Unemployment Insurance Fraud Tricks

Typically, I see a LOT of people with no intention of working or looking for work collecting unemployment insurance payments.  For example, we have summer workers who take the winter off but still collect unemployment in the winter as if they were looking for work.  Most state governments have no desire to hear about this.  In fact, in California (at least a number of years ago) if you call the unemployment fraud number the only kind of complaint they take is reports of employer fraud.  You can't actually report employee fraud, and the one time I tried to do so I was threatened by a California State employee with dire legal consequences for "harassment" and "retaliation".

The new dodge I saw the other day is when Company A goes to an employee of Company B and offers to hire them away for higher pay.  When the employee leaves B for A, A tells them that they should file for unemployment, claiming they were forced out rather than quit (essentially constructive termination).  In most states, if an employee says one thing (I was forced out!) and an employer says another (She quit!), the employee is almost always believed unless the employer can bring an absurd amount of written evidence to the table to prove otherwise.

Anyway, having convinced the state the employee was terminated rather than quit, the employee collects unemployment benefits.   Then, company A pays the employee in cash under the table an amount per hour less than minimum wage but which in combination with the state unemployment payments does indeed add up to more than they were making at B.  They end up paying less than minimum wage and pay no employment taxes (since it is cash under the table) and the state makes up the difference with an unemployment check.  Company B, by the way, sees its unemployment taxes go way up because these rates are experience-based.

  • OttoMaddox

    Part-time college teachers in California are allowed (upheld by the CA Supreme Court) to file for unemployment during the six week Christmas break. Most would prefer a shorter break but the part-timers have vetoed that, claiming that would cost them money. No discussion of the ultimate patsies - us taxpayers.

  • esoxlucius

    I've lived this. I also had an employee that tried it on the earliest day she *thought* she could and mis-counted by one day saving my bacon but causing me a bout of hilarity. The worst part are the employment rules in Iowa. At the time they stated if you hired someone across 2 quarters, they were entitled to unemployment. Even if they worked one day in december and another in january. It may have changed by now. I hope it did.

  • Eau de Javelina

    I had a p/t employee in NYS that worked for a second company as well. The second company fired him and he moved to Florida and then collected unemployment from my account (as well as the other company I assume). When I wrote NYS and told them I was perfectly happy to keep the employee employed and never fired him and that he voluntarily moved to FL, the all-wise NYS board decided against me.

  • Daublin

    It seems like the "fired" versus "quit" question is hopelessly non-objective. How would you ever find this out even if you had access to every written or spoken word or even the *thoughts* of the employee in question? People fool themselves, you know.

    It's similar to the question of why someone is unemployed. Is it because they prefer not to work, or is it because there's no opening in the job market for them? I'm not sure what the difference is even with access to every possible form of data. You can pretty much always go work at a grocery store.

    In an ideal world, such distinctions wouldn't be on the books. They're not just easy to be fraudulent about. They don't even mean anything.

  • slocum

    Wow, I hadn't heard of that scheme before. This kind of BS is why I'm happy I've been able to do business in a partnership with occasional subs and no W2 employees.

  • Not Sure

    “There are no jobs!” That is what people told me when I visited this NYC “jobs center” near Fox’s studios.

    But it’s not true.

    After people at that welfare office told me, “There’s nothing out there, nothing!” …“no jobs available”, my team of four researchers (two of them interns) walked the area within a few blocks of the “jobs center”. In a few hours, they found 40 job openings! 24 of the employers said they had entry-level positions—“no experience necessary.”

    John Stossel - http://www.foxnews.com/opinion/2012/07/03/no-jobs.html

  • mlhouse

    Well, the truth is that if they did not stick the employer then the State would have to take care of them. That is why there is a bias against the employer. You can have stacks and stacks of documentation on the employee, and they will find the employee's wild ass tale "more believable". When you consider the "judge" is a representative of the state then you will get a clearer picture. It would be like having a situation were two parties A and B could have to pay, but B is the judge and jury. How often do you think A is going to win?

  • PGoodale

    Couldn't you argue with the state that they are still employed by you and you expect them back to work immediately. Then If they don't show up you begin disciplinary proceedings to terminate them for absenteeism. What are they going to do tell unemployment that no they don't work for you because they quit? If an employee tells you they quit tell them they are not allowed unless they put in in writing with a notary signature.