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California agency denied unemployment claims in illegally confusing letters: Lawsuit

A person passes the office of the California Employment Development Department in Sacramento. | Rich Pedroncelli/AP Photo

Two Bay Area workers filed a class action lawsuit against the much-reviled California agency responsible for handling unemployment insurance. 

The workers allege that the state’s Employment Development Department (EDD)—which also handles disability and parental leave payments—violated their rights when it retroactively concluded they did not qualify for benefits and only informed them through confusingly worded letters.

Their lawsuit could have implications for thousands of other workers who have had their benefits retroactively canceled or who may rely on EDD for unemployment in the future.

Renee Okamura formerly worked as a cashier in Alameda County. Kathryn Din worked at a hotel in San Francisco. 

Both women say they were forced to leave their work during the pandemic—Okamura because she is at high risk for complications from Covid and Din because she was furloughed and later laid off. Both sought and received unemployment benefits.

But, two years later, EDD accused Okamura of making false statements or withholding information in her unemployment claim.

“I was really scared,” Okamura said in a statement provided by Legal Aid at Work and Rosen Bien Galvan & Grunfeld LLP, who are representing the plaintiffs. “I could not figure out what they thought I told them that was [a] false statement, and I could not figure out why they thought I should be disqualified.”

The agency said Din had been paid in error. She only found out when she received a collection notice; the previous notices had been mailed to her old address, the lawsuit states.

Both women were told they needed to return thousands of dollars that they had already spent on living expenses to EDD. Okamura was also ordered to pay a fraud penalty. And both managed to appeal these conclusions and have them overturned.

Their lawsuit, filed in Alameda County together with nonprofit Legal Aid at Work, alleges that EDD wasn’t just wrong in their cases. Rather, it failed to properly inform them and thousands of others of these types of decisions. They believe this constitutes a violation of due process rights guaranteed in the 14th Amendment of the U.S. Constitution.

The suit comes at a time when EDD has faced withering criticism for descending into dysfunction during the Covid pandemic, falling victim to rampant fraud and making it exceedingly difficult for Californians to receive benefits.

EDD declined to comment on the lawsuit. In previous statements to The Standard, the agency blamed the pandemic for case backlogs and benefits delays while also arguing that its performance has significantly improved since then.

At its core, the lawsuit argues that EDD only informs recipients of retroactive denials by regular mail, despite having other, more reliable contact information for them. Often, the recipients have since moved away.

In cases where the letter alleges that the recipient withheld or provided false information to receive benefits, the notice does not specify what it believes to have been false or withheld. The recipient usually only finds out the concrete allegations if he or she chooses to appeal the decision.

That can be confusing and frightening for the recipient. It also does not mean they have actually broken any rules: Roughly half of denials by EDD are overturned upon appeal, double the rate outside California.

The letters are written in convoluted legalese, which can be difficult for recipients to understand. They also bury information about the recipient's right to appeal the decision, the suit states.

These practices have led to situations like Din’s where the benefits recipient did not find out about EDD’s retroactive denials until they received a notice of collection or, worse, after the agency garnished their wages or took their tax returns, the lawsuit states.

When someone is asked to pay back unemployment benefits they have already spent, “it can be financially devastating,” said George Warner, director of Legal Aid at Work’s Wage Protection Program.

His organization also joined the suit as a taxpayer, alleging that EDD’s approach wastes state funds.

Warner said that his organization has raised the issues described in the suit with EDD for several years, but has not seen engagement from their side. He said the agency has previously cited technological issues and policy barriers as obstacles to improving assistance.

“That isn’t a good enough answer for us,” Warner said. “Constitutional rights are not subject to technology constraints, especially in 2023.”

Besides requesting damages for the plaintiffs, the suit also asks the court to require EDD to send benefits notices by email, automated phone call, text message and messages in the EDD online portal, as well as to disclose allegations against claimants in plain language.