The State Worker

California auditor says jobs agency wrongly denied benefits

Hundreds of thousands of unemployed Californians have been forced to wait for their unemployment checks because the state wrongly denied claims only to have the decisions reversed on appeal.

A new state audit portrays the Employment Development Department as squeezed between federal deadlines to decide benefit claims and requirements that cases be carefully reviewed. Expediency often trumps accuracy, according to the report, such that half of denied unemployment-benefits appeals are decided in favor of the claimants.

Of more than 390,000 decisions made by the Unemployment Insurance Appeals Board in the last three fiscal years, between 45 percent and 51 percent favored claimants. Many of the decisions overturned conclusions by front-line EDD staff that the applicants were lying about how much they earned before losing their jobs.

The law allows the state to withhold benefits for willful false statements of income, not honest reporting mistakes.

If the department did a better job of screening the lies from the errors, State Auditor Elaine Howle said, the department “could significantly reduce the number of its determinations that the appeals board overturns.”

And EDD rarely attends appeal hearings, according to auditors, “which may make the appeals process more favorable toward appellants than it otherwise would be.”

Neither EDD nor the appeals board collects trend data about why benefit decisions are overturned, so it’s not clear whether changing policy would curb the number of appeals or their outcome. The departments’ computer systems aren’t designed to track that information, auditors said.

EDD can shrink the number of benefits decisions that are reversed, auditors suggested, by updating staff training for determining lies vs. honest reporting mistakes and more carefully adhering to precedents set by decisions. The department should also add a common-mistakes list to filing materials and the EDD website, try harder to reach claimants by phone or email before denying their benefits, allow more staff time to process complex cases, track appellate trends and act on the findings, and consider phoning in to claim-appeal hearings.

In a written response to the audit, EDD Director Patrick Henning Jr. said that EDD follows precedent and gathers necessary information before denying benefits, but otherwise agreed with the report’s recommendations. The appeals board said it would implement auditors’ suggestions.

The audit was released in the midst of downsizing by the Unemployment Insurance Appeals Board. As California’s unemployment rate has declined, lawmakers have steadily whittled away at its budget. Facing a total budget cut of $13.8 million for fiscal 2013-14 and 2014-15, earlier this year the board announced plans to cut 50 administrative law judge positions. Cutting needless appeals would help reduce the board’s workload.

EDD has also come through more than a year of struggles that included a computer system meltdown one year ago and cuts in federal funding.