Unemployment Insurance: Overpayment

YOUR LEGAL RIGHTS

1. What is an overpayment?
An "overpayment" of unemployment benefits occurs when the Employment Development
Department (EDD) receives information that a "claimant" -- the person claiming unemployment
benefits --has received unemployment benefits at a time when s/he was not legally eligible to receive
them. Overpayments tend to happen in one of 5 ways:

a claimant innocently misuses the term "lay-off" during the claim-filing interview;

a claimant is originally granted benefits but then loses a later appeal;

a claimant cashes unemployment benefit checks mistakenly sent by the EDD;

an employer reports earnings or employment information to the EDD that differs from
the information given by the claimant; or,

a claimant untruthfully completes the Continued Claim Form.

If an overpayment was caused by the loss of an appeal or a simple mistake on the part of the EDD or
an employer, it does not necessarily create a large problem for the claimant. If, however, the
overpayment was caused by untruthfulness on the part of the claimant, the claimant will be heavily
penalized.

OVERVIEW OF OVERPAYMENT PROCEDURE

If the EDD believes you have been overpaid, you will receive a Notice of Potential Overpayment and
be given an opportunity to respond with information showing that an overpayment did not occur. If
the EDD is not satisfied by your information, you will be sent a second notice, a Notice of
Overpayment. You may choose to either repay the amount as described in this Notice or make an
appeal. There are 3 possible levels of appeal. To succeed at any of them, you will have to show that
you were not at fault in causing or receiving the overpayment and that asking you to repay it would
cause you great economic hardship. If you do not succeed on appeal, and the overpayment becomes
final, the EDD will begin the process of collecting the overpaid amount. The EDD may use various
methods to collect this overpaid amount, but if the EDD does nothing (which is increasingly rare) -and you file no new claims for unemployment or disability benefits -- the overpayment will
automatically be waived after 3 years have passed. Each of these aspects of overpayment will be
discussed in further detail below.

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2. How will I know what the EDD thinks I have been overpaid?
The EDD will inform you of the details of a suspected overpayment by mailing a Notice of Potential
Overpayment. The Notice of Potential Overpayment will list all of the weeks the EDD believes you
have been overpaid benefits. The Notice will also tell you the way the EDD thinks the overpayment
happened.
If the EDD believes you made false statements that caused the overpayment, a 30% penalty will be
added to the repayment amount. The EDD will also disqualify you from receiving unemployment
benefits for the next 2-10 weeks you would otherwise be eligible. The length of disqualification from
future benefits depends on how many false statements the EDD believes were made.
If, however, the EDD believes you were not at fault in causing the overpayment, the EDD will usually
send a Financial Statement form along with the Notice of Overpayment. This Financial Statement
form helps the EDD decide how much money to ask you to repay. You should complete this
Financial Statement form and return it to the EDD as soon as possible, because the EDD may use
this information to reduce or forgive the repayment amount.

3. What can I do if the EDD thinks I have been overpaid?

The EDD's Notice of Potential Overpayment gives you 10 days to respond with information that
would prove to the EDD you were not actually overpaid benefits or that, if an overpayment did occur,
it was caused by some simple mistake or confusion. If you have any information that would help
show the EDD that you were reporting your eligibility as accurately as possible, you should send this
information to the EDD immediately.
For example, if the Notice of Potential Overpayment says you received benefits while also receiving
unreported earnings from an employer, it would be helpful to send the EDD a photocopy of your
final check or any other document that clearly indicates you reported to the EDD all earnings from
that employer. Similarly, if the Notice of Potential Overpayment says you received benefits while you
were physically unable to search for or accept potential employment, it would be helpful to send the
EDD a photocopy of a note from your doctor clearly stating you actually have been physically able to
search for and accept potential work. Likewise, if the Notice of Potential Overpayment says you
untruthfully reported that you were looking for work when you actually were not, it would be helpful
to send the EDD a photocopy of a list of all of your job contacts and interviews during the weeks in
question.
If you do not respond to the EDD's Notice of Potential Overpayment, or if the EDD is not satisfied
with your response, you will be sent a Notice of Overpayment. This means the EDD still believes
you received unemployment benefits at a time when you were not legally eligible to receive them. The
Notice of Overpayment will again list the weeks the EDD believes you were overpaid benefits and the
reasons the overpayment occurred. The Notice of Overpayment will give you 2 options:

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repay the overpayment; or,

request an appeal

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If you completely agree with the EDD about the amount of overpayment and its cause, you should
contact the EDD to arrange for repayment of the overpaid amount. If, however, you disagree with
the EDD about the amount of overpayment or about its cause, you should request an appeal.

