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Overpayments of unemployment benefits are increasingly common among unemployment and Pandemic Unemployment Assistance benefits recipients. Overpayments arise when the New Jersey Department of Labor finds that a current or former unemployment claimant received benefits in error and is liable for a refund. Under the law, the NJDOL has four years from the payment of benefits to issue a notice of refund. There is no limitation, though, on the time for demanding a refund of benefits fraudulently received.

The COVID-19 pandemic, which has led to unprecedented numbers of unemployment applications, has wreaked havoc on the unemployment system and led to many claims that the agency now says were improperly paid and liable for refund. The financial and emotional hardship that overpayments impose on claimants—particularly in a pandemic—cannot be overstated. This article outlines several considerations for challenging unemployment overpayments.

Assessing overpayment refund liability

The first question to ask is whether the overpayment may be challenged on appeal. For example, you may have received regular unemployment benefits and now you’re being asked to refund the benefits, but you may be eligible for Pandemic Unemployment Assistance benefits. In a case like this, an appeal could resolve the matter so that you don’t have to repay any benefits.

If an overpayment does exist, and cannot be challenged through an appeal, you should assess whether the overpayment resulted from an error made by the NJDOL. Many claimants are receiving notices of refund that acknowledge the overpayment resulted from an error made by the agency, particularly in cases from the beginning of the pandemic, when the agency scrambled to process claims as quickly as possible. Many claimants were paid when they weren’t actually entitled to benefits; others were paid under the wrong program (traditional unemployment versus Pandemic Unemployment Assistance). In those cases, the “agency error rule” may apply, limiting the ways in which the agency may take back the overpaid benefits in certain situations. The agency error rule, states:

“[F]or any claimant whose overpayment is determined to be the sole result of the Division’s error, the offset amount shall be limited to 50 percent of the claimant’s weekly benefit rate for each week of benefits subsequently claimed.”

While the agency error rule still requires you to repay the overpaid benefits in full, the actions the agency may take to recoup the money are limited in the following ways:

• You  will not be subject to an intercept of tax refunds, as a claimant with an overpayment normally would.
• If you file a new claim for benefits, you will receive 50% of your weekly benefits and the agency will keep 50% of those benefits, until the entire debt is repaid.
• If you never file a subsequent claim for benefits, the overpayment will not be repaid.

Less common than overpayments arising from an agency error but worthy of consideration are overpayments following multiple determinations of entitlement to benefits. Under the “two determination rule,” a claimant who has received two determinations of entitlement (determinations holding the claimant both eligible and not disqualified from benefits) will not face any refund liability, even if the claimant is later deemed ineligible or disqualified from unemployment benefits.

The usual situation where this applies is when a claimant is granted benefits by an Unemployment Division deputy, the employer appeals, the Appeal Tribunal decides in favor of the claimant, and then the Board of Review reverses upon further appeal by the employer. In this situation, since the claimant has received two determinations of entitlement (from the Deputy and the Appeal Tribunal), he or she will not have to repay any of the benefits received, even though the employer ultimately won the case.

In certain situations, your overpayment may be waived altogether. The Unemployment Division director may grant a waiver of overpayment if you become permanently disabled or if repayment would be “patently contrary to the principles of equity.” Waivers are only granted if you have not misrepresented any information to the agency. Fraudulent overpayments cannot be waived. Pandemic Unemployment Assistance overpayments may be waived where “the individual is not at fault for the payment and repayment would be contrary to equity and good conscience.” We have yet to see how the NJDOL will handle requests for waivers of PUA overpayments, but you should consider requesting a waiver if you have no other option for challenging an overpayment.

Invoking the protection of an overpayment-related regulation

To request a waiver, you should send a written request directly to the director of the Unemployment Division. The waiver request should state the reason for the waiver request, and should include as much support for the waiver as possible. For requests based on financial hardship, the Unemployment Division may request financial information.

The processes for asserting the agency-error and two-determination rules are less clear. If the claim is still in the appeals process, you may ask the Appeal Tribunal or Board of Review to apply the rules. If you have appealed and lost, you may write to the director of the Unemployment Division and request that the agency-error rule or two-determination rule be applied to limit or eliminate the refund liability.​

This information last reviewed: Mar 31, 2021