Lawmakers attempt to end interest payments on unemployment overpayments vetoed by Sununu

By ETHAN DEWITT

New Hampshire Bulletin

Published: 08-16-2023 10:11 AM

New Hampshire officials are attempting to recover $6 million in unemployment benefits that have been incorrectly paid out to Granite Staters since 2017. But how the state enforces those collections has sparked debate. 

Currently, residents who wrongly receive unemployment benefits are informed by the Department of Employment Security that they must pay back the money – with interest. The department adds 1 percent interest to the total for every month of nonpayment by the recipient. Those interest payments are unique to state unemployment benefits – federal programs such as SNAP and TANF do not add interest when people are required to pay back benefits.

This year, the Legislature voted to limit the practice: The House and Senate passed Senate Bill 42, which would eliminate interest payments on those overpayments unless the recipient had committed fraud. 

But in late July, Gov. Chris Sununu vetoed the bill, arguing that the interest provides a critical incentive to ensure the money is returned. He said enforcing the collection of overpayments provides fairness for businesses that pay into the state’s unemployment fund. 

“Without the accrual of interest, individuals do not have an incentive to pay these funds back,” Sununu said in his veto message. “In other words, this bill would allow ineligible beneficiaries to get an interest-free loan on the backs of New Hampshire employers.”

The veto has frustrated some. To New Hampshire Legal Assistance, which provides legal services to help people who are charged for overpayments by the department, the characterization of the recipients is unfair. 

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Some people were improperly given unemployment benefits because of simple errors or misinterpretations of the application, NHLA says. For them, even if the benefits were given incorrectly, paying them back years later can be a new financial burden. 

“We really see the interest as punitive,” said Ray Burke, a staff attorney at NHLA and co-director of the organization’s benefits program. “For people who have not committed fraud, the interest accrues, even if they’re actively repaying it back, but can’t afford to repay the entire amount in the first 60 days.

“We felt that people shouldn’t be left worse off and having debts that grow over time because of a mistake.” 

State officials counter that the interest payments are important to the process, and that eliminating them could reward people for not paying back the money. 

In an email, Richard Lavers, deputy commissioner of the Department of Employment Security, said the current process is designed to provide accountability.

“People need to answer questions truthfully and honestly, and as long as this happens then they will never have a problem,” Lavers said. “It is when they provide inaccurate information that they knew or reasonably should have known was inaccurate that they need to repay those benefits with interest.”

Most of the overpayment situations arise due to someone receiving a bonus payment from their work after losing their job and failing to report that when they apply for unemployment, Lavers said. People receiving unemployment benefits must provide updated information every week to the department. The department generally is not able to vet that information until it receives wage information from the employer. At that point, if there is a discrepancy, the department sends a notice that the benefit is overpaid and the recipient must pay it back. 

Lavers said that while the bill carved out exceptions for people who commit fraud, it did not take into account people who submit wrong information without necessarily committing fraud. Those recipients should still face interest payments, he argued. 

“The department is not looking to create a chilling effect on the public’s use of the unemployment program and investigate everyone for fraudulent behavior,” Lavers said. “However, just because your conduct that resulted in being paid when you should not have been paid where you knew the information you provided was inaccurate, this should not be encouraged.”

NHLA says many of the clients they have talked to were unaware the information was inaccurate. 

Under current law, anyone who enters incorrect information to receive unemployment benefits – whether accidentally or fraudulently – must pay back the money. Recipients are exempt from that requirement only if the error was on the part of the department or that person’s employer. 

In 2022, 1,670 people in New Hampshire were found to have received benefits wrongfully due to their own fault – but not due to fraud, Lavers said. Collectively, that group owes $1.2 million in overpaid benefits, according to Lavers.

NHLA has historically worked to help represent people who are facing “clawback” actions by the state and federal government over benefits. 

The process can lack transparency for people on the other end, NHLA says. Sometimes, people are sent letters informing them they must pay back their overpayments years after having received the benefits, without informing the recipients why their application was at fault, NHLA says. Often, those who receive that notice are not aware they can appeal it, preventing them from getting simple mistakes rectified. And when they do appeal, access to a lawyer can make all the difference. 

Recently, the organization has assisted clients who stated in their application that they had lost access to child care due to COVID-19. Those clients had lost out on child care services from family members and friends due to the outbreak of COVID-19, but the Department of Employment Security argued that they were ineligible for pandemic unemployment assistance because they hadn’t lost out on a child care facility. Pointing to the U.S. Department of Labor guidelines, NHLA successfully contested those decisions through the department’s appeals process and reversed the finding that the clients were ineligible, Burke said.

The cases illustrate that simple misinterpretations can lead to incorrect findings that a person owes back unemployment benefits, which in turn can saddle families in debt, Burke argued. 

“We believe there’s lots of people out there who did not contact us who were affected by the same situation, and if they did not know how to appeal . . . they likely wouldn’t have been able to succeed,” he said. 

In opposing Sununu’s veto, NHLA argues that financial punishment is not necessary because people already have incentives to pay back overpayments, such as the impact the debt has on their credit score. 

NHLA said the Department of Employment Security also has other tools to recover the money more quickly. The department can intercept that person’s federal tax refund. Staff can pursue a lien against the person’s house or try to garnish that person’s wages. And the state can deduct the amount owed from future benefit payments until the debt is repaid. 

But Lavers argued that in reality, those tools are costly and time-consuming. 

“The department has limited resources for investigating unemployment fraud, and we focus these resources on the potentially more egregious behavior where someone finds new employment while filing for benefits and does not report the new job or the wages earned from the new job to the department,” Lavers said. 

SB 42 began in the Senate with bipartisan support, with cosponsors that included Sen. David Watters, a Dover Democrat; Sen. Tim Lang, a Sanbornton Republican; Sen. Cindy Rosenwald, a Nashua Democrat; and Sen. Sharon Carson, a Londonderry Republican, among others. It passed the Senate by a voice vote and then cleared the House by a narrow margin, 196-178.

In a statement after the veto, Sen. Becky Whitley, a Hopkinton Democrat, called the decision “appalling” and said the bill would have helped residents “during an incredibly trying time in their lives.”

“To imply that these individuals – who did their best to work in a flawed and rushed system, after losing their jobs and needing to pay their rent and buy food – purposely manipulated the system is a troubling and deeply unfair characterization,” Whitley said.

In his veto message, Sununu pointed to a different measure of fairness.

“. . . Employers expect the state to provide accountability for these funds by ensuring those who are filing for benefits are eligible for them in the first place,” he wrote. 

A vote on whether to override the veto will be taken up by the Senate on Jan. 3, ahead of the start of the 2024 session, after State House leaders decided to postpone the traditional September “Veto Day” in order to streamline votes. That override motion will need two-thirds support in the Senate and House to pass. 

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