(TNS) — The state of North Carolina says tens of thousands of people who received unemployment benefits during the pandemic need to give at least some of the money back.

The state, which provides among the least unemployment benefits in the country, says these claimants were "overpaid," often by thousands of dollars. It's cut benefits for most of them by half in an attempt to recover the money.

From April through September, the most recent data available, the N.C. Division of Employment Security says it identified overpayments to 46,800 people totaling $61.5 million. Over 1.3 million people in North Carolina have received unemployment benefits during the pandemic.

To recoup the money, DES has reduced benefit amounts by 50 percent for additional benefit weeks for 38,791 people this year. The majority of these claimants received benefits the state has since determined they were ineligible for because of corrected information about their earnings or the reason they lost employment, DES spokesperson Kerry McComber wrote in an email to The News & Observer. People are only eligible for unemployment benefits if they make below a certain amount from other sources and are unemployed "through no fault of their own."

It's an unexpected expense facing unemployed people across the country.

In Ohio, officials said more than 160,000 people received overpayments in August and September. The Texas Workforce Commission says it overpaid $203 million to about 185,000 people from March 1 through Sept. 15, according to the Dallas Morning Herald.

North Carolina lawyers working on unemployment benefits cases say many overpayment charges have arisen out of confusion over eligibility requirements for different unemployment programs.

For example, some people who freelanced before the pandemic, and therefore weren't eligible for regular state benefits, were approved anyway.

The federal CARES Act established a program specifically for freelancers — Pandemic Unemployment Assistance — but as states rushed to prop up the new program in the first months of mass layoffs, guidance on eligibility was unclear and hard to find, said Thomas Lodwick, an attorney at Pisgah Legal Services in Asheville.

"If you're a normal person, you call to file for unemployment — you don't know if you're applying for unemployment or PUA or what the difference is," Lodwick said.

Charges for Thousands of Dollars

When the pandemic hit, D. Matthew Brown, a former client of Lodwick's, applied for benefits right away.

The self-described "master of all trades" worked as a freelance carpenter, tech support person and mechanic in the Asheville area. He's on a state disability program because of ADHD, which he said made it difficult for him to understand the unemployment application. PUA wasn't set up yet, and he applied for regular state benefits.

Brown received nothing for months as his request was pending. When he finally received months of back benefits over the summer, he quickly spent most of it paying his landlord missed rent and friends who had helped him out with bills and buying groceries to feed his two kids, he said.

But then in September, Brown said he received an overpayment charge requesting that he return the entire amount he had received: $13,140.

The notice said he was ineligible for benefits because he had turned down an offer of employment without good cause. That determination was based on a single weekly certification form, Brown says: the first week Brown filled out the weekly certification form he had checked the box, referring to a job he'd been offered but couldn't do because his kids' school and child care had closed.

The state put him on a payment plan for $420 a month. But he doesn't know how he'll repay it.

"I'm really just a guy who's trying to get through the next day at any given moment," Brown told The N&O.

He appealed immediately but more than three months later said he has yet to receive a hearing date.

"If I call the phone number, I've never had it say anything but 'this system is too busy, call back another time, goodbye, click,'" he said.

Unemployment Only Option for Some

Overpayment of unemployment benefits happened before the pandemic too. Between April 2019 and March 2020, the state overpaid recipients by $31.5 million, according to data from the U.S. Department of Labor, an overpayment rate of 14 percent.

The rate of overpayment in the first six months of the pandemic made up a far lower share of the unprecedented multi-billion dollar total benefits: just under 2 percent of payments made by the state.

But the higher benefits amount, challenges of appealing, and massive job cuts that have left many with no income other than unemployment benefits, make the impact of overpayment charges acute.

Over the last few months, Lodwick and other lawyers across the state have regularly seen clients who now owe thousands of dollars, and often more than $10,000. The extra $600 weekly federal benefit accounted for the majority of the overpayments from April through the end of September, according to DES: nearly $40 million.

Many claimants received months of benefits before being told they should not have been receiving benefits at all.

Meghan Lucas, a legal intern at Charlotte Center for Legal Advocacy, says some of her clients have waited months for benefits, only to receive a large back-pay sum and an overpayment notice on the same day.

Some are forced to begin paying with no opportunity to contest the charge.

"On the same date that people are receiving overpayment notification, they are seeing their ongoing payment reduced," Lucas said.

The state has a big incentive to recoup overpayments: the U.S. Department of Labor measures the accuracy with which each state administers benefits. States below federal performance standards can be subject to financial penalties.

"It's so frustrating that the one thing they seem to do quickly is assess overpayments," said Lodwick. In some cases, the notifications don't explain the reason for the charge, he added. "That is not acceptable on any level to my mind, even just as a matter of due process. Like how are you supposed to challenge this thing that you don't have a basis for?"

Stalled Appeals Process

Brown is one of thousands of people statewide who have appealed an overpayment charge.

In 2020, 3,671 people have appealed an overpayment charge compared with 1,249 in 2019, according to DES. That's created a backlog. For appeals completed in November, the average wait time was roughly 118 days between filing and completion, McComber said.

Appealing an overpayment is further complicated by the multiple benefits programs, all of which come with their own eligibility requirements, amounts, and eligible weeks.

The backed-up appeals process has also delayed the possibility of receiving a waiver for the charges.

States can waive overpayment charges of regular state unemployment benefits and the extra $600 weekly benefit "if the payment was without fault on the part of the individual and such repayment would be contrary to equity and good conscience," according to CARES Act guidance.

But typically a claimant must go through the appeals process before a waiver is considered, and even the waivers are rare, said McComber.

People charged for overpaid PUA benefits don't even have the right to a waiver at all, according to CARES Act rules. The September version of the HEROES Act, the stimulus package proposed by House Democrats would have allowed states to authorize waivers in situations where claimants could not repay the funds "without severe hardship." But the halted stimulus talks in Congress left the bill in limbo.

Across the state, people like Brown are still waiting for an appeal date. Brown has a $420 payment due Saturday. But he won't be able to pay it — he says he doesn't even have enough money for groceries.

Brown said he's started to lose hope.

"I just haven't had the spunk to spend another week calling numbers that don't go anywhere," he said. "The unemployment system was set up to be hard to tackle, hard to get through without being discouraged to where eventually you just say 'ah, forget it, it's not worth it."

Brown said he's never applied for unemployment benefits before, and never thought he would.

"But here I am with kids and no school and daycare and I don't know what else to do, so, bingo," he said. "But it doesn't work, because it was set up not to work."

(c)2020 The News & Observer (Raleigh, N.C.) Distributed by Tribune Content Agency, LLC.