State News

Michigan's Unemployment System Has History of Being a Mess

June 16, 2020, 10:50 PM

The author is a Detroit freelance writer. 

By Nicole Stafford

“This is beyond patience.  This is beyond two months. What am I supposed to do?  What is anybody supposed to do?” said Detroit resident Brian Douglas of his more than two-month wait for unemployment benefits.

Now June, Douglas has received payment but remains anxious about the status of his claim, if only because he’s had to jump through so many hoops to get his benefits, to lose them. Between filing multiple applications, faxing documentation, appearing in court, emailing government leaders and making hundreds of phone calls, Douglas, 48, spent countless hours trying to get his benefits, his only economic lifeline since being laid off in March under the Covid-19 shutdown.

Now, he worries his is among the 200,000 claims red-flagged by the Unemployment Insurance Agency (UIA) for identity theft fraud review and benefits freeze. The initial tally of claims needing this review was 340,000, but the state was able to process 140,000 last week.

The temporary hold on benefit payments follows holdups that kept laid off workers from getting funds for close to three months.

Before the latest delay, the agency announced 134,000 claims needed review and adjudication for other reasons that would take weeks.

The Department of Labor and Economic Opportunity (DLEO), which oversees the UIA, declined to comment on whether the UIA had made progress and resolved any of those claims. The data is currently under review, said DLEO Communications Director Jason Moon.

Rick Snyder (Photo: Facebook)

The review of an additional 20% of Michigan’s total 2.2 million unemployment claims seems like a step backwards; Gov. Gretchen Whitmer and the agency made great strides in facilitating claims, catapulting the state to third in the nation for claims paid.

A substantial number of Covid-19 claims simply stalled due to changes made by Gov. Rick Snyder and a Republican-controlled legislature that reduced the state’s unemployment benefits recipiency rate – from a pre-Great Recession level of 40% to below 25%.

Given the number of laid off workers in Michigan and the need to maximize federal assistance during a global pandemic, Whitmer and the UIA had no choice but to perform an emergency overhaul. As Steve Gray, current UIA Director and longtime attorney for workers, described it to legislators, we had “to build a plane, mid-flight.”

The Snyder-era changes, aimed at replenishing Michigan’s depleted unemployment trust fund account after the recession, left a legacy of problems, including an expensive and litigious scandal in which the state falsely accused and financially penalized about 40,000 claimants of fraud, a quasi-crime.


Snyder, in the throes of cutting unemployment expenditures, replaced UIA workers with an automated computer system calibrated to target fraud. It was thought to be a win-win for the bottom line-focused businessman-turned-governor: The agency would spend less paying humans to identify fraud; and would find more fraud and pay out on fewer claims.

Unfortunately, MIDAS, as the computer system is called, errored at a rate of 93% when it automatically made and issued legal determinations of fraud to Michigan workers who had lost their jobs.

The system cost taxpayers about $45 million to build and implement. And the state spent countless more dollars litigating the false fraud claims. By August 2017, it had reversed 70 percent of unemployment benefit fraud cases and paid out $20.8 million to people who were wrongly accused of collecting excessive benefits.

Additionally, Michigan was court-ordered to cease making computer-generated fraud determinations.

Affected claimants are now part of a class action suit against the third-party technology providers hired by Michigan to develop and implement MIDAS.

Because the UIA continues to use MIDAS, the technology has never undergone independent or public review and has such an egregious history, critics fear a repeat of Michigan’s past mistakes that have clearly harmed scores of citizens.


The false fraud claims had devastating effects on prosecuted claimants. Some were penalized at a rate of 400% by automatic state withdrawals from their bank accounts, setting off a domino effect that resulted in tremendous financial hardship, including bankruptcy for some.

The current 340,000 claims under review for identity theft fraud were red-flagged by MIDAS, raising deep concerns about how the process will play itself out.

“We know MIDAS is a problem,” said Rachel Kohl, director of the University of Michigan School of Law’s Workers’ Rights Clinic, who has represented numerous unemployment claimants’ and false fraud cases. The system has “had systemic problems for a decade.”

DLEO stated in a press conference last week it planned to take extra precautions in investigating the fraud claims and would form a task force to oversee the matter.

However, DLEO Director Jeff Donofrio readily admitted innocent claimants who had not committed fraud had been swept into the investigation and temporarily lost their benefits.

“We cast a wide net,” said Donofrio. “Unfortunately, many of these are legitimate claimants whose economic lifeline is now tied up.”

The state declined to give much detail about the process it used to identify the 340,000 claims, but confirmed MIDAS red-flagged the cases. Affected claimants will receive a mailed notice requesting they provide identity verification documents within 10 days.

Actual human staff – 600 workers with 200 more in training – will review the fact-finding and issue a decision, appealable for 30 days. The state task force includes Michigan State Police and the Michigan Department of Attorney General.

“We are very sensitive to fraud in this state, given our history, and we want to make sure we are acting appropriately,” Donofrio said. “This is why we are bringing in a forensic auditing team and fraud experts. We want to make sure we protect the people of Michigan and make sure we are moving people into benefits as soon as possible.”

Acted Inappropriately

Tony Paris, lead attorney at the Detroit legal services non-profit Sugar Law Center and the attorney overseeing a MIDAS class action suit, suspects the state already has acted inappropriately and perhaps unconstitutionally.

“Is making the request (for identity verification documents) – without a determination or adjudication – and stopping benefits at the moment that we need to verify identity constitutional, or do you need more in a case of potential fraud?” Paris mused aloud, noting the state made no attempt to eliminate innocent filers from the review and benefits freeze.

Paris worries many claimants will fail to provide the necessary documentation in time either because they don’t receive the UIA’s notice, don’t read it, or lack the technology resources to meet the 10-day deadline, causing the state to issue a determination of fraud against them.

The agency’s poor track record with mailing communications and ensuring claimants receive adequate notice increases the concern, Paris said, adding “it’s a fact” that the agency has a history of mailing crucial communications to incorrect addresses.

As recently as this month, the UIA bungled a crucial mailing, failing to update claimant addresses with Bank of America, the provider of Michigan’s unemployment benefits debit cards. Bank of America declined to comment on how many Michigan debit cards came back “return to sender.”

Most worrisome: As with the state’s past false fraud claims, innocent laid-off workers now sit in the target sights of criminal prosecution. Despite its track record of impinging on the rights of claimants, and falsely accusing people of fraud, the state is waving its law and order flag.

“No amount of fraud is acceptable,” Donofrio said at last week’s press conference.

Criminal fraud conviction penalties include fines and jail time.

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