the scale of the error. Employers who pay into the unemployment insurance trust fund won’t be happy footing the bill for the Commonwealth’s mistake, nor will the other claimants who paid their debt in full or weren’t overpaid in the first place.

“It’s so subjective,” said Feinberg, who grew up in Brockton. “What you need to do here, based on my experience, is some type of rough justice. … All 719,000 [claims] you will be treated the same, the same formula, the same approach.”

That was Feinberg’s philosophy when he distributed money from One Fund Boston to Marathon bombing victims by working out a compensation formula mostly based on length of hospital stays and a sliding scale calibrated by the severity of injury rather than detailed medical records or lost income. The fund awarded about $61 million in just 60 days.

But given the contentious and daunting task DUA faces on clawbacks, Feinberg thinks it’s wise to do an audit first, rather than continue to press forward.

“I don’t believe it myself,” he said of the multi-billion-dollar blunder. “That sounds like an awful lot of money.”

The DUA stands by its numbers, and the colossal overpayments may be a function of volume. The agency processed about $33 billion in claims to about 4 million claimants over the course of the pandemic; by comparison, in 2019 the DUA served approximately 400,000 unique claimants and paid out $1.4 billion.

I wondered whether State Auditor Suzanne Bump would look into how the DUA is handling overpayments. Not at the moment, she told me, but the federal Office of the Inspector General has been monitoring the situation. She said massive overpayments happened not only in Massachusetts but across the country, and that typically about 10 percent of jobless benefits are flagged as apparent overpayments.

“The emphasis was on getting the money out. Not all of the normal cross checking could be done,” said Bump. “There were delays in getting guidance in how to administer these new benefits.”

Maria O’Brien, a professor at Boston University School of Law who specializes in insurance and employment benefits, said those who can afford to pay the money back should, while the state should forgive all or some of the debt of those who are less fortunate. O’Brien pointed out that other government programs, such as Social Security, employ a formula that is more generous to those whose career earnings were modest.

“When you’ve got real bona fide hardship and there is no reasonable way to pay it back, they should forgive the overage,” said O’Brien.

It’s also not too early to look at how to prevent such a mess from happening again. She believes periodic hits to the economy — whether through another pandemic or climate change — could be part of our new normal, and the state needs to prepare by upgrading technology and procedures.

“I’m not sympathetic to the idea they were overwhelmed,” said O’Brien. “We need to think about revamping their processes so this is not a problem.”

To ease some of the burden, Representative Joan Meschino, a Democrat from Hull, has filed legislation that seeks to clarify and expand the criteria for waiving overpayments for people who didn’t commit fraud. Beacon Hill can be slow to act, but I’m hoping the DUA can just implement some of the changes administratively without legislative action.

Meanwhile, business leaders — hyper aware of the optics of recouping money from people who can least afford to pay an unexpected debt — are calling on Beacon Hill to use federal relief money and the state budget surplus to waive some or all of the overpayments.

One more thing that should be on the table: a moratorium on the clawbacks until there is more transparency in the process.

What’s most needed now is compassion and accountability, not a business-as-usual bureaucratic response.