The March 31 response from the state is the latest development in a court battle over unemployment bills. It follows a January class-action lawsuit that alleges the state unlawfully demanded pandemic-related unemployment benefits back.
An agency mistake led to 690,000 Michigan claimants being retroactively deemed ineligible for a federal program that extended benefits to self-employed and gig workers. An estimated 530,000 people have received notices they need to repay their benefits with some, according to the lawsuit, facing bills up to $50,000.
Plaintiffs in the lawsuit filed a motion last month asking the Michigan Court of Claims for a preliminary injunction to block collection efforts on the overpayment notices. Ann Arbor-based attorneys David Blanchard and Frances Hollander argue collection activity will cause “irreparable harm” to thousands of Michiganders with pending bills.
“The requested relief will have the beneficial effect of allowing thousands of Michiganders to be free from the stress of receiving bills for tens of thousands of dollars of alleged overpayments that the Agency never should have issued and to file their tax returns without fear,” the March 10 court filing said.
The state was given 14 days to respond to the motion.
Lawyers representing the unemployment agency argue the motion fails to show wide-scale harm from collections.
“In their preliminary injunction motion, the only irreparable harm plaintiffs allege is the possible economic and financial implications of continued collection activity, including interception of tax refunds and wage garnishments,” wrote attorneys from the Michigan Department of Attorney General Labor Division.
This money can be “easily ascertained and refunded,” the state contends.
Blanchard and Hollander also argue in their motion plaintiffs were denied due process when the state started collecting on overpayments caused by agency error despite pending protests.
State attorneys, however, say only three plaintiffs have faced “unwarranted collection activity,” including $7,158 collected from Jennifer Larke, $162 from Erik Varga and $586 from Lisa Shephard.
“Plaintiffs do not allege, must (sic) less prove, immediate collection efforts and actual ongoing financial impact. Rather, they demonstrate only past collection and speculative fear of possible future collection,” the response says.
The state says this is “insufficient” to warrant a preliminary injunction from the court.
Another point of contention is whether the Michigan unemployment agency can redetermine eligibility more than a year after granting benefits.
Citing one section of Michigan law, plaintiffs argue the agency has up to a year to issue a redetermination. The state, pointing to another section of employment law, says in cases of “improperly paid benefits” redeterminations can be made up to three years later.
Now that the state has filed its response with the court Judge Brock Swartzle will consider the motion.
If granted, an injunction would pause collections for Michigan workers whose benefits were redetermined more than a year after being issued. It would also block collections for claimants who are waiting on the agency on issue a waiver or those who haven’t received a ruling on their protest.
The overpayment issues stemming from pandemic aid have prompted action from both the federal and state government.
As of January, about 331,000 claimants received waivers erasing their repayments. Michigan received broader waiver guidance from the U.S. Department of Labor in February to clear other outstanding bills. Those waivers have not been issued yet.
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