LANSING, Mich. (Michigan News Source) – Michigan State Sen. Lana Theis (R-Brighton) introduced legislation that would protect many of the state residents from being forced to repay unemployment benefits they received during the pandemic.

The state’s $2.7 billion clawback.

The state of Michigan’s unemployment office (UIA) said in September it would resume collecting $2.7 billion in overpaid unemployment benefits the state issued to about 350,000 whose jobs were disrupted during the COVID-19 pandemic in 2020. The collection efforts had been delayed by a lawsuit that has now been settled.

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Theis said the mistake was made by the state and not the fault of the people receiving the unemployment benefits.

“During COVID-19, thousands of Michigan residents applied for unemployment benefits honestly and in good faith — following the guidance the state provided at the time,” said Theis in a press release. “Years later, many are being told they were ‘overpaid’ and are now facing collection actions — sometimes in the tens of thousands of dollars. These clawbacks are creating severe financial hardship for people who did nothing wrong; they relied on the state’s instructions and accepted benefits the state told them they were entitled to receive.”

What does the law require?

The state said in September the law requires it to collect the overpayments.

“We understand the impact these collections will have on household budgets. That is why we are providing notice and information about applying for a financial hardship waiver,” said Michigan UIA director Jason Palmer in a press release. “At the same time, we are legally obligated under the Michigan Employment Security Act to seek repayment and we must fulfill our responsibility to ensure taxpayer money is returned to the Unemployment Insurance Trust Fund, so workers can count on money being available if they need it in the future.”

According to the state, the lawsuit settlement allows “workers who believe they were wrongly asked to repay pandemic-era unemployment benefits to the Michigan Unemployment Insurance Agency (UIA) can now go online for information about joining a class action lawsuit settlement.”

Nick Assendelft, spokesman for the unemployment agency, said collecting overpayments has always been a standard part of UIA operations.

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“The unique aspect here is the court blocked UIA from collecting any overpayments dating back to March 2020 while the Saunders case played out,” Assendelft said in an email. “Now, with the Saunders settlement, UIA is once again allowed by the court to follow state and federal law to collect overpaid benefits on state and federal unemployment claims filed since March 2020.”

Theis blames the state.

Theis said the state was at fault.

“My bill restores fairness,” Theis said. “We can and should distinguish between bad actors and honest claimants who followed the rules as they understood them. It recognizes that agency errors, evolving federal guidance and system design contributed to overpayments. Honest claimants should not be punished for relying on the state’s own determinations.”

The press release stated the legislation amends the Michigan Employment Security Act to authorize the state to waive collection efforts for claimants who applied honestly and accepted benefits in good faith.

“This legislation is about common sense and compassion,” Theis said. “Families should not be forced into financial crisis because of government mistakes. Instead, we should be focusing on rooting out fraud and making sure our system works for those who need it most.”