Clean Slate for Unemployment Debt

In February, Emma Sherr-Ziarko, an actor who's been on and off unemployment assistance throughout the pandemic, got a letter from the New Mexico Department of Workforce Solutions telling her she owed the state $2,345.

The letter said she had been overpaid.

It came as a punch in the gut—after months without consistent work, she had to rely on family to support her while she paid off her debt.

Sherr-Ziarko is one of thousands of gig workers and self-employed New Mexicans who signed up for Pandemic Unemployment Assistance, and were later told they owed money back without any clear explanation.

Now, people who were mistakenly overpaid by the state are eligible for waivers that would reduce their debt to zero.

On Monday, the New Mexico Department of Workforce Solutions sent out notifications to 13,405 claimants who are eligible for waivers because they received an overpayment "through no fault of their own."

The federal government created the program as part of the CARES Act last year to extend benefits to self employed people, gig workers and others who do not qualify for standard unemployment.

However, the CARES Act also required states to take back money if they mistakenly overpaid people, even if the overpayment was not the fault of the claimant or if paying the money back would be a burden.

This proved to be a problem when thousands of people trying to navigate the confusing application submitted the wrong information to the state, and Workforce Solutions didn't catch the error before some payments were sent out, says Department Secretary Bill McCamley.

The $900 billion federal relief package Congress passed in December changed the rules, allowing states to waive the debts for people who were mistakenly overpaid or who can prove that paying the money back would cause substantial hardship.

McCamley says that for most people, the overpayment problem is due to "monetary reasons" that stem from issues with the income and tax information they submitted.

He says the IRS required people to submit their net income rather than their gross income on applications. But many people submitted their gross income and received more money each week than they should have. Once the state realized the error, those people received overpayment notices for the difference.

McCamley says people who received overpayments for this reason make up the bulk of those eligible for waivers.

"Most of the overpayments that we've had from the monetary reasons are in the net versus gross income category," says McCamley. "That's the vast, vast majority of the types of cases that we're talking about here."

McCamley says all people deemed eligible have been sent a notification about the waiver that includes a link to a short questionnaire that will determine whether they meet the requirements.

"We're asking people to not call our call center about this. We will reach out to the people who are eligible with this process through the type of correspondence that they chose," he says.

"It is going to take at least a few weeks for payments to start to go out again…This is not something that will happen right away. Because we have to look through every single one of those on a case-by-case basis, and have someone make a determination, 'Does this fit the criteria that the Department of Labor specifically says to us is allowable?'" says McCamley.

Sherr-Ziarko tells SFR she has already received a notice that she is eligible for a waiver. She is skeptical as to whether the process will run smoothly.

Throughout the pandemic Sherr-Ziarko was taken on and off the assistance program as her work sputtered along in fits and starts between spikes in statewide COVID-cases and long periods of shutdown.

Then, as the new year began her experience of the unemployment system devolved into utter chaos.

She received an overpayment notice, then days later received a payment for more than she owed, and then had her payments cut off entirely. Between dozens of unanswered calls to the department and emails to state workers and local representatives, Sherr-Ziarko received a handful of different explanations for what was going on. All the while she was being shuttled between different programs.

"I got 15 different letters all within a few weeks, all saying something different, all putting me on different programs, saying I had benefits, saying I didn't have benefits. It got to a certain point where I was like, it would be almost funny how messed up this is if it weren't people's lives and livelihoods at risk," she says.

"I'm just so frustrated at the whole process and exhausted by it at this point, all I can do now is hope they've figured it out."

McCamley says the process has been equally overwhelming for his staff.

"We just ask that people be patient. We're going to work through it absolutely as fast as we can. This is another brand new program for us, and we are working very hard to get up to speed," he says.

People who received overpayment due to fraud, or who never sent in proof of employment or tax records are not eligible for the waiver. Neither are people who applied for assistance  in New Mexico but worked and are eligible for unemployment in other states.

The waiver only applies to people enrolled in the program. People who have received overpayment notifications under standard unemployment are not eligible and must file a regular appeal to dispute the claim.