Charged with unemployment insurance (EDD) fraud? We can help.
We defend claimants as well as employers who have been accused of this serious offense. And as a law firm comprised of former district attorneys and police investigators, we have the inside knowledge that allows us to defend these cases effectively.
Below, our California criminal fraud attorneys1 address the following:
If, after reading this article, you would like more information, we invite you to contact us at Shouse Law Group.
Unemployment insurance (commonly referred to as UI) is a combined federal-state insurance program that, in California, is run by the Employment Development Department (EDD). Established in 1935, employer tax contributions fund the program.
Unemployment insurance aims to help people who lose their jobs -- through no fault of their own -- to keep their heads above water for at least one year while they actively continue to seek new employment. Beneficiaries receive payments ranging from $40 to $450/week.
In order to qualify for unemployment benefits, you must
- be unemployed (you must wait to file a claim until you are actually no longer working - you cannot file in anticipation of your last day of work), or have had your hours involuntarily reduced to less than full-time,
- be actively looking for work,
- be ready and physically able to work immediately, and
- have worked in the last 18 months.2
Although unemployment insurance is intended for workers who have lost their jobs through no fault of their own, certain provisions within the law may allow a person who either quit or was fired (as opposed to laid-off) to nonetheless receive benefits. Eligibility under these circumstances is determined exclusively by EDD on a case-by-case basis, and questions regarding these types of circumstances should be directed to the California EDD.
The problem (as is the case with many public insurance programs) is that people often take undue advantage of insurance benefits. And with respect to unemployment insurance, this not only drives up costs for employers but also creates a backlog within the system which results in longer wait times for those who are lawfully entitled to UI services.
Unemployment insurance fraud -- a rising type of California insurance fraud -- takes place anytime someone makes a "willful false representation, knowing concealment, or false identification to obtain, increase, reduce, or defeat any benefit under the state or federal programs".3 This type of fraud is regulated specifically by the California Unemployment Insurance Code and generally by the California Penal Code.
People caught bilking the system get prosecuted and often receive heavy sentences, including years in state prison.
The California EDD is the agency responsible for conducting suspected UI fraud allegations. EDD receives most of their tips from
- the public via both their hotline (800) 229-6297 and their "report fraud" website, and
- from the EDD field offices that collect the UI applications (when, for example, an EDD employee notices a "red flag" on the application such as a forged department seal or a forged signature of an EDD director).
Once fraud is suspected, EDD's fraud investigation unit takes over and looks into the allegations. If they uncover enough evidence to convince the local prosecuting agency to file criminal charges, they submit their report to that agency. If they believe that the claim will get rejected, they simply retain their file in case they are able to obtain additional evidence against the suspect individual.
There are a variety of ways to violate California's unemployment insurance fraud laws. The following are examples of some of the most common types of these violations.
- working while collecting unemployment insurance and not reporting that work to the California EDD, the agency that oversees the California unemployment insurance program,4
- collecting other types of compensation, such as a pension, workers' compensation benefits (which could also be a violation of California's workers' compensation fraud laws), etc., without reporting that compensation to the EDD,
- Using a false name, social security number, or employment information while you continue to work and simultaneously receive unemployment benefits (which, depending on the circumstances, may also be a form of California identity theft),5
- living in this state and trying to obtain fraudulent benefits in another state,6
- creating a fictitious employer and listing yourself as an employee who is eligible to receive UI benefits,7
- cashing someone else's unemployment check without authorization to do so,
- fabricating work-search efforts (that is, stating that you're diligently looking for work when, in fact, you are not), and
- falsifying the reason you are no longer working (for example, stating that you were laid-off due to cut-backs, when you were actually fired because of inadequate job performance).8
Employees aren't the only ones who are capable of violating California unemployment insurance fraud. Employers commit this type of fraud when they
- intentionally provide false information as to why an employee was terminated, or about his/her wages, to avoid contributing to the unemployment insurance program,9 or
- knowingly withhold deductions from employees and willfully fail to pay them to the EDD.10
Fortunately, there are a variety of legal defenses that an experienced California criminal fraud defense lawyer can present on your behalf. The following are examples of some of the most common.
Before the prosecutor can prove that you are guilty of violating any California fraud law, he/she must first prove that you had fraudulent intent. If he/she can't prove that you acted with the specific intent to defraud, the judge will instruct the jury to find you "not guilty" of the charges.
