SACRAMENTO, Calif. (AP) — California is reporting a surge in coronavirus unemployment claims last week for independent contractors, gig workers and the self-employed — the category of benefits blamed for much of the state’s fraudulent payments.
The state last week received more than 110,800 Pandemic Unemployment Assistance claims, an increase of more than 77,00 from the week before. It was so large it accounted for more than a quarter of all such claims nationally, according to numbers released Thursday by the U.S. Department of Labor.
The claims fall under a program Congress approved last year to give unemployment benefits to people during the pandemic who are usually ineligible to receive them. The program has helped a lot of people who are self-employed weather economic shutdowns from the virus. But its broad eligibility requirements have made it a target of criminals seeking easy paydays.
State officials, including Gov. Gavin Newsom, have repeatedly blamed the unemployment benefits program for the self employed as the source of much of the state’s fraud. Last year, the state acknowledged it paid $400 million in fraudulent benefits in the names of 20,000 prison inmates. An analysis of 345,000 frozen accounts last year by Bank of America estimated the state paid at least $2 billion in fraudulent claims.
The number of unemployment claims for contractors and gig workers fell significantly after the state imposed new safeguards, until Thursday when a massive increase was reported.
Loree Levy, deputy director of public affairs for the Employment Development Department, said state officials expected that increase after Congress approved an extension of benefits as part of a coronavirus relief package in December.
Levy said it took a few weeks for the state to implement the additional 11 weeks of benefits that Congress approved, causing a delay for some new claims during that period. Plus, she said another round of business restrictions in December because of a surge of coronavirus hospitalizations likely increased the number of people filing for new claims.
But Michael Bernick, a former EDD director who is now an attorney with the Duane Morris law firm, said the numbers “make no sense” because the increase the state reported was all for new claims, not existing claims.
Most independent contractors in California that have been impacted by the pandemic should already have filed their claims in the previous nine months, he said. Their benefits would be extended under the new congressional aid package, but those benefits should not have shown up as new claims.
“These numbers suggest that the identify-theft rings from throughout the world have not halted efforts, and fraud remains a main issue,” Bernick said.
The state has been overwhelmed with unemployment claims since March, when Gov. Gavin Newsom imposed the nation’s first statewide stay-at-home order that shuttered many businesses. The state has processed more than 19 million claims and paid out more than $113 billion in benefits.
The state has not said how many fraudulent claims it has paid. State Auditor Elaine Howle is scheduled to release two audits of the department next week.