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State settles lawsuit over false unemployment fraud claims

Feb 2, 2017

Michigan's Unemployment Insurance Agency has settled a lawsuit over an automated claims processing system that falsely accused tens of thousands of people of fraud.

Between October 2013 and August 2015, the system kicked out more than 50,000 potential fraud cases. An initial state review of those cases found a 93% error rate. 

A lawsuit filed on behalf of the United Auto Workers union, Sugar Law Center and several individuals accused of fraud was dismissed Thursday under an agreement between the state and the plaintiffs.

Attorney David Blanchard says the agreement includes safeguards to ensure that claimants are notified of fraud accusations and have time to respond.

"Nobody's money should ever be taken out of their account, out of their paycheck, out of their tax returns without first having some basic due process rights, and that's what was happening. That's going to change going forward," Blanchard said.

Wanda Stokes, director of the state Talent Investment Agency, recently apologized for the fraud fiasco, saying Gov. Rick Snyder appointed her to "assess the situation and then fix it." 

The state is halting all collection activities against people who were subject to fraud determinations over the nearly two-year period the system was in place.