Unemployment Fraud: How to Report Fraud & Protect Your Business

Key Points about unemployment fraud:

  • Unemployment fraud is on the rise. If you notice suspicious or unusual unemployment claims, contact your state unemployment agency as soon as possible.
  • Various preventative measures can help you protect your business and your employee data.

Since the start of the pandemic, unemployment rates have been on the rise. So, too, have fraudulent unemployment claims. In fact, several states have identified fraudulent claims worth billions of dollars.

Employers are often the people who notice unemployment fraud first. If one of your employees becomes a target, take action as quickly as possible.

What is unemployment fraud?

Unemployment fraud occurs when someone uses stolen identities and Personally Identifiable Information (PII) to claim unemployment benefits they’re not entitled to. 

Unemployment fraud can cause various problems. For one thing, fraudulently claimed unemployment benefits take funds away from people who actually need the money. In addition, it’s often harder for victims of unemployment fraud to claim these benefits in the future. These individuals are also more likely to be targeted by other forms of identity theft.

What should employers do if unemployment fraud occurs?

In many cases, you may not be aware of unemployment fraud until:

  • An employee notifies you of suspicious unemployment claims made in their name
  • An employee receives a Form 1099-G for unemployment benefits they weren’t expecting
  • You notice unusually large unemployment charges
  • Your state unemployment agency notifies you of suspicious unemployment claims
  • Your state unemployment agency requests separation information for an employee who is still actively employed by your company
  • You receive word that claims have been filed by or for people who are still actively employed by your company
  • You receive word that claims have been filed by or for people who have never been employed by your company

If you notice any of these warning signs, take action as follows.

1. Investigate the claim

You should receive an initial claim for someone seeking unemployment benefits. In most cases, this will be the first place you spot any suspicious activity. 

Investigate these claims and gather as much information as you can. Are any claims unusual? For instance, have you received claims for someone who’s still working for you? Or claims for someone who you know is working for another company?

2. Report fraud to the appropriate agency

If you suspect fraud, report it to the state that issued the benefits. It’s important to note that each state has different protocols for reporting unemployment fraud. Some may refer to it as “identity theft” or “imposter fraud.” Some may also require additional information to officially open an investigation. 

Click here to see each state’s website and hotline for reporting unemployment fraud.

3. Notify & help the employee(s)

Notify the affected employee if they’re unaware of the fraudulent claims made in their name. Then help them file the necessary reports and protect their information from future breaches.

Report identity theft

Help your employee report identity theft to:

Protect their data

Then share tips to help them protect their data from future identity theft. You might suggest that they:

  • Review their credit reports
  • Place fraud alerts on their credit
  • Freeze their credit
  • Protect their Federal tax returns (they can request an Identity Protection PIN from the IRS here)
  • Visit IdentityTheft.gov for more information and tips

4. Consider the possibility of an organization-wide incident

If multiple employees at your organization fall victim to unemployment fraud, you may have experienced a data breach. For instance, someone may have gained unauthorized access to your system and your employees’ PII. 

If you suspect a large-scale incident like this, notify your insurance carrier and legal advisors as soon as possible.

Unemployment fraud is on the rise. If you notice suspicious or unusual unemployment claims, contact your state unemployment agency as soon as possible.

How can employers prevent unemployment fraud?

Many criminals obtain PII through data breaches and other illegal methods. Through email or text phishing, they send messages that impersonate a legitimate organization to try and obtain your employees’ emails, credit card information, and other personal data.

Because of this, strengthening your data security is key to preventing unemployment fraud. To start, you can:

Educate your employees

Make sure your employees know what unemployment fraud is. Share common warning signs, steps they can take to protect their data, and other educational resources. You might also provide information about phishing and other tactics criminals use to obtain sensitive information.

Perform a risk assessment

Like the name suggests, a risk assessment helps you identify risks before they happen. These assessments identify where your employees’ PII is stored and used so you can create the security protocols needed to keep it safe.

Update your company policies

Add your security protocols to your written company policies. Make sure to include protocols for employee and client PII.

Stay vigilant

Fraud alerts often miss unemployment fraud. For this reason, you should check every notice you receive from your state unemployment agency for suspicious claims or unusual activity.

Follow security best practices

Incorporating standard security practices into your everyday operations can help keep your data secure. You and your employees should:

  • Create strong passwords and update them regularly
  • Use a Virtual Private Network (VPN) to securely access company documents and information 
  • Require multi-factor authentication to access the VPN or any software programs with PII
  • Automatically log out of systems after brief periods of inactivity

Protecting Your Organization from Fraud

Being a victim of any type of fraud can be a stressful experience. Help keep your organization and your employees safe by taking preventative measures and understanding how to report fraud if it occurs.

Check out our blog to stay up-to-date with the latest industry news like the rise in unemployment fraud. For more information about unemployment fraud and identity theft, please visit the Department of Labor’s website.


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