As Santa Ana criminal defense attorney Zachary McCready11 explains, "This means that if you
- believe you submitted a legitimate claim,
- accidentally provided the wrong information (for example inadvertently writing an incorrect social security number), or
- didn't realize that you needed to report freelance income to the EDD,
then you didn't intentionally act with fraudulent intent and you shouldn't be held liable for violating California's unemployment benefits fraud."
California unemployment insurance claims (and fraud) are on the rise. The government has responded by ratcheting up the investigation and prosecution of fraud cases. Under pressure to make arrests and get cases filed, investigators often rush to judgment or jump to conclusions when it comes to pursuing a case.
Consequently, we're seeing an increasing number of prosecutions where there's simply a lack of evidence that the accused knowingly engaged in fraud.
Example: You are an employer charged with knowingly withholding deductions from employees and willfully failing to pay them to the EDD. If you don't personally manage the "books" or payroll issues, you may not have noticed that the individual who does has actually withheld the deductions (which could be a violation of Penal Code 503 PC California's embezzlement law).12
If the prosecutor doesn't have enough evidence to tie you to the crime, you should be acquitted of the charge based on insufficient evidence.
Which ties into the next defense.
Demonstrating your innocence is the ultimate defense. There are numerous reasons why innocent people get accused of this crime. Perhaps someone in your office filed for a fraudulent claim and, when questioned, tried to escape his own liability by pointing the finger at you. Perhaps you were the victim of identity theft and -- as a result -- you were also the victim of mistaken identity, since you are not the culprit who submitted the false claim.
A good defense attorney and defense investigator can often uncover the critical facts to exonerate a falsely accused suspect.
When all else fails -- and the evidence against you is too obvious to dispute -- your California criminal fraud defense attorney will attempt to negotiate a plea bargain. Plea bargains are useful tools when you can't escape criminal liability and when there are weaknesses in the state's evidence, mitigating factors or too many cases in the system.
Plea bargains allow the prosecution to obtain a conviction against you and allow you to plead guilty or nolo contendere ("no contest") to a reduced charge and/or a reduced sentence in exchange for a dismissal of the more serious unemployment insurance fraud charge.
The exact sentence you face depends on the specific offense for which you were convicted. Penalties range quite a bit, as many fraud offenses are what we call wobblers. "Wobblers" are offenses that the prosecutor may choose to file as either a misdemeanor or a felony, depending on
- the facts of the case, and
- your criminal history.
Below are examples of some misdemeanor and felony penalties that are frequently imposed in connection with unemployment benefits fraud. These are the penalties that are imposed in connection with
- Unemployment Insurance Code 2101 (the most common law relating to California unemployment insurance fraud), and
- Penal Code 550 (which is the more serious offense and regulates general cases involving California insurance fraud).
It bears repeating that your sentence may vary, depending on your exact conviction, given that there are a variety of laws that pertain to unemployment insurance fraud.
If convicted of this offense as a misdemeanor, you face up to one year in a county jail and a maximum fine of $20,000. If convicted of this offense as a felony, you face imprisonment in the California state prison for 16 months, two or three years, and a maximum $20,000 fine.13
If the prosecutor convicts you of this offense, the amount of the fraud controls the sentence. California unemployment insurance fraud may qualify as a misdemeanor if the amount of the alleged fraud is $950 or less. When this is the case, a conviction subjects you to up to six months in a county jail and a maximum $1,000 fine.14
If the amount exceeds $950, the crime is a wobbler. If the amount exceeds $950 (and you are convicted only as a misdemeanor) your potential jail time increases to a maximum one-year sentence and your fine increases to a maximum $10,000.15
If the amount of the alleged fraud:
- exceeds $950, or
- exceeds $950 in any 12-month consecutive period,
prosecutors may elect to charge you with this offense as a felony. If so, a conviction carries a
- two, three, or five-year jail sentence, and either
- a maximum $50,000 fine, OR
- double the amount of the fraud, whichever is greater.16
In addition, a conviction for unemployment benefits fraud subjects you to
- professional discipline (since criminal convictions can affect professional licenses, especially when the crime is classified as a crime of moral turpitude which is typically the case with fraud offenses),17
- ineligibility to receive (or possibly to retain) any paid benefits,18 and
- repayment of benefits plus a 30% penalty.19
Depending on the circumstances of your offense, a skilled California criminal defense attorney could arrange for you to pay restitution to the California EDD in exchange for the Department's agreeing not to file criminal charges.
