Like many states, Arizona has been a recent target in the wave of nationwide fraudulent unemployment claims. When the CARES Act passed in the spring of 2020, states were authorized to award expanded unemployment relief to persons whose jobs were impacted by the COVID-19 pandemic, including some persons who otherwise were ineligible for or had exhausted their unemployment benefits.
Cue the scammers ready to seize an opportunity! In the months that followed passage of the CARES Act, many states saw a surge in unemployment insurance (UI) filings, which in most jurisdictions takes only completing a form online with some basic personal information (in many cases, information that can be found unlawfully on the dark web). Employers were often surprised by notifications of UI claims filed by persons they had never employed, or by employees still on their payroll.
Unfortunately, the trend continues despite efforts by states to identify and weed out fraudulent claims earlier in the process. For example, the Arizona Department of Economic Security (AzDES) reports that, whereas initial UI claims had averaged between 6,285 and 15,561 per week between August and December 2020, there were 41,487 UI claims filed in the week ending January 23, 2021 and 60,775 UI claims filed in the week ending January 30, 2021.
After many astute employers reported claims filed by current employees or never-employees, on February 7, 2021, AzDES instituted a front-end security check measure (using an identity verification tool, ID.me) to try to prevent the filing of a fraudulent claim at the outset. In many cases, this process works and prevents UI benefits being issued to the scammer and the employer’s UI experience rating being charged, but the process is imperfect. Consequently, employers are urged to be vigilant when responding to UI claims, including carefully reviewing the name, address, and Social Security number (SSN) information on the application and verifying that information and the alleged circumstances of termination against company records. If a claim appears to be fraudulent, AzDES has instituted a fraud reporting hotline (1-800-251-2436) and website making it easier for employers to report them without going through the time, expense, and hassle of responding to them.
At a virtual meeting hosted on February 19, 2021 by the Arizona Chamber of Commerce, AzDES Director Michael Wisehart denied that a data breach at AzDES was to blame for the spike, but nonetheless encouraged employers to report suspicious claims and to warn employees whose information is being misused to do the same using the same online link. Duplicate reports help to create a record should the fraud victims receive Forms 1099-G for the unemployment benefits and need to avoid taxation on money they never claimed or received. (Anyone receiving a Form 1099-G for UI benefits they did not claim or receive can report it here.) In addition, victims can take steps like placing credit freezes with the credit reporting bureaus and with the federal identity theft reporting system, as fraudulent claims mean, more likely than not, their SSNs have been compromised. Director Wisehart also encouraged prompt reporting because the Department will hold harmless employers whose experience ratings are inadvertently charged for benefits paid to scammers.
Fortunately these efforts appear to be working, as the current AzDES UI Data Dashboard shows a sharp decrease in initial (likely fraudulent) filings, but employers should remain vigilant and timely respond to all claims to avoid the award of benefits to very undeserving scammers.