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Colorado won’t try to collect the $1.4 million in overpaid unemployment benefits it distributed after all

Confusing forms in the federal Pandemic Unemployment Assistance program led some gig workers to overestimate their income.

The Colorado Department of Labor and Employment office in Denver's Capitol Hill neighborhood on March 21, 2020. (Eric Lubbers, The Colorado Sun)
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About 9,000 Coloradans who were overpaid more than $1 million in unemployment benefits and told to pay it back may not have to after all, Colorado Department of Labor and Employment officials said on Thursday. 

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Confusing forms for gig workers and the self-employed had many applicants overstating their earnings, which were supposed to be based on adjusted earnings and not gross income. Because of that — and the number of Coloradans hit with overpayments — state officials launched a focus group last month to figure out what went wrong and on Oct. 29, will issue a revised form, with clearer language, for new applicants. 

Most of those impacted are gig workers and the self-employed who were covered by Pandemic Unemployment Assistance. The state has identified about $1.4 million in overpayments to people who have shown they misunderstood the process or that repayment will cause financial hardship.

“When we looked into monetary eligibility for these claims, it did appear that there was confusion in reporting (wages), overreporting and misreporting,” said Cher Haavind, deputy director of the labor department. “Consequently, on Oct. 28, all remaining offset balances will be written off.”

The news was a relief to Meggan Hurley, a self-employed business owner in Woodland Park. She thought her unemployment benefit was too high back in April and called in to double check, but was told “Oh, don’t worry, that’s just the system. It calculates everything,” she recalled.

Then she got a message from the state on Sept. 3 saying she had to pay back more than $13,969 in overpaid benefits.

“I’m so grateful that Colorado is writing it off. But they really need to have things implemented properly,” said Hurley, who is a genetic health coach and had to end her in-person visits when the pandemic began. “I mean, seven months! That’s a long time.”

Meggan Hurley, a self-employed DNA health worker, was shocked to learn she was overpaid $13,969 in unemployment benefits after being told to not worry about it. Colorado’s unemployment office told her she must pay it back. (Provided by Meggan Hurley)

Hurley had started a Change.org petition to bring attention to the overpayments in Colorado that were due to clerical errors and confusion. She dug into the federal CARES Act, which provided funding for PUA claims, and found that it allowed states to approve waivers to those overpaid “without fault on the part of any such individual.”

“I’ve been getting a lot of messages from other people and here’s the deal: they’re not people who aren’t paying taxes, they’re not people that are committing fraud,” she said. “This was not their fault.”

Overpayments happen all the time with unemployment. Typically, this is the result of the worker misreporting wages, an employer protesting the benefit or fraud. But because the PUA system was new for the state, the implementation was not smooth. PUA was also targeted by scammers using stolen IDs to file claims. The state estimated there was more than $40 million in overpayments, most of it linked to fraud.

Colorado moved quickly to make sure people received benefits after thousands lost their jobs during coronavirus restrictions ordered by the state, Haavind said.The CARES Act allowed states to use federal money to pay gig workers for the first time even though they normally don’t pay for unemployment insurance.

But the federal guidance was to model PUA after Disaster Unemployment Assistance, which typically goes into effect during disasters and emergencies and is meant to aid small business owners and the self-employed who are expected to know their tax forms. Gig workers, such as those who drive for Uber, were not always familiar with the terminology.

“The department does have the ability to either have a write off or a waiver. In this instance, if the claimant indicates to us that the offset was a result of this misunderstanding of the process, or that it provides a financial hardship then that will be considered under a write off,” Haavind said.

The other option people facing repayments have is to appeal. Usually, unemployed workers have 20 days to appeal a labor department decision. But because of the form confusion, the department is extending it to 180 days to include anyone who might have been socked with an overpayment in the spring.

More: What’s Working: Extra $300 unemployment benefit gets a start date and how Colorado overpaid $40 million in jobless aid

People who are already on a repayment plan but can vouch that they, too, were confused also can appeal and get the funds back

Those who don’t qualify for the waiver and must pay back the benefits may see future unemployment benefits decrease to pay back the state. Folks also can request a payment plan, which could include delaying payments until the person is back to work. 

Jeff Fitzgerald, the state’s director of unemployment insurance, said that Colorado and its strapped state budget won’t be held liable for overpayments made to PUA workers. But the state must try to recover the money when possible.

“At no point would we have to make a general fund payment to recoup funds and pay the feds,” he said. “What happens is that we have to perform exhaustive efforts to recover those dollars from those claimants. Those efforts never really go away.”


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