If the Department agrees.and you make timely payments.you will not face criminal charges. However, if you default on any of your payments, the EDD may institute criminal proceedings at any time.20
Because unemployment insurance fraud frequently involves allegations of theft, forgery, and perjury, prosecutors may file the following charges in addition to or in lieu of UI fraud.
Penal Code 487 PC California's grand theft law prohibits unlawfully taking another person or entity's property that is valued above $950. "Property" includes money, labor, personal property or land.
This means that if you fraudulently obtain unemployment benefits that total more than $950, prosecutors could charge you with this wobbler, punishable by up to three years in jail and a maximum $10,000 fine.21
Penal Code 470 PC California's forgery law prohibits knowingly altering, creating, or using a written document intending to commit a fraud. This means that if, for example, you apply for unemployment benefits
- by signing someone else's name as the applicant, or
- sign for your boss or another "supervising" person who is required to confirm your application,
prosecutors could opt to file forgery charges as well. If convicted of forgery, you again face a wobbler, which is also punishable by up to three years in jail and a maximum $10,000 fine.22
Penal Code 118 PC California's perjury law is a felony, subjecting you to up to four years in county jail and a maximum $10,000 fine. You violate this law when you deliberately give false information while under an oath to be truthful.
This means that if, for example, you submit an unemployment insurance application in a false name, with a false social security number, or intentionally falsify any other information in your application, prosecutors could charge you with forgery as well.
Penal Code 182 PC California's conspiracy law prohibits conspiring to commit any crime. If you conspire with another person.that is, make an agreement to commit an unlawful act.in order to either
- obtain fraudulent unemployment insurance benefits, or
- deny legitimate unemployment insurance benefits,
you face a felony, punishable by the same penalties you face for being convicted of UI benefits fraud.23
Penal Code 472 PC California's law against forging, counterfeiting, or possessing a fraudulent public seal is also a wobbler, punishable by up to three years in county jail and a maximum $10,000 fine.
If you forge or counterfeit a public seal -- for example, on a forged or counterfeit UI application -- prosecutors could additionally charge you with this offense.24
Call us for help.
If you or a loved one is charged with unemployment insurance fraud and you are looking to hire an attorney for representation, we invite you to contact us at Shouse Law Group. We can provide a free consultation in office or by phone. We have local offices in Los Angeles, the San Fernando Valley, Pasadena, Long Beach, Orange County, Ventura, San Bernardino, Rancho Cucamonga, Riverside, San Diego, Sacramento, Oakland, San Francisco, San Jose and throughout California.
Arrested in Colorado? Go to our information page on Colorado unemployment fraud | C.R.S. 18-4-401.
Arrested in Nevada? Go to our information page on Nevada unemployment fraud law (NRS 612.455).
California's Employment Development Department webiste -- Provides information about California's unemployment insurance program for employees as well as employers.
1Our California criminal defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier. We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.
2Employment Development Department (EDD)'s website. ("To be entitled to benefits you must be: out of work due to no fault of their own, Physically able to work, Actively seeking work, Ready to accept work.")
3California Unemployment Insurance Code 2101 -- Unemployment insurance fraud. ("(a) It is a violation of this chapter to willfully make a false statement or representation, to knowingly fail to disclose a material fact, or to use a false name, false social security number, or other false identification to obtain, increase, reduce, or defeat any benefit or payment, whether for the maker or for any other person, under any of the following statutes administered by the department: (1) The provisions of this division. (2) The provisions of any unemployment insurance law of the federal government. (3) The provisions of any training allowance law of the federal government. (4) The provisions of any trade readjustment allowance law of the federal government. (5) The provisions of any other allowance law of the federal government. (b) Nothing in this section shall be construed to preclude the applicability of Section 470 of the Penal Code to any acts or omissions which violate this section.")
4Facts taken from People v. Armstrong (1950) 100 Cal.App.2d Supp. 852.
5Facts taken from People v. Ruster (1976) 16 Cal.3d 690 (overruled on other grounds).
6California Unemployment Insurance Code 2102 -- False statement or representation or concealment to obtain [unemployment insurance] benefits under employment laws of another state. ("(a) It is a violation of this chapter for any person residing in this state to willfully make a false statement or representation or knowingly fail to disclose a material fact to obtain or increase benefits or payments under the provisions of the unemployment insurance law of any other state. (b) Nothing in this section shall be construed to preclude the applicability of Section 470 of the Penal Code to any acts or omissions which violate this section.")
