Colorado Tries to Recoup over $100 Million in Mistaken Unemployment Benefits

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The state Labor Department is whittling away at a $128 million unemployment overpayment balance. The agency collected $20 million in the last 12 months. Source: Colorado Department of Labor and Employment.

Around Christmas last year, Matt Tuttle got a letter from the Colorado Department of Labor and Employment, saying he had been overpaid unemployment benefits for the last three years. It also said he had to pay it all back with a 50% penalty. The total bill: $25,000.

“It was way shocking, my heart dropped into my stomach.” Tuttle said. “I was just like, ‘I can’t do this, I can’t afford this right now.’ And I was like, ‘I just don’t get it, what’s going on, why is this happening?’”

Tuttle is a banquet assistant manager at a Colorado Springs hotel. About three years ago he lost a lot of hours, and he also found out he was going to be a dad, so he applied for unemployment benefits. Tuttle didn’t save his unemployment benefits for a rainy day, it was already raining.

“It went to the house, it went to him,” Tuttle said as he motioned to his now 2-1/2 year old son. “Diapers, they’re expensive, god they’re expensive; formula, doctor’s appointments, and stuff that like. Everything that a family would need to get by - gas, food on the table."

The state told Tuttle he failed to report his tips. A big share of his income is gratuity. He says when he applied for benefits three years ago the Labor Department told him to only report his base wages since the tip money was so erratic. That was clearly bad advice, and in retrospect, Tuttle said he should not have received a lot of the unemployment aid he did. He wonders, though, why it took so long for the Labor Department to finally say something.

“Because I’ve been doing the exact same thing for three years. All of a sudden the flag comes up now. It should have come up way back then.”

What Tuttle did not know was that Colorado had stepped up efforts to claw back some of its $128 million dollars in unemployment overpayments.

“Our goal was to increase collection about 10%,” said Cher Haavind, a spokesperson for the Colorado Department of Labor and Employment. “And we’ve quadrupled that actually.”

After a scathing audit and an executive order from the Governor, the agency had to recoup overpayments quickly.

Most of the cases are not fraud related. They are mistakes in paperwork or an employer contesting the benefit claim. Haavind says the department doubled investigation staff to find those errors, and it plans to add even more workers.

The hiring binge paid off. Colorado was ranked as one of the poorer performing states just last year but could soon be within federal standards. The state has collected $20 million in overpayments in just 12 months.

“Our goal was just to get to an acceptable level first,” Haavind said, “and now we’d actually like to be one of the better performing states in this area.”

Haavind added that the Labor Department works with claimants, and gives them options for repayment.

“So we feel like we don’t want it to be a hardship on a claimant, and we do have tools in place to negotiate those so that it isn’t a hardship,” she said.

Labor attorneys like Brian Stutheit, however, say the Labor Department isn’t as accommodating as it claims to be. Clients tell him the tone has changed.

“You wouldn’t believe how often people come to me and say, ‘I was explaining my situation to somebody from the state, they cursed at me and hung up.’ Seriously.”

He said in his experience the Labor Department has never negotiated to waive penalties without formal hearings. He represented Matt Tuttle in two such hearings trying to reduce the 50% penalty. Tuttle won one hearing, but he lost the other because he couldn’t prove the Labor Department told him not to report his tips. He still owes $20,000.

“I feel like I was conned, you know?" Tuttle said. "I almost feel like they were being the fraud. I don’t know if that’s just the angry half of me saying that, because I kind of feel like I have the right to be upset about it.”

Tuttle’s now trying to set up a payment plan with the Labor Department. It’s a bill he’ll likely be paying for years.