Fixing Michigan’s Unemployment Problem

That’s what David Blanchard hopes to do with two class action cases against UIA

Super Lawyers online-exclusive

By Trevor Kupfer on April 14, 2023


David Blanchard has been spending so much time on cases against the Michigan Unemployment Insurance Agency over the past decade that he’s starting to refer to fixing it as “a long-term hobby.” The employment litigator at Blanchard & Walker in Ann Arbor made some waves late last year when Court of Claims Judge Brock Swartzle put a stop to UIA’s attempt to recollect benefits from more than 1.8 million workers who received them during the pandemic. The injunction is tied to a class action Blanchard filed contending the agency’s demands are illegal.

“I’ve actually got four active cases against UIA,” he says, “and two are class actions. I’ve been litigating against the agency for 10 years now and telling them they have to change. Then everything just got blown up in the pandemic—all the defects in their procedural systems and their computer system, their under-resourcing, everything was exacerbated and became very obvious, and the people of the state of Michigan were paying for it.”

He has a coalition of employment lawyers behind him, plus colleagues Angela L. Walker, Natalie Walter and Leslie Wenzel at his firm. Still, it’s no easy task.

When Saunders v. Michigan UIA was first filed, he says, “the news hit on a Friday night and the phones were off the hook all weekend. I get notifications when there’s a new voicemail at the firm. It was like every five seconds. We had 10,000 people reach out to us. So that’s asking a lot of the staff, but we do it. Who else is going to?”

He says the suits are a source of pride. “It tells this story of why we go into law, why we think it’s impactful for people. I’ve had cases with thousands of people that I’ve made money for or reformed systems, but I’ve never had something like this where you just go with your gut and use all the skills you have and it turns into something that’s impactful for millions of people.”

Saunders v. Michigan UIA

The origin of Blanchard’s class action suit in state court stems from UIA’s retroactive decision to categorize nearly 75% of the 2.48 million people who received unemployment benefits during the COVID-19 pandemic as ineligible for aid.

At first, Judge Swartzle’s court order was only going to apply to the named plaintiffs Blanchard & Walker brought. “And I said, ‘No, no, no, it’s bigger than that,’” Blanchard says.

Then it was set to apply to those who were waiting for a hearing and appealed within 30 days. “And I said, ‘No, no, no, actually the systems don’t work, and you have no idea what’s timely and what’s not timely.’

“They didn’t know who they’re collecting against or how many people, but they also didn’t know who has appeals and who doesn’t,” Blanchard continues. “So they said, ‘We have to stop collection against everybody.’”

That turned out to be 1.8 million people.

UIA is broken, Blanchard says. For example, early in 2020, UIA forms mistakenly asked unemployment applicants for their gross income. Then UIA fixed it to ask for net income. But the “fix” was retroactive, Blanchard says, so those who answered for gross appeared to answer for net, therefore the information became false—and false reporting is a reason to deny benefits.

“It’s a cluster of different things, but it’s all related to a backlog and a failure to ask the right questions at the right time, or a failure to review, if they asked the questions, the answers,” he says. “There’s just a layer upon layer of stuff. I can tell you stories all day.”

The case is currently in the discovery phase, which means it could take a long time to resolve, although Blanchard thinks settlement talks may occur soon. The second class action, Kreps v. Michigan UIA, is three to six months behind Saunders.

Kreps v. Michigan UIA

Blanchard & Walker filed another class-action lawsuit last August claiming the state froze payments for thousands of workers and failed to provide a way for workers to appeal.

“The aspect that’s different is that we’re raising the claim under federal constitutional law and based on prior settlement agreements,” Blanchard says.

He’s representing UAW (International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America), as he did in some previous suits against UIA. According to the prior settlement agreements in those cases, Blanchard says, UIA agreed to the following condition: “If they decide somebody’s eligible and start paying benefits, they won’t turn around and stop their benefits until there’s a final decision otherwise.”

Basic due process in the unemployment system means appealers get a hearing before the government can take a benefit away, he says. “It’s a hearing that people haven’t gotten, yet they’re getting benefits cut off.”

The state has filed motions to dismiss based on immunity arguments, while Blanchard has filed a motion for preliminary injunction. “They have to stop suspending everybody’s benefits,” Blanchard says.

Information about both cases can be found at their firm site here.

So What Went Wrong?

When Blanchard thinks back to the pandemic, he pictures himself sitting at his dining room table taking calls—lots of them, and many of them pro bono—mostly people trying to navigate the system to get unemployment benefits.

“In those first weeks of the pandemic, I held some Zoom meetings and said, ‘We’ve got to get on top of this because everybody’s losing their work and everybody’s calling. It’s going to be a disaster for unemployment,’” he says. “Every week we were tracking, ‘OK, what’s the new law? Who’s eligible? How are we dealing with intake?’”

With the CARES Act, money started rushing out the door in early 2020. By the middle of the year, however, reports were coming in of criminal rings trying to get money. The problem, Blanchard says, is “the system is so broken that there’s no fine-tuning of, ‘We’re paying the right people and we’re stopping the fraudsters.’”

Because of the political implications, he says there was pressure to fix the fraud ASAP. “The best fraud prevention measure is just to pay nobody. If you turn the off switch, then you’re not paying any fraudulent claims. From the administrative side, that’s a fix. From the people that need to get access to benefits, it’s not,” Blanchard says.

“From a matter of humanity, it doesn’t make sense to do this to people. From a matter of policy, we’re talking about billions of dollars that either stay in Michigan or leave. On top of that, we’re talking about a financial stimulus package that was supposed to get rushed to people so the economy didn’t collapse. It’s not just beneficial from the ‘We’re worried about people putting food on the table’ aspect, but because we want them to spend money at Kroger. We want them to pay rent to their landlord so their landlord doesn’t go bankrupt. To change your mind two years later and try to claw back these benefits from the poor people that took them so they could keep the economy going is a reverse, and the most regressive tax you could imagine.”

While it’s easy to feel overwhelmed by systemic problems, Blanchard says he’s certain their work will lead to a long-overdue overhaul to UIA’s computer system.

“We’ve got legal reforms that have happened. We’ve got waiver systems that have occurred. A lot of things I am confident occurred only because we’ve been holding them accountable,” he says. “I say we because it’s not just our firm, but a bigger coalition out there that has resulted in a lot of positive change. I’m confident without that, the collections would’ve gone forward against these 1.8 million people. But other horrible things that almost happened or were happening got avoided.”

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