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Businesses See an Increase in Unemployment Fraud: Business Update Part 10

Pennsylvania Unemployment Office Issues Updated Fraud Warning and Response Guide

We have received many calls over the past months from concerned employers who have received notices from the Unemployment Compensation Service Center that an employee who is still employed, an individual who has never been an employee, and, even in some cases, the business owner themselves have applied for unemployment compensation benefits.  Of course, these folks have not applied for unemployment compensation.  Rather, this is an elaborate fraud attempt.  This type of fraud is not limited to large employers—we are seeing businesses of all sizes being targeted.

Here is what the UC Office and Department of Labor and Industry recommend when responding to and reporting fraudulent UC claim filings:

For Employers that Receive Paperwork/Notices for Persons that were Never Employed by the Business

  • These are random phishing attempts by computers and it is likely that no human being filed the application and that the person named in the documents does not actually exist.
  • Do not waste time tracking down the claimant or person named in the paperwork, simply confirm that the business never employed this person.
  • Response: mark in the employer’s portion of the UC form the selection “never worked here” and send it back to the UC Office according to the instructions on the form. Do not report this information through the fraud hotline or other similar resource.

For Employers that Receive Paperwork/Notices for Persons that are Still Fully Employed by the Business

  • Speak with the employee named in the paperwork or notice in a discrete and confidential manner to confirm that the employee did not file the claim.
  • Typically, these employees are completely unaware of the filing or claim. Also, with this type of fraudulent claim, it is likely that the employee’s identity has been stolen, and impacted employees should act accordingly to protect their own personal information.
  • If the employee did not file the claim, direct the employee to report the fraud to the UC Office at its fraud website here or at the PA Fraud Hotline at 1-800-692-7469. It may be necessary to assist the employee in reporting the fraud or at least providing the employee a copy of the documentation of the claim the employer received. In all cases, the employer should log the steps taken in response to the fraud and retain any reporting paperwork or incident numbers for record keeping and follow-up purposes.
  • Response: When the employer responds to this type of claim, it should not work to track down any real employment information (i.e. hire dates, salary, etc.). Rather, the UC Office only needs a response that indicates that the claim is not legitimate. Only certain fields are required to be completed to submit a response, and employers only need to fill in enough information so the form can be submitted (i.e. *required fields). The only information required to be entered is the reason for separation, and the phrase “still working full-time” should be entered. This response will initiate a pause on the payment for the claim. The employer should only respond to the claim and not report the fraud, only the impacted employee should report the fraud.
  • New Benefits System Response: To file a response under the new benefits system, follow the steps here. The employer can also, starting on the Unemployment Services widget, click “More Unemployment Services” and then the “Notice of Separation” link. Choose the Claimants tab. After locating the individual you wish to report, click on the “Needs Response” link.
    • If the new benefits system is unavailable, and the employer is enrolled in the SIDES program, the employer may file a response under the SIDES systems by following the instructions here.
    • If neither of the online portals for responding to a fraudulent claim are available, then the employer should write on top of the paperwork/notice “fraudulent claim” and then mail it back to the UC Office.
    • It is important to remind the employee that if they receive a benefit check or a debit card that they must return this to the Unemployment Compensation Service Center. There may be serious penalties for an employee who cashes or utilizes benefits that they are not entitled to.

For Employers that Receive Paperwork/Notice for Themselves and/or Owners

  • Response: Similar to the Still Fully Employed section above, this notice likely means that the business owner’s identity was stolen, and the same reporting and protection steps referenced above should be taken by these individuals.

Some other helpful information to know before responding to a fraudulent UC claim

  • Both when employees’ and business owners’ personal information is stolen, a second question, beyond how to respond, may arise—how was the information stolen. With the number of data breaches occurring on a yearly basis in the United States and around the world, it is very difficult to say how fraudulent actors obtain the personal information of employees or owners. Businesses should, however, be more vigilant during this time of heightened fraud, particularly after one of the incidents described above has occurred, to ensure that the hack or theft was not committed locally, either through the business or its vendors. If signs point to breaches at the business level, the business should investigate and respond accordingly.
  • Even if counterintuitive, the UC Office and DLI is asking employers to follow the above steps. Appealing financial determinations or other ways of reporting the fraud or duplicating reports for the same incident are ineffective and result in overwhelming other aspects of the UC system.
  • Similar to the above, if the UC claim is the result of identity theft, the employer is responsible for responding to the claim, and the employee is responsible for reporting the fraud perpetrated against him or her. The employer should not also file a fraud report.
  • Once a payment is made on a fraudulent claim, payments will continue on that claim until the UC Office can interrupt the process by denying the claim. These checks should not be cashed or funds spent. These payments should not ultimately result in charges to employers’ trust accounts. Once benefits are denied, an overpayment will be set up, which credits employers’ accounts.
  • Different employers are being impacted to different degrees by this fraud. Starting in May, the amount of UC fraud increased significantly, even further than that in 2020. Employers that are seeing an acute increase in fraud or have been dealing with these issues in large volumes for sustained periods should consider reaching out to local chambers of commerce or state representatives to express to them the extent of the issue and its impact on businesses and their employees. Just in the past few days, the Lancaster Chamber of Commerce joined a letter with other Pennsylvania chambers and business organizations strongly asking that the UC fraud and reporting issues be resolved immediately and in a manner that supports businesses and employees.

If you or your business has any questions concerning the UC system or fraudulent filings and an appropriate response, do not hesitate to contact our employment law attorneys Jeff Worley and Ian Brinkman who have experience assisting clients in these and other UC matters.

This update was prepared by Attorneys Jeff Worley and Ian Brinkman.  This update does not constitute legal advice and has been prepared for informational purposes only. Please contact us directly with questions about your specific situation.