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Unemployment insurance came into U.S. law in 1935, in large part as a response to the economic conditions of The Great Depression. Millions of workers lost their jobs in the early 1930s because of the deterioration of the world’s financial condition. These displaced workers often lost their homes and other valuable assets. Many could find no work at home and took to the road, becoming hobos.
The government recognized the need for a safety net. Politicians also realized that large scale unemployment led to decreased spending, which caused more businesses to go under, exacerbating the problem. They devised unemployment compensation as a way of insuring workers against losing their jobs.
The federal government requires each state to administer its own unemployment insurance system. In California, displaced workers are granted unemployment benefits when they are laid-off, fired for a reason other than misconduct, or quit for good cause attributable to their employers. To be eligible, workers must have been employed during the previous 18 months, actively seek work while collecting unemployment benefits, and be ready and physically able to work.
What is unemployment insurance fraud?
A person commits unemployment insurance fraud when he or she willfully makes a false representation, concealment, or identification for the purposes of obtaining, increasing, defeating, or reducing an unemployment insurance claim. This charge often results from individuals claiming false information to collect benefits.
One of the most common violations involves collecting unemployment insurance while working. This may occur when an individual falsely certifies that they are still unemployed in order to collect benefits on top of the paycheck from a new job. When unemployment recipients return to work, they must certify their new income.
Laid-off workers may earn some wages from part-time work while collecting unemployment compensation. To ensure they are in compliance with unemployment insurance laws, they must report this income. Once their income surpasses a certain level, unemployment benefits are reduced.
Another common violation involves collecting other benefits and unemployment at the same time. This occurs when claimants fail to certify that they collect these other benefits. For example, collecting workers compensation at the same time as unemployment constitutes unemployment insurance fraud.
Recipients are required to search for work. A violation of law can occur when recipients falsely certify that they are looking for work and fabricate documentation of work search efforts.
Other common frauds include using a false social security number or name to collect benefits while working under a different name or social security number, claiming benefits based on working for a fictitious employer, and the unauthorized cashing of someone else’s unemployment checks.
Unemployment fraud by employers
Employers also commit unemployment insurance fraud. Often, employer fraud is motivated by the desire to avoid contributing to the unemployment insurance program. For example, an employer commits fraud when it knowingly withholds deductions from employees but fails to pay required contributions to the unemployment insurance fund. Other violations result from providing false information about why an employee was terminated or employee wages to circumvent the unemployment insurance program.
When it suspects unemployment insurance fraud, the California EDD investigates. Investigations frequently arise from tips to the unemployment insurance fraud hotline or from red flags discovered in documentation by unemployment insurance administrators. If the EDD discovers evidence of criminal wrongdoing, it forwards the case file to the district attorney.
For a court to find a defendant guilty of unemployment insurance fraud, the prosecution must prove criminal intent. Therefore, evidence that the defendant acted with no fraudulent intent can lead to acquittal. For example, defendants commit no fraud when they believe they filed a legitimate claim, accidentally provide the wrong information, or don’t realize they need to certify freelance income.
Insufficient evidence, false accusations, and mistaken identity are also strong defenses. Often, these defenses result from cases of investigators jumping the gun in filing charges. Criminal defense lawyers and investigators have a great track record of winning dismissals with these defenses.
Unemployment insurance fraud convictions lead to serious repercussions. Depending on the severity and criminal history of the accused, prosecutors can pursue it as a felony or a misdemeanor. Misdemeanors carry up to a year in jail and felonies up to three.
With jail time at risk, people accused of unemployment insurance fraud need a strong defense. Because fraud has risen in the past few years, the state has ratcheted up enforcement efforts. This often leads to a rush to judgement. Don’t let this rush to judgment lead to a false conviction. If you face unemployment insurance fraud charges, call our office immediately.