Proposal would lessen or eliminate penalties for receiving unintentional unemployment overpayments

The term “debtors’ prison” would seem to be a relic of the past.

But the term was heard several times Wednesday to describe the financial trap some people fall into when trying to pay off the steep fines levied against them if they collect unemployment benefits they are not entitled to.

Many of those debts and penalties are due to unintentional mistakes on unemployment applications, said Rep. Mohamud Noor (DFL-Mpls). He's seen a few thousand dollars in penalties grow to $15,000 or more and believes people “should never be criminalized” as they are under current law that allows for a fine of 40% of the overpayment plus 12% interest.

He sponsors HF784 to drastically reduce or eliminate penalties when a person unintentionally receives an overpayment of unemployment benefits.

The House Workforce Development Finance and Policy Committee approved the bill, as amended, Wednesday and sent it to the House Ways and Means Committee.

Noor said there are many reasons applicants make unintentional mistakes, including misunderstanding the process because English is a second language, or simply confusing gross versus net income when filing an unemployment application with the Department of Employment and Economic Development.

The bill would require the department to consider any “literacy, language, disability, and mental health barriers of the applicant” when assessing whether an applicant’s misrepresentation was intentional.

No penalty would be assessed for an unintentional misrepresentation; the fine would be capped at 15% of the overpayment amount. The 12% interest rate would be deleted regardless of intentionality.

The current time limit to file an appeal would increase from 20 days to 60 days.

“The Minnesota Legislature has created a ‘debtors’ prison’ of sorts unlike any other state in the union for workers who make mistakes in their unemployment insurance applications,” said Jessica Webster, an attorney with the Legal Services Advocacy Project.

She said Minnesota’s current 40% penalty is higher than 40 other states, and elimination of the interest penalty would put the state in line with 17 others.

“This is long overdue. I’m glad we are bringing some common sense to this,” said Rep. Dave Baker (R-Willmar), a business owner who’s had employees struggle with situations addressed by the bill.