Investigations

Kentucky’s new unemployment insurance overpayment waiver is supposed to offer some relief to people who were mistakenly overpaid benefits, but many who owe money are excluded from even asking.

The state legislature first created the waiver program in March, after the Kentucky Center for Investigative Reporting detailed how people who applied for benefits in line with Gov. Andy Beshear’s public statements about eligibility later got debt collection notices.

Nearly a year after Beshear told people to save money from unemployment insurance benefits in case the state made a mistake and asked for that money back, the waiver offers debt forgiveness for people who were overpaid through no fault of their own — and for whom collection would be “unconscionable, unjust or unfair.”

In June, the unemployment office began mailing overpayment waiver applications to those who might be eligible for an overpayment waiver based on their records. Kentucky Labor Cabinet spokesperson Kevin Kinnaird said in an email the agency sent out just over 14,600 applications so far, allowing the chance of forgiveness for over $19.6 million in total overpayment debt.

But the office has limited who can ask for debt forgiveness to people the state has predetermined might be eligible — and those people have to request the waiver within 30 days of notification.

The unemployment office has so far approved debt relief to just over a third of those individuals who received letters. Kentucky-based attorneys and national advocates say this restrictive approach to overpayment waivers may leave people saddled with debt they shouldn’t have to pay.

No one from the Kentucky Office of Unemployment Insurance was available for an interview on the subject, according to Kinnaird. He said by email that the waivers amount to nearly $7.5 million in debt forgiven so far. People who were overpaid but didn’t get a waiver application have the right to file an appeal, Kinnaird said, but according to the unemployment office’s website, appeals must be filed within 15 days of the initial decision.

Few Options To Fight Overpayment Debt

Leonard Sanderson, a substitute teacher for Jefferson County Public Schools, hoped the new waiver would relieve him of nearly $1,000 in debt.

Sanderson received unemployment benefits from April through June last year when the coronavirus pandemic closed schools to in-person education, and ended the substitute teaching assignments Sanderson relied on.

The Kentucky unemployment office paid him, then determined retroactively he was ineligible for benefits once the regular school year ended. The unemployment office said substitute teachers weren’t supposed to file unemployment claims during summer break. Sanderson didn’t know that. 

Just a few months earlier, in March of 2020, Kentucky expanded unemployment insurance to cover independent contractors and substitute teachers. Sanderson normally picked up school assignments those months, and plus, the state already paid him. So when Sanderson heard about the new debt forgiveness waiver, he thought it would certainly apply to substitute teachers like himself.

Sanderson remembers watching a press briefing on TV as a representative from the state saying people would be receiving a form to fill out and apply for forgiveness.

“Well, I haven’t received that,” Sanderson said. “The only thing I’ve ever received was two collection letters.”

Sanderson filed suit against the unemployment office last December seeking a judge to reverse the unemployment insurance office’s decision that he was ineligible for unemployment benefits. A JCPS spokesperson told KyCIR last year that more than 2,200 unemployment claims were filed by JCPS employees and substitute teachers at the time.

He hasn’t received a waiver application, and hasn’t been able to reach the unemployment office to ask for one. He is so far unable to ask for basic forgiveness, and stuck in “limbo.”

“With no prize on the other side,” Sanderson said.

‘Good faith’ but no shot at waiver

The unemployment insurance hasn’t even given many substitute teachers, and potentially other workers, a chance to apply for debt forgiveness, according to Louisville attorney Robyn Smith.

The state needs to fill out portions of the waiver application first, including how much money the applicant was overpaid, and there’s no blank forms online or elsewhere for people to submit their own application. People seeking forgiveness through the waiver then need to explain why their overpayment wasn’t their fault and that the debt causes a financial hardship for the applicant and their family or they spent the money on necessary expenses.

When Smith reached out to the unemployment office to ask for a waiver on behalf of a client, she said the unemployment office told her substitute teachers couldn’t request a waiver application for summer payments because they were not a “no-fault” overpayment.

Smith disagrees. 

“I don’t see anything that implicates fault,” Smith said. “They in good faith did what your people told them to do. There wasn’t a law that told them not to claim that they were ignoring. They did not falsify anything. They did not misrepresent anything and they relied on your agency granting that sum.”

And, she said, they’re unemployed and have long since spent that money.

“If you make them pay it back, that’s a hardship, that’s exactly what the waiver is supposed to address,” Smith said.”

The application process laid out in the statute puts the onus on the claimant to request a waiver and prove that they meet the criteria for debt forgiveness, a process Smith said many people may find confusing.

“You get this bill in the mail and you only have 30 days from the date that mailed to you to try and build a case, using words that lawyers use, about why you shouldn’t have to pay all of that back,” Smith said. “That is to me the epitome of unconscionable unjust and unfair, putting that burden on people who are still struggling to get back on their feet.”

Republican State Sen. David Givens from Greensburg, who sponsored the law creating the waiver process, did not respond to a request for comment.

Steve Gray, senior counsel at the National Employment Law Project, a nonprofit advocating for economic security and opportunity for workers, said anyone who was given benefits from the state should be eligible to request a debt waiver

In Michigan, where Gray led the state unemployment insurance office through the first eight months of the pandemic, the office granted waivers automatically for many people who were overpaid due to an agency error.

“If you look for the purpose of the unemployment statutes across the country, it’s to relieve the crushing force that unemployment has on people and their families and their communities,” Gray said. 

But, Gray said, many states shifted the focus of unemployment insurance in recent years from providing relief to as many out of work people as possible towards limiting access to prevent relatively rare instances of fraud or mistaken overpayments.

As a result, unemployment insurance often fails to reach the people who need it most: At the dawn of the coronavirus era, 20% of unemployed people in Kentucky received benefits, which is lower than the national average of 28%.

Gray said the mindset that keeps recipiency rates low may impact how states implement their waiver programs.

“Lots of states that have waivers in place don’t give very many of them, even though there are lots of people that are eligible for them because of this sort of same mentality,” Gray said. “It’s entrenched in our system. We just need a complete overhaul.”