What is Unemployment Insurance Fraud?

A government typically provides unemployment insurance to its citizens, which continues to provide people with income in case they lose their jobs through no fault of their own. Unemployment insurance is temporary relief and the qualifications for eligibility vary from jurisdiction to jurisdiction. Abuse of the system through unemployment insurance fraud, which occurs when a claimant makes any misrepresentation with the intention of fraudulently obtaining unemployment insurance benefits, is fairly common. The penalties for unemployment insurance fraud vary based on the locale, but can be fairly steep.

The purpose of unemployment insurance is to continue to provide someone who loses his or her job with income until he or she is able to find another source of income. Unemployment insurance programs are usually maintained by the local government and are typically funded by a tax on employers. In order to qualify for unemployment insurance benefits, the claimant generally must have earned a certain level of income over a stated period — usually a year — and must have lost their job through no fault of his or her own. Most unemployment insurance claims stem from layoffs, especially during times of economic downturn.

There are a few ways by which a claimant can conduct unemployment insurance fraud. Anytime someone makes an intentional misrepresentation with the intention of getting unemployment insurance benefits, he or she is committing unemployment insurance fraud. For example, if a claimant were to misstate his or her previous income when applying for unemployment insurance benefits, that would constitute unemployment insurance fraud. Additionally, simply continuing to receive unemployment benefits after acquiring a new job without informing the unemployment office that the claimant had found employment would also constitute unemployment insurance fraud.

The penalties for unemployment insurance depend on the jurisdiction in which the fraud is committed, though certain things tend to hold true across borders. First, the defrauding party will be prohibited from claiming unemployment insurance benefits for a stated period of time, usually a year. Additionally, he or she will be required to pay back all of the benefits with interest prior to ever receiving unemployment insurance benefits again. Further, anyone convicted of unemployment insurance fraud will likely face expensive fines and may face jail time depending on the egregiousness of the circumstances.

Generally, governments have “whistleblower hotlines,” which are phone numbers that people may call and give anonymous tips as to unemployment insurance fraud of which they are aware. Because the costs are so great, governments are typically aggressive in pursuing these leads. In the event the investigators find a reason to believe the lead to be true, then prosecution will be quickly initiated.