Protecting Yourself from Fraudulent Unemployment Claims

Identity theft has always been a pressing issue, and has become more prevalent with the rise of digital transactions over the past two decades. In the past year, the Coronavirus pandemic has produced an environment ripe for identity theft and fraudulent claims.

For individuals, it’s important to note that you can be a target of identity theft leading to fraudulent unemployment claims, even if you’re still employed. For businesses, there are steps you can take to protect both yourself and your employees. To protect yourself or your business, it’s important to establish whether you’ve been the target of unemployment fraud, and to take steps to clear your records.

Signs that you, or one of your employees, may have been the target of unemployment fraud include:

• Receiving a debit card or unemployment insurance when you haven’t filed a claim.
• Receiving a notification from the Internal Revenue Service of a new claim that you didn’t file.
• Receiving a notification from your employer of an unemployment claim.
• Attempting to file a new unemployment claim, only to find that one already exists.
• For businesses, receiving an unemployment claim for a worker that is currently employed at your company.

Unfortunately, there is no quick way to resolve a fraudulent unemployment claim made in your name. Regulations vary by state, and there is no “simple” resolution. However, there are a few steps you should immediately take if you find that you’ve been the target of a fraudulent claim.

For individuals:

• Report the fraud to your employer and your state’s unemployment agency. If you’re currently employed, notifying your employer is a critical first step, as state unemployment agencies are currently overwhelmed and backlogged due to the Coronavirus pandemic.
• Report the fraud to the Federal Trade Commission (FTC) at www.identitytheft.gov, or by calling 1-877-IDTHEFT. As a national organization, the FTC can help to lock your identity to prevent future thefts.
• Review your current credit reports from the three major credit bureaus, or from on online vendor, to determine if you’ve been the target of more than just an unemployment claim. Claims usually require a Social Security number, so you may have additional fraud carried out with your name.
• Report the fraud to the three major credit bureaus. If you’re not planning on a major purchase such as a car or home in the near future, or on expanding your existing credit lines (or applying for a new one – for either yourself or for a business), it may be advisable to freeze credit lines in your name. It’s worth noting that this is a free service, although you’ll have to contact them again to unfreeze your identity prior to any major purchases in the future.
• If you received a fraudulent debit card, DO NOT USE IT. Report it to your state authority. They will likely advise you to destroy it.

For companies:

• Monitor and document unemployment claims. As fraud has escalated significantly during the Coronavirus pandemic, many employers do not have active systems in place to track fraudulent claims. Active oversight can help to protect your employees.
• Contact your IT team to investigate the fraud. It’s possible that employee information may have been gathered from your firm’s systems, meaning that one claim may lead to others. Unusual activity may be a sign of compromised data. This may not affect only employee records, but other important business records. It’s safer to ensure that your company’s data and information has not been compromised.
• Confirm the employee’s employment status if a claim is filed. While this may be obvious, documentation of fraudulent claims is key to a quicker resolution.
• Communicate with the employee, with documentation of each step. It’s possible that the employer may become aware of the fraud before the employee. By sharing information on the process, you’re protecting your employee as well as continuing to document the procedure.
• Notify the state of fraudulent activity. Each state has varying regulations regarding fraudulent unemployment claims, and your team should be aware of the particular process. Illinois regulations on this topic can be found here.

As long as either an employee or employer reports fraudulent activity, you will not be responsible for any disbursements made by state or federal authorities, or for any taxes on those disbursements. However, you will likely have to make significant efforts to document that the claims were fraudulent. Unfortunately, if you’re a target of fraud, there is no easy remedy.

Once you take these steps, it’s important to be patient. Due to the Coronavirus pandemic, many state agencies are overwhelmed both with processing new claims, and investigating fraudulent ones, with a reduced available staff. However, by maintaining your own vigilance, you can ensure the security both of any future unemployment claims you may have to submit, as well as your overall fiscal identity.