The US Department of Labor has sent letters to 53 states and territories, warning them that they will withhold administrative funds if they do not take action to combat waste, fraud, and abuse within the unemployment insurance program. The letters, sent by acting head of the agency Keith Sonderling, specifically targeted three Democrat-led states: California, New York, and Illinois.
The Department of Labor claimed that California owes $20bn to the federal government for a loan during the Covid-19 pandemic, and that New York loses an estimated $2m per day in unemployment insurance fraud and improper payments. Illinois was also cited for improper payments of $320m, at a rate of 14%. However, experts have pointed out that these figures are not necessarily evidence of fraud, and that the Department of Labor has provided no data to support its claims.
Michele Evermore, a senior fellow at the National Academy of Social Insurance, criticised the approach as 'part of the problem' in tackling unemployment fraud. 'Fraud is still a problem and it hasn't gone away since the start of the pandemic, but this press release is part of the problem, why the fraud isn't going away,' she said.
The Department of Labor has a history of sending letters to state unemployment agencies, including one in May 2025 requiring them to return any unspent funds allocated in the American Rescue Plan Act. This move was criticised by unemployment experts for disrupting states' efforts to modernise their unemployment systems and fight fraud.