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Michigan Ignored Warnings About Loose Pandemic Aid Criteria

The state received a warning from the federal government in May 2020 to avoid overly lenient qualifications for pandemic unemployment assistance. The state didn’t update its requirements until June 2021.

(TNS) — The federal government warned Michigan in May 2020 to avoid adopting overly lenient qualifications for pandemic unemployment assistance as it carried out the federal jobless aid program.

In a May 12, 2020, email to Michigan and other Midwest states, the U.S. Department of Labor said it was aware of some states being too loose with eligibility requirements for the pandemic jobless program. The Labor Department warned against an overly permissive approach, according to emails obtained through a public records request.

"We have learned that at least a few states have seriously cut corners in their implementation of PUA to the extent that they are not meeting the statutory criteria to determine basic eligibility," wrote Dustin Adams, the division chief for the U.S. Department of Labor's Employment and Training Administration's Region 5.

The email becomes the earliest indication yet that Michigan was made aware of the federal focus and scrutiny that would be applied to the eligibility criteria for a new form of federal unemployment assistance created for part-time, self-employed or gig workers who wouldn't normally qualify for benefits.

In the email to then- Michigan Unemployment Insurance Agency Director Steve Gray and others, Adams warned states that the Office of Inspector General had "significant interest" in the way PUA was implemented. He asked the states to inform the Department of Labor about their PUA implementation plans so the department could correct any problems "before they become larger issues."

"Hopefully, reduce the risk of unwanted attention being drawn to your state's programs now or later," Adams wrote.

Eight months later, in January, federal officials chided the Whitmer administration after a review of Michigan's program for developing unapproved qualifications. The Department of Labor directed the state to reassess the qualifications of about 600,000 people who had received benefits under the unapproved eligibility criteria.

The state didn't send letters asking people to recertify under different qualifications until late June — more than a year after the Department of Labor initially warned about the loose criteria. The recertification letters set off a wave of alarm from claimants concerned they'd have to repay benefits because of the agency's error. Gov. Gretchen Whitmer has said she'll seek waivers for the individuals affected by the mistake.

Lawmakers — who have fielded thousands of unemployment-related calls during the COVID-19 pandemic — have expressed frustration with the June mailing and the later revelation that the state was informed of the problem as recently as at least January. House Republicans announced late last month they're drafting a series of bills to increase oversight and accountability at the agency.

Rep. Steve Johnson, R- Wayland, said Sunday the reforms could help to address problems like the May 2020 warning and persistent customer service problems at the agency.

"This is showing once again the need for a complete overhaul of the unemployment agency," Johnson said.

The May 2020 letter moves up the Michigan agency's awareness of a federal concern about pandemic assistance qualifications by eight months. That warning also came less than two months after then-President Donald Trump signed the jobless aid in the CARES Act into law March 27, 2020. The Department of Labor issued initial guidelines for pandemic unemployment assistance implementation April 5, 2020.

The Michigan Unemployment Insurance Agency did not respond over a five-day period last week to questions regarding the May 2020 letter. The U.S. Department of Labor did not respond to requests for comment.

Current UIA Acting Director Liza Estlund Olson told lawmakers last month that the U.S. Department of Labor eventually "greenlighted" Michigan's list of qualifications in July but that federal guidance was updated continually afterward.

The agency has said the qualifications were developed as officials also juggled a maelstrom of claims, changing federal guidelines, persistent fraud attempts and the transition of hundreds of employees to remote work.

Gray, who now serves as a senior counsel for the National Employment Law Project, declined comment through the group's spokesperson. He entered a separation agreement with Whitmer's administration when he resigned from his position in November that requires him to "maintain confidentiality" about his work at the UIA.

The May 12, 2020, email from Adams requested several documents, including a copy of the state's initial PUA self-certification and recertification forms that contained the COVID-related reasons for unemployment outlined in federal guidance.

Gray told senior staff upon receiving the email that May 12 that he'd like to see their response before they sent it.

On May 18, 2020, Teresa Burns, head of internal controls for the Michigan agency, sent the proposed qualification criteria to Gray and several others in agency administration.

The eligibility criteria sent to Gray included three of the four that were later deemed ineligible by the federal government:

— Your work hours have been reduced as a direct result of COVID-19.

— You are seeking part-time employment and affected by COVID-19.

— You have insufficient work history to qualify for regular unemployment compensation and are affected by COVID-19.

It's not clear when the fourth criteria later deemed ineligible was added. The fourth criteria was:

— You are unemployed or working less than regular hours as a result of COVID-19 and were denied benefits on another claim.

Burns ended the email by asking Gray for his sign-off: "Steve, upon your approval we will get these to Kristine S. for implementation."

Gray recommended the rephrasing of one of the qualifications related to whether an individual was receiving unemployment in another state, but otherwise didn't object to the proposed qualifications.

The May 18 email came the same day UIA Head of Investigations Timothy Kolar wrote to Gray, former Labor and Economic Opportunity Director Jeff Donofrio and his successor Susan Corbin to inform them of "rampant identity theft (and claimant fraud) that has happened with our PUA claims."

Kolar expressed concerns about the relatively speedy release of PUA claims, which were being paid, including backdated claims, before the claims could be run through the agency's security system.

The payments made without any security check were in part due to an early software error but also intentional decisions by the agency to lower security protocols to expedite the processing of a crush of claims.

Gray had signaled in earlier staff emails that he'd taken issue with some of the federal guidance. When Burns emailed him April 29, 2020, with updated federal guidance regarding eligibility for PUA, Gray cautioned against a strict interpretation of some of the eligibility requirements.

Specifically, Gray questioned federal guidelines deeming people ineligible if they refuse to return to work or if they weren't working "due to general concerns about COVID-19."

"We all know that it is usually not just one reason a person refuses to return to work," he said. "I assume the normal refusal rules should apply — is it suitable and were there other good cause reasons for the refusal."

Gray added later about the ineligibility of people who weren't working because of "general concerns": "...There is rarely one monolithic reason that a person isn't working. Let's not create a list with a drop down that asks people to choose one."

(c)2021 The Detroit News. Distributed by Tribune Content Agency, LLC.

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