4. How do I request an appeal?

To request an appeal, you must send an appeal letter to the EDD within 20 days of the mailing date
of the Notice of Overpayment. The mailing date can be found in the upper right hand corner of the
first page of the Notice. The address to which to send the appeal letter appears on the Notice.
The appeal letter must contain your current contact information, your Social Security Number, and a
statement indicating you disagree with the EDD's Notice of Overpayment. You do not need to
explain your reason(s) for disagreeing in the appeal letter. You will have an opportunity to thoroughly
prepare and present your arguments during an appeal hearing. At this stage in the appeal process, it is
best to keep your communication very brief.

5. What will happen after I mail an appeal letter?

Once the EDD receives your appeal letter, all of the paperwork concerning your claim will be sent to
the nearest office of the California Unemployment Insurance Appeals Board (CUIAB) for
processing. The CUIAB is the State agency that handles all administrative stages of unemployment
insurance appeals. Within a few weeks the CUIAB will schedule you for an appeal hearing in front of
an Administrative Law Judge (ALJ.) This will be your opportunity to explain why you disagree
with the EDD's Notice of Overpayment. Even though appeal hearings are fairly informal, they are
still legal proceedings. The appeal will be decided based on how the ALJ sees the law as it applies to
your particular situation. If you are not familiar with the law in this area, and sometimes even if you
are, it can be difficult to represent yourself. [For more information about appeals and how to
prepare for an appeal hearing, see our booklet titled Do-It-Yourself Guide to Unemployment
Insurance Benefits]

6. What are my chances of winning an appeal?

To win an overpayment appeal, you must prove the overpayment did not happen or be able to show
all of the following:

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the overpayment was not due to fraud, misrepresentation or willful omission; and

the overpayment was received without any fault on your part; and

it would be unfair for the EDD to force you to repay it.

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In other words, if the ALJ believes you were not at fault in causing or receiving the overpayment, and
repaying it would cause you great economic hardship, the ALJ can excuse you from having to repay it.
This is called a "waiver." Once an overpayment has been waived it can never be collected by the
EDD.

7. How can I show the overpayment was not due to fraud,

misrepresentation, or willful omission?
The best way you can show an overpayment was not due to fraud, misrepresentation, or willful
omission is to show that you reported as truthfully as possible about your eligibility through the claimfiling interview and Continued Claim Forms.
Many overpayments are caused by confusion in the initial claim-filing interview. As part of this initial
interview, the EDD asks each potential claimant how her/his most recent employment ended. To be
eligible for unemployment benefits, a claimant's most recent work has to have ended through no fault
of her/his own. If it is clear that the claimant's employment ended for reasons that have nothing to
do with her/his performance or actions, then the EDD will not bother to have a detailed eligibility
interview about the ending of the job.
If the situation is not so clear, the EDD will schedule a thorough initial interview to decide whether
benefits should be paid. During that initial interview, the claimant sometimes innocently misuses the
term "lay-off" and ends up being paid benefits when s/he may not be legally eligible for them. This is
because, in technical terms, a "lay off" means an employer had a decrease in business or finances that
caused the elimination of the job position. To the EDD, this means the claimant is immediately
eligible for the payment of unemployment benefits, because the end of the employment clearly had
nothing to do with the claimant's performance or actions. Many claimants, however, use the term
"lay-off" to describe a discharge or firing, without realizing the term has a different technical meaning.
If this is what happened to cause your overpayment, you should explain to the ALJ that you did not
intend to mislead the EDD by using the term "lay-off."
Overpayments are also sometimes caused by confusion in answering questions on the Continued
Claim Form. The EDD uses the Continued Claim Form to be sure that claimants are meeting all the
requirements for continued payment of unemployment benefits. The Continued Claim Form asks a
series of questions about ability to work, availability for work, work search and earnings. If a claimant
answers these questions in a way that indicates s/he is able to work, available for work, seeking work
and not earning more than her/his weekly benefit amount in current work, the claimant will be paid
benefits. Sometimes a claimant forgets to report earnings, or temporary periods of absence or
disability, and is paid some amount of unemployment benefits s/he should not have been paid. If this
is what happened in your situation, you should explain to the ALJ that you did not intend to mislead
the EDD by answering these questions wrongly or incompletely.
If it is clear that your overpayment was caused by the loss of an earlier appeal hearing, or a mistake on
the part of the EDD or an employer, generally the ALJ will assume that it was not due to any fraud,
misrepresentation or willful omission on your part.
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8. How can I show I received overpayment without any fault?

