Fraudulent Unemployment Claims – What Employers Need to Know

Identity thieves are always on the prowl for new opportunities. They seek to take advantage of anything and everything that might allow them easy access to valuable information, opening up the virtual doors to fraud on a grand scale. A drastic increase of unemployment claims in 2020 brought on by the coronavirus pandemic has granted these cybercriminals yet another opening to prey on the system set up to help those in need.

While this form of identity theft targets government funding at the state and federal levels, employers need to keep themselves informed on how to limit and identify risks that can lead to fraudulent unemployment claims to help assist their employees during these trying times and prevent data breaches moving forward.

How Fraudulent Unemployment Claims Work

As with many other types of cybercrimes, fraudulent unemployment claims begin by thieves gaining access to personal information that can be used to steal an identity. Access to this information gives criminals everything they need to perpetrate numerous identity theft scams and this valuable data is the key component of recent instances of unemployment fraud. Personal information gives them the ability to file fake unemployment claims and receive benefits in the form of weekly payments, just as a legitimate unemployed individual would receive.    

Record numbers of unemployment benefit applications were seen as the pandemic began earlier in the year. As uncertainty in the job market swept across the country, Congress passed the CARES Act to deliver additional unemployment funding to state programs – providing assistance to those who lost their jobs out of no fault of their own. However, alongside this extra aid came an easing of some important safeguards and vetting regulations typically involved in the unemployment process. This combination of large amounts of funding and fewer restrictions on how to gain access to benefits created an ideal situation for cybercriminals to strike. 

Posing as legitimate assistance-deserving members of a crippled workforce, thieves stole hundreds of millions of dollars through false unemployment claims. Washington state alone has seen a nearly 500% increase in fake unemployment claims since March of 2020 compared to an 18-month stretch from the beginning of 2018 to mid-2019 (Cohen, 2020). Several states have said that a majority of claims attempting to access CARES Act funding are fraudulent – Colorado alone reported that only 23% of unemployment claims from July 18 to August 22 were actually legitimate (AP, 2020).

Criminal rings both domestic and abroad are seizing on unique circumstances to steal funding at a time when others truly need it. The situation has turned into cyber fraud on a grand scale, demanding the attention of state and federal authorities alike. This new version of unemployment fraud is on the radar of law enforcement and government officials, but that does not indicate that it will be abating any time soon. Employers need to be aware of the situation in order to protect their businesses and the welfare and livelihood of their employees.

What Employers Need to Know     

While much of the funding and unemployment support allocated by the CARES Act has dried up, the lingering effects of the pandemic indicate that there might be another round of federal funding designated to supplement state programs in the near future. This means that considerable levels of unemployment fraud are here to stay and that employers need to remain aware of the threat to spot it when it happens and prevent data breaches that increase the possibility of that fraud happening in the first place.

It is vital to inform and educate your employees of this matter so that potential fraud can be recognized and dealt with quickly. Any employee, or anyone involved with the company, who has been a victim of identity theft in the past is at a higher risk of unemployment fraud. If steps have not been taken to restore any occurrence of suspected identity theft in the past, this should be done immediately.  

Employers should also instruct all employees about the types of common scams that exist which can lead to personal information being compromised. Unsolicited calls and emails requesting personal information are obvious red flags, and employees need to know of the prevalence of these common attempts to steal personal information and related data. Physical theft of any personal items such as a wallet or cell phone can also provide all of the information needed to commit a fraudulent unemployment claim. 

Employers also need to keep an eye for out on any suspect unemployment confirmation notices that they receive. If a fraudulent claim is made, the employer will typically notice it before the actual victim will. If an employee is still actively employed, this claim is an obvious indication of fraud. Even if they are unemployed – due to the pandemic or any other situation – employers should contact the employee and inquire as to whether they actually filed for unemployment benefits.

What to do When a Fraudulent Unemployment Claim Occurs  

If a fraudulent unemployment claim is found, immediate action should be taken by the employer to assist the employee and ensure that a larger data breach of the company’s information has not occurred. Reporting the fraud to the Department of Labor is a good first step, as is contacting employer fraud resources in the state your business is based. Both the employer and employee should contact these resources to document the fraud.

Employers can assume that a data breach has occurred within their ranks if multiple false unemployment claims occur with individuals associated with the business. This is an alarming situation that can lead to future issues with fraud, unemployment and otherwise, and needs to be dealt with quickly and effectively. If the fraud is associated with unemployment claims, this should again be reported to the Department of Labor and your state’s resources. Additional steps should be taken to restore the security of your company as well. Professional identity theft restoration services can help rectify the matter and implementing data breach defenses, in the form of planning and response services, is highly recommended if not already in place. 

Cybercriminals will take advantage of any new opportunity that presents itself. Fraudulent unemployment claims have skyrocketed in recent months due to easy access to large amounts of funding intended to help those directly affected by current world circumstances. While not entirely preventable, the impact instances of this type of fraud and identity theft can have on employers and employees can be limited with quick action and a solid line of data defense in place.


  1. Cohen, P. (2020, Oct 1) Fraud Schemes Exploit Weak Spot in Unemployment Claims System. The New York Times.
  2. AP. (2020, Sept 10) Colorado Deals with Widespread Fraud in Unemployment Cases.  U.S. News and World Report.

LibertyID is the leader in identity theft restoration, having restored the identities of tens of thousands of individuals without fail. If you retain personal information on your customers, now is the time to get data breach planning and a response program in place with our LibertyID for Small Business data breach preparation program. With LibertyID Enterprise you can now add value to existing products, services, or relationships by covering your customers, employees, or members with LibertyID’s fully managed identity theft restoration service – at a fraction of our retail price – with no enrollment and no file sharing. We have no direct communication with your group members – until they need us. 

Call us now for a no obligation proposal at 844-44-LIBERTY (844) 445-4237