Is it possible to have a fraudulent unemployment claim filed against your business? The quick answer is yes, but you likely knew that. You may be wondering how to best handle such claims and whether you can prevent them.

Fraudulent Unemployment Claims

They’re on the rise.
According to the Associated Press, US unemployment claims fell to 376,000 in early June, the sixth consecutive drop in as many weeks. Despite claims ticking back up to 412,000 later in the month, the ebb and flow shows a steady trek back to some semblance of normalcy. There is light at the end of the long, dark tunnel we have navigated for over a year. While hope is visible, we still have some economic shadows to face.

Fraud Unemployment

Forbes reports that fraudulent unemployment claims are adding to a growing backlog at state offices. The pandemic spawned the perfect storm for scammers to steal unemployment benefits. In mid-2020, the FBI addressed a spike in fraudulent claims that we now see stretching into 2021. Criminals are filing false claims via stolen identities.

Employers across the country are not only receiving claims for individuals still employed who did not file a claim, but they are also receiving claims from individuals who have never even worked for them. What’s worse, failure to properly handle these claims can leave your bottom line vulnerable and risk increases to your unemployment insurance account and tax rate.

What should you do if fraudulent unemployment claims are filed against your business?


Steps Businesses Can Take

In most states, claims must be challenged within 10 days to avert penalties or possible tax increases. There are three critical steps you should take:

  1. Check the Notice: Look for red flags of identity theft, such as a claim from a worker who is still employed or a former employee who has not worked for you in several years.
  2. Report It: Suspicious or false claims need to be reported to the Department of Labor immediately, both by calling them directly and via the form you receive.
  3. Contact the Claimant: If red flags of identity theft are present, reach out to the current, ex or never employee. In most cases, they are unaware that a false claim has been filed under their name. They will need to report the fraud to the state unemployment office and work with that office to clear the claim.

You can actively help reduce the impact of fraudulent claims by sharpening three major areas of your business:

  • Employee Education: Ensure your workers know about unemployment benefit scams and help them navigate the process if they become victims. An excellent resource for this is IdentityTheft.gov.
  • In-House Policies and Procedures: Ensure that you have well-defined processes for accurately and promptly reporting new hires to the correct government agencies, checking unemployment reports for accuracy, and reporting potential fraud immediately.
  • Security: Review your cybersecurity and how your employees’ personal information is handled so it can be maintained and improved.

It’s likely the uptick in fraudulent unemployment claims will continue as we rebound from the pandemic. Is your business insurance ready to weather what’s ahead? Contact one of our local, trusted advisors at 757-464-4443 to review your coverage and preparedness today.

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