Constitutional Interest Exists in Covid-19 Unemployment Benefits

A worker who alleged he was deprived of emergency unemployment benefits during the Covid-19 pandemic without due process has a constitutionally-protected property interest in receiving the benefits, the Ninth Circuit said Thursday in a reversal.

The Coronavirus Aid, Relief, and Economic Security Act, which created the Pandemic Emergency Unemployment Compensation program, created the right because it mandated that participating states provide payments to individuals who satisfy specific requirements, Judge Jennifer Sung wrote in an opinion for the US Court of Appeals for the Ninth Circuit.

Damario Rasheed Sterling lost his job in 2020 due to the Covid-19 pandemic and started receiving PEUC-funded unemployment benefits from the Washington State Employment Security Department.

The department determined in January 2021 that Sterling’s former employer misreported his wages. The agency sent Sterling six notices in less than two weeks, asserting two different overpayment amounts, and provided four separate deadlines for Sterling to appeal. By the time an administrative law judge ruled Sterling wasn’t liable for any overpayments, the agency had offset nearly $7,000 of Sterling’s PEUC benefits. The agency’s system continues to indicate that Sterling owes $339, which the department said is the amount it determined Sterling owed for the alleged overpayments but hadn’t been offset.

Sterling brought a proposed class action against current and former commissioners of the department, claiming they unlawfully deprived him and others of their property interests in unemployment benefits.

The district court concluded Sterling didn’t have a property interest in PEUC benefits, since the CARES Act allowed Washington to end its participation in the program at its discretion. The judge still denied the defendants summary judgment since there was a factual dispute over whether the offsets were related to Sterling’s PEUC or regular unemployment benefits.

The court granted Sterling’s request to certify an interlocutory appeal on the question of whether there’s a constitutionally-protected property interest in pandemic benefits.

The CARES Act mandated participating states to provide unemployment payments through a specific formula to individuals who satisfy objective requirements. Although states could end their participation in the program by giving 30 days’ notice to the secretary, a state’s discretion to decide to participate in a benefit program doesn’t preclude the creation of a property interest, Sung said.

The emergency nature of the program also “does not negate the fact that beneficiaries had a legitimate claim of entitlement” to the benefits while the state participated in the program. And the state’s discretion in administering the pandemic benefits was significantly constrained by the statute, since it required states to administer PEUC funds under the same conditions that apply to regular unemployment compensation, Sung wrote.

The Ninth Circuit rejected the defendants’ arguments that Sterling lacks standing to seek damages and prospective injunctive relief, finding it reasonable to expect Sterling will seek unemployment benefits again in the future. His claims also aren’t moot because, although the PEUC program expired in 2021, he’s seeking prospective relief as to procedures the department continues to use to administer unemployment benefits.

The court also declined to address the defendants’ due process argument.

Senior Judge Carlos T. Bea and Judge Lucy H. Koh joined the opinion.

Frank Freed Subit & Thomas LLP represents Sterling.

The case is Sterling v. Feek, 9th Cir., No. 24-1296, 9/4/25.