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The California Employment Development Department has told self-employed workers they need to prove their status or return federal pandemic unemployment assistance funds. Courtesy photo
The California Employment Development Department has told self-employed workers they need to prove their status or return federal pandemic unemployment assistance funds. Courtesy photo
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EDD looks to reclaim federal unemployment benefits from self-employed

REGION — Nearly one million self-employed Californians may be on the hook to pay back their unemployment benefits from the COVID-19 pandemic, according to the California Employment Development Department.

The state’s employment department recently announced it is requiring self-employed workers to prove their eligibility or return the money with a possible 30% penalty, according to a release. If a claim for pandemic unemployment assistance, or PUA, started in 2020, the documents need to be from the 2019 tax year, and if the benefits claim began in 2021, tax documents need to be from 2020.

According to the department, proving work history can be done by uploading a choice of documents through UI Online, such as a tax return, business license, business receipt or invoice, W-2 form or paystub for those who worked for an employer.

The state’s Employment Development Department, or EDD, is also continuing to remind pandemic unemployment assistance recipients of the federal requirement to prove self-employment or employment work history.

Last year, Congress extended the pandemic benefits and required proof of eligibility due to rampant fraud. In California, the EDD has lost $11 billion due to fraud, with the state blaming pandemic unemployment assistance and the self-employed for much of the fraud.

Former California Labor Secretary Julie Su said that of the $114 billion paid out to claims, 10% has been confirmed lost to fraud, with another 17% identified as potentially fraudulent.

Assemblywoman Lorena Gonzalez (D-San Diego) said the self-certification process on the state department’s website allowed for massive fraud. Many residents pointed out the legislator’s comments fail to acknowledge a laundry list of problems at the employment agency, such as outdated technology and security protocols, the agency did nothing prior to rolling out the largest unemployment benefits system in state history.

A Jan. 28 report by California State Auditor Elaine Howle found that “EDD did not take substantive action to bolster its fraud protection efforts” to safeguard its unemployment insurance program, “resulting in payments of $11.4 billion for claims that it has since determined may be fraudulent because it cannot verify the claimants’ identities.” Additionally, the department’s “uninformed and disjointed techniques” to prevent fraud placed the agency at “higher risk” for criminal activity.

A second audit report also found that “EDD’s inefficient processes and lack of advanced planning led to significant delays in its payments” and the agency’s “poor planning and ineffective management left it unprepared to assist Californians unemployed by COVID-19 shutdowns.”

The federal PUA program was a new benefits program created by the federal government for the first time during the pandemic in 2020 to aid those who were not eligible for traditional state unemployment insurance, such as those who were self-employed or could not work because of COVID-19 or related impacts.

According to media reports, about two million people have already submitted documentation to prove their self-employed status. To expedite payments early in the pandemic, the EDD did not require proof or documentation upfront.

Claimants must submit proof of work history even though the program has now expired and even if the claimant returned to work and was no longer collecting benefits before the program expired.

Under federal rules, claims filed for benefits on or after January 31, 2021, will have 21 days to submit proof or request an extension. Claims filed before January 31, 2021, will have 90 days to submit proof or request an extension.

Click here for the employment documentation requirements.