The US Labor Department has denied a request from the Baker administration for approval to waive without individual review nearly $2 billion in federal jobless benefits paid to as many as 300,000 recipients who were later deemed ineligible or received more money than they were due.
The federal government instead handed the state a complicated split decision that will be challenging to implement, permitting financial relief en masse for just one group of claimants who were overpaid, and only for some amounts. The state Department of Unemployment Assistance will have to continue its conventional process of sorting out most overpayments one by one.
Massachusetts is the only state to seek a blanket waiver for overpayments to all participants in federal programs, including Pandemic Unemployment Assistance for self-employed and gig workers, as long as the benefits weren’t from fraudulent unemployment claims.
On Friday, a Labor Department official told the Globe that the state’s request could not be granted under federal law. But the official, Michele Evermore, deputy director of policy in the Office of Unemployment Insurance Modernization, said in an interview the state could forgive one category of overpayments: PUA recipients who didn’t respond to requests for proof of previous employment.
The failure to provide a work history — a requirement Congress belatedly set after the PUA program was well underway — was the most common reason unemployment claimants in Massachusetts were retroactively ruled ineligible for federal benefits, according to the DUA.
But the blanket forgiveness will be limited to PUA payments made before March 23, 2021. That’s when the state notified recipients that they must substantiate their work history; subsequent benefits can still be waived, but only after the DUA takes a look at each case individually.
It’s too soon to know how many people may qualify under the partial blanket waiver.
While the DUA administered the pandemic programs, the money was provided by Congress. Overpayments on state-funded unemployment claims were not part of the state’s request, which was made to the Labor Department in February.
Massachusetts’ bid for forgiveness on all nonfraudulent overpayments was a long-shot request, but Governor Charlie Baker had said he was hopeful that a deal could be reached with the Labor Department, which is headed by former Boston mayor Martin J. Walsh.
But Congress limits how generous Walsh can be. States are allowed to grant overpayment waivers under two conditions: the recipient was not at fault, and forcing repayment would go against what is known as “equity and good conscience.” The trick is determining when repayment would violate the squishy concept of equity and good conscience.
The Labor Department determined that PUA recipients weren’t at fault for benefits paid before the state sent out requests for employment records, and that requiring repayment would not be fair, Evermore said.
“Those people didn’t know that they were going to have to substantiate their employment,” she said.
But for benefits paid after the notification, Evermore said, “it was just difficult to make the case for someone who didn’t respond. . . . Non-fault is a hard standard.”
The Baker administration said it appreciated the “initial relief” provided by the Labor Department. The state is “reviewing the decision, and will have more to say soon about plans to provide further opportunities for relief for claimants with overpayment issues,” a spokesperson for the Executive Office of Labor and Workforce Development said.
Overpayment notifications surged after Congress passed new jobless relief legislation in December 2020. The bill included a requirement that state employment agencies like DUA obtain documented proof of prior employment from PUA recipients. Initially those people were able to self-certify their eligibility. PUA was created for self-employed and gig workers who aren’t covered by state unemployment.
The rule change piled more work on an already overloaded DUA.
The DUA has about $2.33 billion in outstanding overpayments, the agency said in a report to the Legislature last month.That includes a separate category of overpayments involving benefits provided directly by the state government, some $375 million worth.
Many of the overpaid recipients had returned to work and were no longer checking their DUA accounts for e-mails, the Globe has reported. The notices were sometimes confusing, especially to people with limited English skills, and the DUA’s service agents were often impossible to reach. Many people had long ago spent the money the state was now saying they owed.
More than three-quarters of the overpayments are tied to federal benefits, including PUA. The state had 29,000 pending waiver requests, including 13,700 tied to federal benefits.
According to its report, about 55,400 people with overpayments of state benefits and 7,800 PUA claimants have either fully or partially repaid the DUA, or are on a repayment plan. Recoveries total $183 million on federal benefits and $39 million from state unemployment.
The DUA said earlier this year that it had dropped on appeal or waived $1.8 billion in overpayments using its current procedures.
Jon Chesto of the Globe staff contributed to this report.