7Facts taken from People v. Belnick (1986) 184 Cal.App.3d 1449.
See also People v. Koch (1970) 4 Cal.App.3d 270.
See also California Unemployment Insurance Code 2114 -- Report on registration of fictitious employer or employee and wages. ("Any individual who, with the intent to defraud, reports or registers a fictitious employer or fictitious employee, and fictitious wages, to the department in order to obtain benefits or increase any benefit or payment, whether for the maker or for any other person, is in violation of this chapter.")
8The preceding examples are the types of cases that the California EDD investigates as unemployment insurance fraud claims.
9California Unemployment Insurance Code 2101.5 -- False statement, representation or concealment for purpose of lowering or avoiding contribution on becoming subject to division. ("It is a violation of this chapter to willfully make a false statement or representation or knowingly fail to disclose a material fact for the purpose of lowering or avoiding any contribution required of the maker or other person, or to avoid becoming or remaining subject to this division.")
10California Unemployment Insurance Code 2110 -- Failure to pay deductions withheld from workers. ("Any employing unit, including any individual member of a partnership employing unit, any officer of a corporate or association employing unit, any manager or managing member of a limited liability company, or any other person having charge of the affairs of a corporate, association, or limited liability company employing unit, that knowingly withholds the deductions required by this division from remuneration paid to its workers, and willfully fails or is willfully financially unable to pay such deductions to the department on the date on which they become delinquent is in violation of this chapter.")
11Santa Ana criminal defense attorney Zachary McCready defends clients accused of unemployment insurance benefits fraud throughout Orange County, including Fullerton, Anaheim, Newport Beach, Santa Ana, Irvine and Westminster.
12This example is hypothetical and not an actual case. However, that doesn't mean that this type of situation doesn't happen. If you discover that an employee is secretly taking money or other property from you (that you have entrusted to him/her), consult with an attorney about the possibility of pressing charges for a violation of Penal Code 503 PC California's embezzlement law.
13California Unemployment Insurance Code 2122 -- Violations of chapter; punishment. ("Except as provided in Sections 2117, 2117.5, 2118, and 2118.5, a violation of this chapter [that is, of California's unemployment insurance fraud laws] is punishable by imprisonment in the county jail not to exceed one year, or in the state prison, or by a fine of not more than twenty thousand dollars ($20,000), or by both the fine and imprisonment, at the discretion of the court.")
See also People v. Booker (1994) 21 Cal.App.4th 1517 (summary). ("Moreover, both the language and the legislative history of the statutes, as well as the legislative intent, indicate that the punishment for a violation of Unemp. Ins. Code 2101, subd. (a), is found in Unemp. Ins. Code 2122.")
14California Penal Code 550(c)(2): ("Every person who violates paragraph (6), (7), (8), or (9) of subdivision (a) is guilty of a public offense. (A) When the claim or amount at issue exceeds nine hundred fifty dollars ($950), the offense is punishable by imprisonment pursuant to subdivision (h) of Section 1170 for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater, or by both that imprisonment and fine, or by imprisonment in a county jail not to exceed one year, by a fine of not more than ten thousand dollars ($10,000), or by both that imprisonment and fine. (B) When the claim or amount at issue is nine hundred fifty dollars ($950) or less, the offense is punishable by imprisonment in a county jail not to exceed six months, or by a fine of not more than one thousand dollars ($1,000), or by both that imprisonment and fine, unless the aggregate amount of the claims or amount at issue exceeds nine hundred fifty dollars ($950) in any 12-consecutive-month period, in which case the claims or amounts may be charged as in subparagraph (A).")
17To learn more about how criminal convictions can affect professional licenses, please visit our pages on professional license issues (which are organized by individual professions).
18California Unemployment Insurance Code 1263 -- Conviction for false statement or concealment. 19Per California EDD's Guide to Benefits and Employment Services, pg. 26, "A fraud overpayment occurs when you knowingly give false information or withhold information and receive benefit that you should not have received. Withholding or giving false information to obtain unemployment insurance benefits is a serious offense that can result in criminal prosecution. With a fraud overpayment, you are assessed a penalty in the amount of 30 percent of the amount of the overpayment and a false statement disqualification of 5 to 23 weeks. Fraud overpayments and penalties must be repaid.")
