Kansas unemployment bill hearing raises questions of identity theft, fraud penalties

TOPEKA, Kan. (KSNT)— Kansas lawmakers heard from the state department of labor in a hearing Thursday, raising questions about widespread fraud that’s impacted the state’s unemployment system.

Some concerns related to identity theft, pushed some lawmakers to address issues that impact employees, including an almost decade-old law that prohibits people that have filed fraudulently from receiving unemployment benefits for up to five years.

“We’re starting to hear from persons who are entitled to benefits, but they can’t receive them because their name has been flagged as fraudulent,” Senator Virgil Peck, R-Havana, said, pressing for answers on where the department is at in addressing the issue.

Kansas senators wrapped up their fourth day of committee hearings on a bill to revamp the state’s unemployment system Thursday. The House has been working on their own version of the bill as well.

The state is working to figure out how many people had their information stolen, and a fraudulent claim filed using their name and social security number.

Peck raised issues of identity theft that have affected some Kansans seeking to file their claims. The state’s unemployment office has set up a website, where unemployment insurance claimants can report fraud. The department will then suspend the account if suspicious activity is found, then refer the issue to law enforcement.

However, Peck mentioned moves had not yet been made for some of his claimants experiencing identity theft issues.

“We got to do better than we’re doing right now,” said Senator Robert Olson, R-Olathe.

The department told Kansas’ Capitol Bureau it’s working through a list of claimants experiencing these problems, and are hoping to move through it quickly. For those receiving 1099 tax forms, the department is providing an automatic correction without action needed to be taken by the person affected.

“It’s not going to happen overnight,” said Peter Brady, one of the deputy secretaries for the state’s labor department. “It’s going to take some time to sort these out.

People across the state are getting tax forms showing they filed unemployment claims when they didn’t. Someone stole their personal information and used it to fraudulently file under their name.

During the hearing, Ty Dragoo, a representative for a transportation union in the state, brought up an example of someone trying to file for unemployment benefits, after being flagged for fraud.

“Let’s say that I lose my job, and I get a normal job, where I would qualify for unemployment. I’m on a fraudulent list for 5 years. Nothing to do with it,” Dragoo said.

However, the department said that statement is incorrect. Dragoo was referring to a 5-year fraud penalty under state law, which was provided in a bill passed in 2013.

According to the department, under the current fraud penalty law in Kansas, there is a 5-year disqualification for anyone determined to have fraudulently obtained benefits. This means identity theft victims are not impacted.

However, the ban does raise concerns for other reasons.

“During the 2020 Kansas Legislative Session, KDOL introduced legislation (then HB2704) to eliminate the five-year penalty (prohibition from receiving unemployment benefits) for fraud. It would have allowed the penalty phase to end upon the claimant repaying all funds owed plus any penalty fees and interest. The bill was introduced but no hearing was granted. It died in House Commerce, Labor and Economic Development. KDOL’s position was that it was an incentive to repay the debt owed.”

Kansas Department of Labor

You can click here to find more information on the 5-year penalty.

Lawmakers are considering amendments that would help adjust the bill they’re working on to make it geared toward the needs of employees and those who have lost their jobs. The 5-year ban may be one of the issues they address.

“Making sure a bill serves the people of Kansas is of foremost importance,” said Senator Cindy Holscher, D-Overland Park.

The state has added identity theft software to the process, which so far has prevented more than 4 million fraudulent login attempts in just the last few weeks.

An audit is also being done to determine how many tax dollars have been used to pay fraudulent claims in Kansas. That answer is expected by the end of February.