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Jobless Claims for Gig Workers Soar to 36% of Overall Filings

June 5, 2020, 10:00 AM

The new jobless benefits program for gig-economy workers now represents 36% of all unemployment insurance claims processed during the coronavirus pandemic, far surpassing initial projections even without reflecting data from 15 states plus the District of Columbia.

The latest Labor Department figures released Thursday, covering the week ending May 16, show 10.7 million continuing claims for Pandemic Unemployment Assistance, a program Congress created through a virus-relief law to extend unemployment compensation to freelancers and other workers not typically eligible for regular coverage.

That’s up from 7.8 million continuing claims as of the prior week—when PUA accounted for 25% of claims in all unemployment programs for people who already had an initial application processed and were either paid or approved and awaiting payment.

Those numbers lag two weeks behind data on first-time claims, meaning they don’t include the additional 623,000 initial PUA applications the DOL reported Thursday for the week ending May 30.

The new data show PUA as an increasingly popular option to cover gaps in traditional jobless benefits coverage in an economy that’s been relying more on contractor work since the Great Recession. The rising percentage of PUA claims also adds to an already complex debate on Capitol Hill about about how to bolster the federal-state unemployment system to aid long-term economic recovery.

“That means that there are a lot of people that UI doesn’t cover who need benefits,” said Michele Evermore, who researches unemployment insurance at the National Employment Law Project. “This is a huge red flag about our underlying unemployment system, that you have to be ineligible for UI to get PUA.”

Evermore, who will be testifying along with Labor Secretary Eugene Scalia during a June 9 Senate Finance Committee hearing on jobless aid, said the 10.7 million PUA claims came as a surprise. She said she was expecting the total to be more in line with the 5 million PUA claims the nonpartisan Congressional Budget Office projected in April for the duration of the program.

That’s not to mention the number will further increase once the DOL collects information from the 15 states and Washington, D.C., that have yet to submit data. Those numbers—which include claims from heavily populated states such as Florida, Georgia, and Arizona—combine to reflect an undercount of about a half-million workers filing PUA claims, according to a Bloomberg News analysis Thursday.

Software and staffing challenges delayed states’ ability to begin collecting and paying PUA claims in April and May. But aided by technology upgrades and more clarity from DOL about how to navigate the new law, the majority of states are getting PUA checks out the door.

Under the $2.2 trillion CARES Act that created PUA, the program provides up to 39 weeks of benefits through the end of 2020 for independent contractors, including ride-share drivers who are forced off the road because they contracted Covid-19 or because their business has suffered.

Also eligible for coverage are individuals who quit their jobs as a direct result of Covid-19; those who became their household’s primary breadwinner due to a death caused by the virus; or those who were scheduled to start a new job but had the offer rescinded because of the pandemic, among other qualifying reasons.

Fraud Boosting the Surge?

But it may be too soon to draw conclusions on the significance of the rising number of Americans relying on PUA benefits, some observers say. Reports are mounting of fraudulent claims filed by scammers seeking to capitalize on the historic expansion of unemployment insurance.

The PUA program itself is particularly vulnerable to fraud due to the Labor Department’s guidance to states that they can begin paying claims without waiting for workers to submit documentation of their past earnings, the DOL’s Office of Inspector General warned in an alert memo May 27.

The department’s blessing for states to allow initial payments to applicants who self-certify that they’re eligible for PUA, without including evidence supporting their claim, could mean the 10.7 million total is inflated by payments made to people who shouldn’t be eligible.

“Any time you have that much money flowing through a system and you can claim it with self-certification, the chances of fraud go up. So I think that’s a legitimate concern,” said Doug Holmes, who lobbies for employers as president of UWC—Strategic Services on Unemployment & Workers’ Compensation. “I’m hoping that Congress or the Department of Labor address it—maybe have some requirement of documentary evidence before you decide to pay somebody that much money.”

The DOL internal watchdog asked the department to consult with Congress on the self-certification question, giving DOL leaders a preferred deadline of Tuesday to respond to its memo. A DOL spokeswoman said in a statement late Wednesday that the agency would respond to the IG “within the coming days,” but that the department has been “vigorously working to combat fraud.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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