Common Penalties for Misusing Unemployment Insurance Benefits


Unemployment insurance benefits are awarded based on need and specific criteria. Anyone who is currently receiving unemployment insurance must be satisfying the three basic requirements. The first requirement is the reason for unemployment. If a worker was laid off due to factors beyond his or her control, he or she will likely qualify. The second requirement is based on wages, and will vary depending on the state – in this case, Wisconsin – in which the worker resides. The final requirement is that a worker shows an effort to find a new job while on unemployment insurance benefits. Unemployment is meant to be temporary and due to the stringent nature of the program, workers often misuse their unemployment insurance benefits, resulting in penalties. Some of the most common unemployment insurance fraud penalties that unemployed workers may face are listed below and available in greater detail.

Failing to Report New Employment

The basic idea behind the unemployment benefits program is that workers who are making efforts to find new jobs will have at least some income to help them with expenses. This is not meant to be a permanent system; the main objective is to help a worker find a new job and get off unemployment benefits. Many workers may forget this, but when they do find jobs that are comparable, they must report back to the unemployment authorities to notify them of this; the bureau will not automatically keep up with this information. When a worker does report to the bureau, he or she must inform the state of the new job, how much he or she is earning and that unemployment benefits are no longer necessary. This is to ensure that resources are reserved for the next worker who needs them. A worker must report a new job before his or her first paycheck; failure to do so will result in an improper payment, which could lead to some serious consequences.

Identification Theft/Misleading Information

It is rare, but still possible, for workers to submit applications with false or misleading information in order to obtain unemployment insurance. An example of this would be someone using an alias, another’s Social Security Number or someone else’s income wages on a form. Additionally, adding extra family members, falsifying income altogether or including a disability when there is none is considered fraud. If a worker is caught attempting fraud, he or she will most likely be sentenced with the more serious consequences, such as jail time and prison.

Employer/Employment Fraud

In order to continue receiving unemployment benefits, a worker must submit a report that details his or her active search for acceptable employment. If a worker is not actively looking for a new job, and is falsifying the weekly reports that are submitted to the office, he or she will be convicted of employment effort fraud. Just like with fraud on applications, employment effort fraud is taken very seriously, and may warrant harsher punishments associated with unemployment benefits. It is not only employees that can commit fraud, employers can commit unemployment insurance fraud as well. If an employer happens to put workers in a different classification, such as an independent contractor instead of full-time or a part-time employee, the employer will be engaging in fraud, too. Employers who do not report any of the wages that have been paid to workers or pay workers in a way that is not upfront are also committing fraud. Finally, if an employer provides falsifiable information regarding workers, and workers are deemed ineligible for unemployment insurance because of it, they will have committed fraud as well.

How to Avoid Unemployment Fraud

When a worker commits unemployment fraud, either intentionally or unintentionally, it is a serious matter. Depending on what type of fraud was committed and how blatant the error was, a worker could face some serious consequences which include: possible jail time, prison sentences, prosecution by the government, repaying the improper payments made, as well as some extra fines, forfeiting income tax refunds for the future and becoming permanently ineligible for unemployment insurance moving forward. In order to avoid this, a worker should always report gross wages, report all work for which income was earned (self-employment included), report the week’s dates an employee worked and keep a record of wages for each day – if possible. By doing these things, workers can provide accurate lists, in case the unemployment authorities request them.