Unemployment Insurance Fraud

What Is "Unemployment Insurance Fraud?"

Whenever false, misleading, or incomplete information is provided for the purpose of defrauding a state or federal level unemployment insurance program and acquiring unlawful gain to oneself, unemployment insurance fraud has taken place.

There are many forms in which unemployment insurance fraud can occur, and these are criminalized and assigned penalties in the California Penal Code, and more particularly, in the California Unemployment Insurance Code. While punishments vary based on the specifics of the crime and incident and on the defendant's past criminal history, heavy fines and long jail/prison terms are often part of the sentence.

In California, the EDD (Employment Development Department), which is a combination state and federal program, manages unemployment insurance. The purpose of the program is to assist those who have recently lost their jobs through a tough time until they can find new employment. The program will provide from $40 to $450 per week to qualifying recipients for up to 12 months.

In general, you can only legally get unemployment insurance payments if you lost your job through no fault of your own, but there are some exceptions. When you were fired or quit your job, instead of laid off, you have to apply to the EDD for special consideration to receive benefits, and these decisions are made on a case by case basis.

Other requirements to receive unemployment benefits include:

• You cannot file while still employed or simply because your hours have been reduced. Even if you know you will soon be laid off, you must wait till you are actually laid off to file.
• You cannot file more than 18 months after the last day you were employed.
• You must be ready, willing, and able to work but simply unable at present to find a job.
• You must be actively searching for a new job.

When people file in violation of the rules of the program mentioned above or by falsifying their applications in some way, it is unemployment insurance fraud. When people on the inside of the program, who are responsible to disburse unemployment funds according to the law, wrongfully withhold or wrongfully disburse them, that also is fraud. And when employers lie about why a worker ceased to work for them or about how many hours or how much income they had, or otherwise wrongfully try to eliminate or reduce valid benefits, that is yet another form of California unemployment insurance fraud.

Types of Unemployment Insurance Fraud

Going into more detail, here are some examples of how California unemployment insurance fraud can be committed:

1. Employees Commit Unemployment Insurance Fraud When They:

• Collect benefits while working and not reporting that fact to the EDD. This is known as "double dipping."
• Fail to report other forms of income, such as pensions, workers comp payments, or social security benefits, to the EDD while collecting unemployment insurance benefits.
• Fail to actively search for work and submit applications to potential employers and tell the EDD that they have done so.
• Lie about the reason they lost their job. Saying it was a lay off when, in reality, they were fired or they quit.
• Collect benefits from more than one state simultaneously.
• Cash another person's unemployment insurance check without their knowledge and consent.
• Use a fake name, SSN, or other information to obtain unemployment benefits. If personal information of another actual person is used, then it is also identity theft.
• Invent a fake employer, saying they were laid off by that employer and then collecting benefits on that basis.

2. Employers Commit Unemployment Insurance Fraud When They:

• Lie about why an employee is no longer working for them, saying he or she was fired or they quit, when in fact, the employee was laid off.
• Lie about the wages, hours, or other information concerning a former employee that would potentially increase his or her unemployment insurance benefits.
• Purposefully withhold unemployment insurance deductions from employees' checks, while not making the corresponding unemployment insurance contributions to the EDD.

Unemployment Insurance Fraud Investigations

As unemployment insurance (UI) fraud is a high-profile, hot-button issue these days, given its widespread occurrence and the high cost it incurs on California taxpayers, the EDD is very vigilant in seeking to discover and prosecute suspected UI fraud incidents.

The EDD collects hot tips on possible instances of UI fraud through their public fraud report hotline. And while that is the source of the majority of their tips, they also get tips from their field offices, when an EDD employee happens to notice a red flag that raises his/her suspicions.

The EDD then assigns suspected cases of UI fraud to a special investigation unit. If that unit is able to find sufficient evidence that the EDD is convinced both that fraud has taken place and that the case is winnable, they are likely to file unemployment insurance fraud charges. If evidence is insufficient, they will either drop the case entirely or work to obtain further evidence.

Possible Penalties for Unemployment Insurance Fraud

In California, UI fraud can be charged as either a misdemeanor or a felony, depending on the details of the case and on the defendant's past criminal record.

The punishments will also vary based on the particular type of UI fraud that was committed and on whether it was a violation of Penal Code section 550 or Unemployment Insurance Code section 2101. Penal Code section 550 covers the more typical scenarios, while UIC 2101 deals mostly with serious offenses.

Under Penal Code section 550, which also covers other types of insurance fraud, if the value of the benefits involved in the fraud claims amounted to $950 or less, it is a misdemeanor offense. But, if the fraud claims total to above $950, it can be charged as a felony or as a misdemeanor. Note that all fraud UI claims within a 12-month period will be added together to determine if the total is above/below $950.

