One of the scariest and most common issues in unemployment compensation law concerns overpayments. An overpayment occurs when the Unemployment Compensation Service Center (“UC Service Center”) pays a claimant benefits that they were not entitled to. When this occurs the UC Service Center will send a letter to the claimant telling them that they have been overpaid and that the money they were given must be repaid or recouped. This will almost always accompany a termination of benefits. That is why overpayments are such a serious issue. Most claimants have been relying on their benefits to survive, when suddenly their benefits are cut off and the government is telling them they must repay the benefits they were receiving. This can be a devastating occurrence, but the characterization of the overpayment itself will determine when and how the money must be repaid. Oftentimes, an overpayment is not as devastating as it may seem.

Characterization of overpayments

Overpayments can be characterized as either non-fault or fault. Non-fault overpayments are less immediate and less devastating to the claimant’s finances than fault based overpayments.

Non-fault based overpayments

Non-fault overpayments do not need to be repaid immediately. In fact, the standard way that the UC Service Center recovers these overpayments is by extracting money from future unemployment benefits. Thus, if a claimant receives a non-fault overpayment they are under no immediate duty to pay it back. They may have just had their benefits cut off, but they don’t immediately fall into debt and have to repay the overpayment. Instead, the UC Service Center takes note of the overpayment and withdraws the money from any unemployment benefits that you apply for and receive in the future. What’s more is that this recoupment cannot exceed more than one third of your allotted future benefits for an entire year and cannot exceed more than one third of your weekly benefits.

In fact, if you never apply for unemployment compensation benefits again, you may never have to actually repay the amount. Thus, if the letter you receive from the UC Service Center says non-fault overpayment, breathe a sigh of relief and know that you are not under an immediate duty to repay.

Fault based overpayments

Fault based overpayments are different. With this type of overpayment you may have an immediate duty to repay and the UC Service Center might take action against you to collect. If you have a fault based overpayment, contact KM&A and we can help you fight for a different characterization of your benefits.