The Michigan Unemployment Insurance Agency has agreed to pay a $55 million settlement in response to a class-action lawsuit over the agency demanding the return of benefits from workers during the COVID-19 pandemic. Filed by workers who were subject to collections without due process, the lawsuit stemmed from overpayment issues during the pandemic due to reasons not approved by the federal government. As a part of the preliminary settlement, the state has agreed to make changes in its method of collecting overpayments. The lawsuit revealed that the Michigan agency collected on overpayments caused by agency errors and initiated collection efforts despite pending protests.

The settlement not only involved a significant monetary award, but also necessitated the Michigan Unemployment Insurance Agency to reform or adopt practices in order to ensure workers are given due process rights before collections begin. The agency has also agreed to void some redeterminations for benefits, including for part-time workers eligible for pandemic aid. Additionally, workers are now allowed to request waivers for agency administrative errors.

One of the major changes includes that the agency will not be permitted to automatically collect overpayments until a worker has had the chance to exhaust any rights to a review or appeal. A court order that prohibited collections for those engaged in an overpayment issue will remain in effect and thus far has returned over $45 million in improperly collected funds.

This is not the first settlement the Michigan Unemployment Insurance Agency has encountered due to violating due process. There’s also a pending case in the federal court. Meanwhile, Michigan plans to replace the problematic MiDAS system by 2025 with a new system costing $78 million.

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