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Jobless Aid Cutoff Lawsuits Go On After Federal Programs’ End

Oct. 18, 2021, 9:15 AM

Lawsuits contesting states’ early shutoff of enhanced federal jobless aid are likely to stretch into 2022, months after the federal programs expired nationwide—potentially testing the duration of a federal offer to fund the benefits retroactively.

On the line are unpaid unemployment benefits estimated to exceed $2 billion across a half dozen or more states.

Appellate rulings are awaited in Arkansas, Ohio, and Oklahoma, while cases are still ongoing at the trial court level in Tennessee and Texas. Those suing over Florida’s early termination have said an appeal of a trial judge’s decision is forthcoming, though no notice has been filed.

“It’s really hard to say” how long the federal offer to fund benefits retroactively will stand, said Chadwick Smith, an Oklahoma attorney representing unemployment claimants there who challenged the early halt of federal benefits.

Governors and workforce agencies in more than 25 states announced in May and June they would end some or all of the federal government’s enhanced, pandemic-response unemployment benefits weeks or months before the Sept. 6 expiration—answering business community complaints that enhanced benefits were discouraging people from going back to work. A JPMorgan Chase research brief from July suggested the benefits’ negative effects on the labor market were minimal.

Unemployment claimants and advocacy groups in at least a dozen states sued to challenge the benefit cutoffs, in many cases arguing language in state law requires officials to secure all benefits available under the Social Security Act related to unemployment. Workers won orders that resulted in benefits being restored in Indiana and Maryland, but not in South Carolina where the state’s Supreme Court ruled Oct. 13 in favor of the governor’s decision to halt the aid.

Arkansas’ legislature in August enacted retroactive changes to state law in an attempt to solidify the state’s position that it isn’t obligated to participate in temporary, special unemployment programs created by the federal government.

Retroactive Federal Funding

Still, a Sept. 3 email from a U.S. Labor Department official told state agencies the federal funds remain available for retroactive payment of the benefits, if states choose to restore them or are forced to do so by court order, even after Sept. 6. But the email also urged states to decide quickly, noting new claims for those federal benefits couldn’t be filed after Oct. 6. So, for some who may otherwise have been eligible for the federal aid, that window has now closed.

“Our understanding is certainly that the federal government will pay out any funds that states are obligated to pay to claimants because of court decisions,” said Kevin De Liban, advocacy director and attorney at Legal Aid of Arkansas, which is representing the Arkansas unemployment claimants who sued.

The Labor Department understands “there may be additional considerations for states responding to a court order, and we will work with states to help them comply on a case-by-case basis,” DOL spokeswoman Monica C. Vereen said in an emailed statement. “Funding is available for payment of benefits for weeks of unemployment experienced prior to September 6, 2021, for those states that are reinstating their participation in the CARES Act Unemployment Insurance programs in response to a court order.”

In a number of related Ohio cases, plaintiffs’ attorney Marc Dann argues the state itself will be liable to pay an estimated $900 million of foregone benefits if the federal government doesn’t cover them. Those cases are on hold while one of them waits for the Ohio Supreme Court to decide whether it will hear an appeal from Gov. Mike DeWine (R).

The governor seeks to overturn an intermediate appellate court’s decision that partially agreed with Dann’s legal challenge but stopped short of ordering benefits restored, instead finding the trial court must further evaluate whether the case meets all legal standards for granting an injunction.

“Our view is it’s not moot if the federal government withdraws its promise to provide the money,” Dann said. If DeWine rejected the federal money in violation of state law, then “the state is on the hook.”

To the extent that prolonged litigation might hurt plaintiffs’ chances of getting benefit payments, attorneys defending the states have argued at least part of the blame lies with plaintiffs and their lawyers.

“The Governor provided Oklahomans with public notice 41 days in advance” of ending the federal programs, “and those 41 days came and went without a legal challenge,” the Oklahoma attorney general’s office argued in an Oct. 13 brief. “It wasn’t until 51 days after this notice, and nearly two weeks after Oklahoma withdrew, that a Plaintiff filed this lawsuit.”

Initial Wins, Stayed on Appeal

The Arkansas plaintiffs, like their counterparts in Oklahoma, initially won a state trial court decision ordering restoration of the federal benefits that their governors ended early. State appellate courts ordered a stay of those decisions pending appeal in Arkansas and Oklahoma, so the benefits were never restored.

Both appeals are moving through the briefing process, with decisions unlikely before the end of the year, according to De Liban in Arkansas and Smith in Oklahoma.

In Arkansas, the state’s brief was due Oct. 13, after which the plaintiffs have about 30 days to respond, Legal Aid’s De Liban said. With time for the state’s reply and breaks for end-of-year holidays, “I can’t imagine the court makes a decision before” early next year, he said.

The litigation pending appeal at the Ohio Supreme Court also could easily stretch into 2022.

“We’re like two months in” to DeWine’s appeal, Dann said. The court routinely takes four or five months to decide whether to hear a discretionary appeal, he said, but added “I would hope they would accelerate that.”

Cases in Tennessee and Texas might be even further away from resolution, with hearings at the trial court level still needed before a judge’s decision there.

“There’s been a lot of delay,” Texas attorney David Sibley said of the case pending in Austin. That has been partly due to in-fighting among the various groups of plaintiffs who organized via Facebook support groups and crowd-funded the legal expenses of the Texas case, he said.

The case is due for a hearing Oct. 19, where Sibley hopes to resolve his motion to withdraw from representing all but six of the plaintiffs but expects he’ll have to wait for later hearings to get to the merits of the case.

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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