Few want to get past the COVID-19 pandemic more than leaders of federal and state unemployment benefit departments. For the last 2 years they have been successfully targeted for fraud and data breaches, racking up billions in losses. Thousands of employees across the country, including yours truly, have had false claims submitted in their name.

Why is this happening? It appears to be a combination of factors, most leading back to one driving force – COVID-19. Congress’ passing rich unemployment compensation benefits to offset the economic carnage stemming from the pandemic created a significant incentive for criminal hackers, specifically the Pandemic Unemployment Assistance (PUA) program. During the same time, the numbers of workers in state unemployment offices went down due to layoffs, while the number of applications for unemployment benefits skyrocketed. Couple that with an expansion of benefits to workers without traditional pay stubs (e.g., gig workers) making verification harder, and data security gaps and challenges regularly facing state agencies and organizations generally, and there is a perfect storm for fraud and data breaches to proliferate.

Here’s a rundown of just some of the losses reported by Yahoo!news:

  • Oregon – $24 million in 2020
  • Washington – $646 million in 2020
  • California – $20 billion, since the start of the pandemic through October 2021
  • Federal – $87.3 billion since the start of the pandemic through September 30, 2021, per the DOL (relying on a historical improper payment rate of 10%).

What are some of the effects? There is, of course, a significant loss of taxpayer dollars, not to mention all the time spent trying to resolve the fraud, getting the much-needed benefits to those whose benefits were delayed due to the fraud, and implementing stronger controls.

With so many employees learning of and reporting false unemployment claims being submitted in their name, employers across the country have had to jump into to help. Frequently, many employees at a single company reported fraud at the same time, making it seem as if the company was the victim of a breach. While it is always important to appropriately investigate suspected data incidents, a compromise to the employer’s systems generally was not the reason for the employees’ reports in these cases.

Is it coming to an end? Maybe not. On Friday, Pennsylvania’s Department of Labor and Industry (L&I) reported it is investigating “sophisticated attacks” on its systems. According to reports,

unemployment recipients stopped receiving their checks, and that L&I telephone agents told they were among numerous Pennsylvanians whose direct-deposit banking information had been changed

What can affected organizations and individuals do? Affected federal and state agencies have been and continue to be taking steps to minimize these attacks and the resulting fraud. One of those steps is to deploy facial recognition technologies to more strongly verify the the identities of claimants. By late summer, more than half of the states in the U.S. have contracted with ID.me to provide ID verification services. For private sector organizations, the deployment of such technologies to verify identities of customers and employees faces a growing web of regulation.  Other efforts to curb this kind of activity includes steps all organizations might consider, like enabling multi-factor authentication (MFA). This is something the PA L&I wished it did. Hopefully, pandemics are not regular occurrences. But planning for business interruption is critical.

For organizations and their employees affected by unemployment fraud, it is important to quickly report incidents and follow recommended steps by the applicable agency. Below are just a few of the online resources that may be helpful.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.