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‘I’m a hostage’ | Why California’s COVID unemployment mess isn’t over yet

Workers denied pandemic-era jobless benefits are still struggling with debt and stress — collateral damage as they fight appeals system facing a ‘historic’ backlog.

SACRAMENTO, Calif. — It’s been 22 months and three unemployment appeals since Nicolas Allen’s last job in Fresno.

This story was originally published by CalMatters.

In the time it has taken the 44-year-old graphic designer to win a fraction of the benefits that he applied for, his wife has weathered a high-risk pregnancy, his youngest son was born and his family has been pushed to the financial brink. 

Now, Allen is one of thousands of Californians who say they lost jobs due to the pandemic, but are still fighting lengthy legal battles over unemployment money that state and federal relief programs were designed to provide. It’s a ripple effect of earlier benefit backlogs that ensnared some 5 million people at the state Employment Development Department (EDD), which officials have said was unprepared and overwhelmed by mass job losses.

Those caught up in payment disputes say they have struggled with debt, housing and necessities like food or health care. Meanwhile, no one is publicly tracking how much appeals cases and lawsuits might end up costing workers or taxpayers in a state that still owes the federal government nearly $19 billion in unemployment debt.

“It’s easier to not think the money’s there,” Allen said. “Because if I worry about it too much, it’s too painful.” 

The EDD has paid out $188 billion in unemployment benefits since the first pandemic shutdowns. State and federal officials waived many ordinary application requirements as millions of claims flooded in, and the agency has acknowledged that up to $31 billion was paid to scammers in the rush to distribute money quickly. 

Along the way, state watchdogs say up to 1 million workers were wrongly denied benefits — many mistakenly flagged for committing fraud themselves.

“Accusing people of fraud is a big deal,” said George Warner, director of the Wage Protection Program at San Francisco’s Legal Aid at Work. “And the EDD does it very casually, very frequently.”

The biggest logjam of contested unemployment cases lies in a state appeals process, where more than 1 million workers have asked for a review of EDD’s decisions in their cases since March 2020. About 880,000 of those cases have already been transferred and heard by a lesser-known state labor agency, the California Unemployment Insurance Appeals Board, where the average case is still languishing for 139 days before a hearing with a judge, federal data shows.

Dozens of workers who have exhausted this state process have elevated their claims even further, to appellate or superior courts. Finally, advocacy groups and hundreds more workers have joined proposed class-action lawsuits against the EDD or its debit card contractor, Bank of America.

Both the EDD and the Appeals Board refused requests for interviews to discuss workers’ concerns and state efforts to respond. The agencies also referred some inquiries to one another or offered conflicting answers, raising questions about how delays and associated costs are being tracked.

Gregory Crettol, assistant director of the California Unemployment Insurance Appeals Board, told CalMatters in a statement that the Appeals Board has hired and trained 105 judges and 100 new support staffers since the onset of the pandemic. The board is also rolling out a new online system for workers to track their cases, and officials said at an April meeting that judges are now closing almost twice as many cases per month as pre-pandemic.

Still, “Given the historic backlog of appeals,” Crettol said in a statement, the Appeals Board “anticipates it will likely take several more years to completely resolve before workload returns to normal levels.” 

Unemployment cases are complex and vary widely, but workers awaiting disputed funds have faced similarly dire challenges. A 33-year-old video editor in Burbank had to create a GoFundMe to restart her life during a gender transition. A security guard In L.A. County worried whether fellow workers still seeking unemployment would end up in the homeless camps he once patrolled. A 62-year-old temp worker in Sacramento spent months terrified she’d lose her car, and a legal office manager in Southern California filed for food stamps and MediCal to survive an appeal with no end in sight.

“I really feel like I’m a hostage,” said the office manager, who asked to be identified only as Carole M. and has been awaiting an appeal hearing since November. “I had no money, and I kept saying: ‘How long is this going to take?’”

Fraud fury

Like many of California’s COVID-era unemployment challenges, slow and unwieldy payment disputes aren’t new. But the pandemic did two things: unleash an unprecedented flood of 29 million jobless claims, and supercharge anxiety about a new generation of online fraud.

Rival politicians have seized on jobless claims filed in the name of death row inmates and YouTube rappers bragging about EDD-fueled spending sprees. Investigators attribute the bulk of pandemic unemployment fraud to organized identity theft. Unemployment attorneys, meanwhile, say they’re seeing regular workers who thought they were eligible for benefits disqualified — and sometimes charged with lying — in cases that can sometimes be explained by confusion about state forms, clerical errors, language barriers or disagreements between workers and employers.  

“It’s so wrong,” said Assaf Lichtash, founding attorney of Los Angeles-based Pershing Square Law Firm. “The way I see it, the EDD is punishing regular civilians that are just filing for benefits who make honest mistakes — they’re punishing them for their failure to safeguard the money from fraudsters.”

State reports have also highlighted a disconnect between the EDD’s ham-fisted approach to large-scale fraud and what some say seems like a hair-trigger impulse to flag individual workers. Organized scammers evaded the agency’s automated application systems early in the pandemic, one September 2020 report by a governor-appointed EDD Strike Team found, while the vast majority of individual workers scrutinized in manual reviews appeared to be innocent.

“Processes intended to block fraud are slowing service delivery without catching fraud,” the Strike Team wrote, since just .02% of the 1.3 million cases flagged that summer appeared to be real fraud. “The cost of finding that small number of imposters is extremely high.” 

A separate report last August by the Legislative Analyst’s Office found that, during the pandemic, state appeals judges overturned EDD unemployment denials up to 80% of the time. That report highlighted another sample of 1.1 million unemployment claims stopped due to fraud concerns by an EDD consultant early in the pandemic, where at least 600,000 cases were later “confirmed as legitimate” and workers saw payments needlessly delayed.

Even before COVID upended the job market, the Analyst’s Office estimated that improper unemployment denials cost workers $500 million to $1 billion a year in unpaid benefits. The agency also noted “concerning steps” at EDD in recent years that “suggest that ensuring eligible workers get benefits is not among its top priorities.”

The EDD refused to discuss its approach to appeals during the pandemic. Over the past three years, the agency has invested heavily in new anti-fraud technology and sought federal waivers for some workers who may have received extra federal pandemic unemployment funds “through no fault of their own.” 

For workers who still want to fight an unemployment case, the first step is to notify the EDD in writing. The EDD then transfers the case to a local office of the Appeals Board, which schedules a hearing with an administrative judge. If a worker or business still feels that their case is unresolved, they can file another appeal with the state-level office of the Appeals Board, or eventually escalate the case to a superior or appellate court.

As of March, the average first-level appeals case with a judge was taking 139 days — a lag not as extreme as some other states, U.S. Department of Labor data shows, but still roughly triple the federal government’s 30- and 45-day targets for state unemployment appeals.



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