State agency sued over denied unemployment benefits

Jun. 16—Carlos Rocha is distraught.

The 53-year-old Albuquerque man said he's worked all his life as a truck driver but was laid off due to health problems in the early days of the coronavirus pandemic.

He was denied unemployment benefits. The state labor agency told him it had overpaid him years before.

This set off a chain reaction that devastated his finances and life.

"I ended up moving out of my home, got a divorce, had to move to my mom's. It was a complete disaster," Rocha said.

New Mexico Legal Aid has filed a new lawsuit against the state Department of Workforce Solutions on behalf of Rocha and more than a dozen other plaintiffs who allege the agency is applying an unlawful policy that prevents them from receiving unemployment benefits.

At issue is the way the department applies a penalty on people determined to have committed fraud against the department.

State law allows the department to disqualify people from receiving additional benefits "for a period of not more than one year," from the time they are determined to have committed the fraud.

But, the lawsuit says, the department has an internal policy that extends the time frame for imposing the penalty from one year from the date of determination to one year from "the date the claimant is next determined eligible for benefits."

This is the second time the legal organization, which serves low-income people, has litigated the issue, staff attorney Alicia Clark said.

The department has refused to change its practices, despite court rulings that the policy is not supported by law, she added.

As a result, the complaint says, people are being denied benefits years after they are alleged to have committed fraud — and years after any penalty period should have expired.

The lawsuit names Workforce Solutions Secretary Ricky Serna and the department as defendants and seeks compensation for the plaintiffs and a court order directing the agency to "immediately cease the practice and policy by which the Department denies claimants access to benefits based on outdated fraud determinations."

Serna said he couldn't comment on the pending litigation and wasn't familiar enough with the issue to comment on the department's policy.

"In any litigation against the agency we are committed to doing what's right by affected claimants," he wrote in subsequent email. "Over the past couple of years, we've learned a lot about how we can strengthen our administration of unemployment administration benefits. We're committed to tightening up any loose ends identified and preparing the agency for future economic downturns."

Clark said the department's fraud determinations often are based on a misunderstanding of the rules rather than willful wrongdoing on the part of the person applying for unemployment benefits.

"The question of whether they actually committed fraud or not doesn't make any difference for our case, but I can tell you most of those people were surprised to find out there was a fraud determination," she said.

"Usually they didn't commit fraud or didn't understand the reporting requirements," she said. "People are not that sophisticated, and this is complicated stuff."

For example, she said, the department doesn't send inquiries regarding discrepancies directly to the applicants. Instead, it posts them online. Applicants have to see the post about a fraud allegation in time to challenge it within 15 days.

"You have to act fast; otherwise bad things happen to you," Clark said.

In many cases, she said, the fraud determination is based on allegations applicants are ill equipped to rebut, thanks in part to a system that requires applicants to prove they didn't do anything wrong, even though the legal burden of proving fraud actually rests with the department.

Clark said the department's bureaucratic methods of communicating with applicants — which rely heavily on online interactions — are especially hard to navigate for people who are not tech savvy, including the elderly.

Albuquerque bartender Rachel Luna, one of the 18 plaintiffs in the case, said she applied for unemployment in 2020 after being laid off because the restaurant she'd worked for since 2014 closed during the pandemic. She was baffled when, after an initial payment, she stopped receiving benefits.

"I looked at the account, and they said they had a hold on my benefits due to fraudulent activity, but I didn't understand why," she said.

"I'm not a very computer-smart person, so I was always trying to call and I was always being disconnected," she said. "I could never get through. ... No one would ever call me back."

She finally got a letter telling her she owed $1,600 due to a fraud determination dating back to 2011, she said, and was offered a chance to apply for a waiver.

She said she applied for the relief but still didn't receive benefit checks and could never find out whether the agency had received her waiver request.

"I would try to call, and it was always, 'Due to high call volume, please call back later,' " she said. "I was on hold for a couple of hours one time, and then it would just hang up."

"It was so frustrating," she said. "To this day, I still haven't been able to talk to a real person on the phone to see what this is all about."

Rocha said he also called for days on end without satisfaction, and when he was able to get his case before an administrative law judge, "they didn't want to hear it."

"It's like dealing with the IRS," Rocha said. "They are impossible to work with. They treat you as some kind of criminal when you are on a phone hearing with the judges."

Rocha and Luna said they contacted New Mexico Legal Aid after hearing the advocacy group had successfully recovered money for other people dealing with the same issue.

State District Judge Matthew Wilson granted a summary judgment in favor of Legal Aid in February in a similar case filed in 2020 on behalf of seven other plaintiffs. Wilson also granted the $69,509 in relief sought by the plaintiffs in that case.

Court records show he found the department's policy "purporting to expand the fraud penalty period" was "without statutory authority or legal effect."

Legal Aid filed a motion in April asking the court to enforce the judge's order.

Wilson issued an order May 31 directing the department to appear in July to show why it should not be held in contempt for its alleged failure to comply with his ruling.