As a misdemeanor with fraud benefits at or under $950, Penal Code section 550 is punishable by:

• Up to 6 months in jail.
• Up to a $1,000 fine.

As a misdemeanor with fraud benefits over $950, Penal Code section 550 is punishable by:

• Up to 12 months in jail.
• Up to a $10,000 fine.

As a felony, Penal Code section 550 is punishable by:

• From 2 to 5 years in county jail.
• A fine of $50,000 OR twice the amount of the fraud claims, whichever amount is larger.

If charged under UIC 2101 as a misdemeanor, your sentence can include:

• Up to 12 months in county jail.
• A fine of up to $20,000.

If UIC 2101 is charged as a felony offense, it is punishable by:

• 16 months to 3 years in state prison.
• A fine of up to $20,000.

Besides the fines and incarceration terms for PC 550 or UIC 2101 listed above, there are other consequences of a UI fraud conviction as well. These include: professional discipline, loss of certain professional licenses (either permanently or temporarily), not qualifying for any future unemployment insurance benefits, and full repayment of fraudulently taken benefits, along with 30% extra as a penalty.

However, there are times when a good defense lawyer may be able to negotiate a plea deal in which making restitution for the fraudulently taken benefits will secure a lessened sentence or even allow you to avoid being convicted at all. Such deals would require you to pay back so much money in so much time and follow a regular payment schedule. If you fail to fulfill the terms of the agreement, a criminal conviction will likely follow.

Common Defense Strategies

At Leah Legal Criminal Defense, we have handled nearly every type of unemployment insurance fraud case imaginable during our years of serving our clients in the Los Angeles Area. We know how to build you a solid defense and how to customize that defense to the precise details of your case. Here are some of the most common defenses we have successfully used in defending against charges of unemployment insurance fraud:

1. Lack of Intent

In order to be convicted of UI fraud in California, it is not enough that you simply filed a claim that was factually inaccurate. It is also required that your actions were done with an intention to defraud the UI system and obtain personal financial benefits as a result. If you truly believed you were submitting a valid claim, accidentally put down incorrect information, or were not aware that certain types of income had to be reported, you are not guilty of UI fraud.

2. Insufficient Evidence

Many times, UI fraud charges are filed based on red flags and anonymous tips, when in fact, there is nothing more than circumstantial evidence seemingly against the defendant. The prosecutor may try to puff up weak evidence to intimidate you into capitulating, but a good defense lawyer will know a weak case when he or she sees one and will know how to challenge the evidence and argument of the prosecution. "Beyond all reasonable doubt" is a high standard to meet. 

3. Not "Material"

Even if you purposefully put down false or misleading information on a UI application and intended to thereby secure wrongful benefits, if the false information was not "material," that is, it was not relevant to whether you would receive a benefit, retain a benefit, or have existing benefits increased, a conviction will likely not be sustained against you.

4. False Accusations

It is not at all uncommon for false accusations of UI fraud to be leveled. This can happen when an instance of internal fraud is pinned on the recipient (or vice versa), when someone with an axe to grind makes false accusations to the EDD hotline out of spite, when circumstantial evidence leads investigators to target the wrong person, or when someone else has stolen your identity and used it to apply for a fraudulent UI benefit.

Other Related Offenses

Other crimes often charged along with or in place of UI fraud include the following:

1. Grand Theft (PC 487): When the value of the fraud UI claims exceeds $950 over a 12-month period, it can be charged as grand theft, which when charged as a felony, is punishable by up to 3 years in jail and a $10,000 fine.
2. Forgery (PC 470): Whenever UI fraud is accomplished via forging someone else's signature or forging a public document of any kind, it can also be charged as forgery, which can be either a felony or a misdemeanor.
3. Perjury (PC 118): Giving out false information on a UI application to receive fraud benefits can also result in a perjury conviction. Perjury is a felony in California, punishable by up to 4 years in jail and a $10,000 fine. 
4. Conspiracy (PC 182): In California, when you conspire with others to commit a crime, including to commit UI fraud, it is a distinct offense and a felony.

Contact Us Today For Help

At Leah Legal Criminal Defense, we stand ready to assist you in defending against allegations of unemployment insurance fraud with top-tier legal advice and representation. Our great familiarity with both the California Penal Code and with the local L.A. Area court system gives us the advantage in the courtroom and helps us to win you the best possible outcome to your case.

For more information or for a free consultation on the details of your case, contact our Los Angeles Criminal Attorney24/7 at 818-484-1100.