It can be difficult to prove that you received an overpayment without any fault, because the EDD and
the ALJ expect you to understand the rules for eligibility and expect you not to cash any
unemployment benefit checks you receive for a period of time in which you were not legally eligible.
Some overpayments happen because the claimant is unaware of the rules and EDD's methods for
determining eligibility, but the EDD expects claimants to read and understand the rules in the
handbook sent to claimants by EDD. If you did not understand the rules for eligibility because you
did not receive this handbook form the EDD, or did not comprehend what was written there, you
should explain this to the ALJ at the hearing. In other words, you will have to show that you believed
you were entitled to any unemployment benefits you received and explain why your belief was
reasonable.

9. How can I show that having to repay the overpaid benefits would be
unfair?
The best way to show that it would be unfair to have to repay the overpaid benefits is to show that
repayment would cause you great economic hardship, because you believed you were entitled to the
unemployment benefits checks and relied on them to meet your basic financial needs. For example, if
you signed a lease for an apartment or a car that you otherwise could not afford, it would be unfair for
the EDD to make you repay the benefits. It also helps prove economic hardship if you can show that
you need all, or most, of your current income and/or savings to meet your basic living expenses. To
show this to the ALJ clearly, you should bring to the hearing a monthly budget detailing all your
income and expenses. If you know that you will soon have additional expenses, like a new child or
medical bills, be sure and include these expenses in your budget.

10. What happens if I lose the hearing?

If the ALJ refuses to waive your overpayment you can further appeal the decision to the CUIAB and,
if necessary, to the County Court using the same procedures as in any other appeal. [For more
information about further appeals, see our booklet titled Do-It-Yourself Guide to
Unemployment Insurance Benefits. If you do not appeal further, or you lose further appeals, the
EDD will ask you to repay the overpaid amount. As mentioned earlier, if the EDD believes you were
not at fault in causing the overpayment, the EDD will usually send a Financial Statement form.
This Financial Statement helps the EDD decide how much money to ask you to repay. You should
complete this Financial Statement and return it to the EDD as soon as possible, because the EDD
may use this information to reduce or forgive the repayment amount. If the EDD does not send you
a Financial Statement form, you can expect the EDD to attempt to collect from you the entire
overpaid amount.
The EDD usually collects overpayments in one or more of the following ways:

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arranging with you to make monthly payments; or,

taking it from future unemployment or disability benefits checks; or,

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taking it from state tax refunds; or,

filing a lawsuit in order to be allowed to take it from other income and assets.

The EDD can collect this overpaid amount by taking it from future unemployment/disability checks
or state tax refunds for a period of time that can last up to 6 years. If the EDD wants to use more
severe methods, like taking repayment from your other income or assets, the EDD must file a lawsuit
against you within 1 year of the final overpayment decision. Otherwise, if the EDD takes no action
and you do not file any new claims for unemployment or disability benefits, your overpayment will
automatically be waived after a period of 3 years.
If you choose to arrange to make monthly payments to the EDD, you may be asked to sign a written
agreement to confirm this. You do not need to sign this agreement and, in fact, signing it can work
against you because signing an agreement will give the EDD additional time to file a lawsuit against
you for failing to repay the amount as planned. If you do not sign an agreement, the EDD has only 1
year to file a lawsuit against you to collect repayment through more severe methods. If you do sign a
repayment agreement, the EDD has 4 years from the signing of that agreement to file a lawsuit against
you for repayment.

This fact sheet is intended to provide accurate, general information regarding legal rights relating
to employment in California. Yet because laws and legal procedures are subject to frequent change
and differing interpretations, the Legal Aid Society - Employment Law Center cannot ensure the
information in this fact sheet is current nor be responsible for any use to which it is put. Do not rely
on this information without consulting an attorney or the appropriate agency about your rights in
your particular situation.
For further information about your employment rights, please call:

The Workers Rights Clinic

415-864-8208 (SF Bay Area) or 866-864-8208 (Toll Free in CA)
The Workers Rights Clinic is a project of The Legal Aid Society - Employment Law Center, a nonprofit organization focusing on the employment-related legal rights of low-income workers and
providing free legal information on a wide range of employment-related problems.

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