20California Unemployment Insurance Code 2113 -- Restitution for overpayment of benefits. ("Nothing in this division shall prevent the department from accepting restitution or an acceptable arrangement for restitution, made voluntarily before the department files a criminal complaint under Section 2101 or 2102, for overpayment of benefits from any person, who has not previously claimed any right under this section, who has not been convicted of an offense under Section 2101 or 2102 within three years preceding the service under this section of a written notice of intent to file a criminal complaint and who has willfully made a false statement or representation or knowingly failed to disclose a material fact to obtain or increase any benefit under any provision of this division. The department shall by mail or personal service give the person written notice of intent to file a criminal complaint under Section 2101 or 2102 not less than 10 days prior to the filing of the criminal complaint. The department may accept restitution or an arrangement for restitution and any such acceptance shall be in lieu of any criminal action against the person, except that the department shall not be precluded from filing a criminal action against any person who defaults under an arrangement for restitution which it has accepted. For purposes of this section, no period of time during which an arrangement for restitution is in effect shall be a part of any limitation of the time for commencing a criminal action. The department shall deposit amounts received from any person under this section in the fund from which the overpayments were made.")
21Penal Code 487 PC California's grand theft law. ("Grand theft is theft committed in any of the following cases: (a) When the money, labor, or real or personal property taken is of a value exceeding nine hundred and fifty dollars ($950) except as provided in subdivision (b).")
See also California Penal Code 489 PC -- Grand theft; punishment. ("Grand theft is punishable as follows: (a) If the grand theft involves the theft of a firearm, by imprisonment in the state prison for 16 months, or two or three years. (b) If the grand theft involves a violation of Section 487a, by imprisonment in a county jail not exceeding one year or pursuant to subdivision (h) of Section 1170, or by a fine not exceeding five thousand dollars ($5,000), or by both that fine and imprisonment. The proceeds of this fine shall be allocated to the Bureau of Livestock Identification to be used, upon appropriation by the Legislature, for purposes relating to the investigation of cases involving grand theft of any animal or animals, or of the carcass or carcasses of, or any portion of the carcass or carcasses of, any animal specified in Section 487a. (c) In all other cases, by imprisonment in a county jail not exceeding one year or pursuant to subdivision (h) of Section 1170.")
See also Penal Code 1170(h)(1) ("Except as provided in paragraph (3), a felony punishable pursuant to this subdivision where the term is not specified in the underlying offense shall be punishable by a term of imprisonment in a county jail for 16 months, or two or three years.")
See also Penal Code 18 PC -- Punishment for felony not otherwise prescribed; alternate sentence to county jail. ("(a) Except in cases where a different punishment is prescribed by any law of this state, every offense declared to be a felony is punishable by imprisonment for 16 months, or two or three years in the state prison unless the offense is punishable pursuant to subdivision (h) of Section 1170. (b) Every offense which is prescribed by any law of the state to be a felony punishable by imprisonment or by a fine, but without an alternate sentence to the county jail for a period not exceeding one year, may be punishable by imprisonment in the county jail not exceeding one year or by a fine, or by both.")
See also Penal Code 672 PC -- Offenses for which no fine prescribed; fine authorized in addition to imprisonment. ("Upon a conviction for any crime punishable by imprisonment in any jail or prison, in relation to which no fine is herein prescribed, the court may impose a fine on the offender not exceeding one thousand dollars ($1,000) in cases of misdemeanors or ten thousand dollars ($10,000) in cases of felonies, in addition to the imprisonment prescribed.")
22California Penal Code 470: Forgery; Signatures or Seals; Corruption of Records.
See also California Penal Code 473 PC -- Forgery; punishment. ("Forgery is punishable by imprisonment in a county jail for not more than one year, or by imprisonment pursuant to subdivision (h) of Section 1170.")
See also Penal Code 672, endnote 24, above.
23California Penal Code 182 PC -- Definition; punishment; venue; evidence necessary to support conviction.
24Penal Code 472 PC California's law against forging, counterfeiting, or possessing a fraudulent public seal. ("Every person who, with intent to defraud another, forges, or counterfeits the seal of this State, the seal of any public officer authorized by law, the seal of any Court of record, or the seal of any corporation, or any other public seal authorized or recognized by the laws of this State, or of any other State, Government, or country, or who falsely makes, forges, or counterfeits any impression purporting to be an impression of any such seal, or who has in his possession any such counterfeited seal or impression thereof, knowing it to be counterfeited, and willfully conceals the same, is guilty of forgery.")
See also California Penal Code 473 PC, endnote 22.
See also Penal Code 672, endnote 24, above.