Can You Go To Jail For Collecting Unemployment While Working?

People waiting in line to apply for unemployment benefits.

Many years ago, state and federal governments started to provide unemployment benefits to eligible candidates. People have enjoyed these benefits in various ways since then. However, unemployment fraud has consistently been on the rise.

The increasing number of unemployment fraud cases has made the federal and state governments devise different ways to detect offenders. The authorities consider it important to curb fraud and ensure that only eligible candidates can access unemployment benefits.

If you’re curious about what happens if you collect unemployment benefits while working, this article will answer your question. We will consider how this fraud is detected, the investigation process, penalties, and other relevant details.


Going To Jail For Claiming Unemployment While Working

You can be charged with civil and criminal offenses if you claim unemployment benefits while working. Offenders facing criminal penalties may end up spending some time in jail.

States have different frameworks for unemployment programs. This framework guides the benefits deployment, the amount entitled, and eligibility requirements. Therefore, you can expect that the severity of penalties administered for unemployment insurance fraud will also differ.


— Criminal Prosecution

Some instances of unemployment insurance fraud may lead to jail time. You can be charged with a misdemeanor or a felony, depending on the state where you’ve committed the offense. For instance, you’ll likely face criminal charges at the felony level in a state like Texas for committing unemployment insurance fraud.

On the other hand, states like Utah and California will determine the unemployment fraud penalty for your offense based on the fraudulent amount. For instance, you may go to jail in California if the amount you fraudulently claim is over $950, while a state like Utah will charge you with a third-degree felony for an amount that exceeds $1,500 but is under $5,000.

Therefore, whether or not you risk jail time depends on your state. If you find yourself in this situation, your best option is to consult a criminal defense attorney to seek legal advice. A felony or misdemeanor will remain on your criminal record and adversely affect any future job or loan applications.


What Is Unemployment Insurance Fraud?

Unemployment Insurance (UI) fraud happens when someone provides unreported, misreported, or false information to claim UI benefits. UI benefits are designed to meet the needs of people who are actually unemployed and require some assistance.

It’s important that anyone filing a claim for these benefits ensures that they meet the requirements set by law to receive them. Otherwise, such a person will be guilty of unemployment insurance fraud and might go to jail.

Unemployment fraud happens in various forms. You can be charged with intending to commit the crime. You can also be charged with providing inaccurate documents and false statements that facilitate receiving the benefits. The severity of your punishment will depend on the crime, the amount in question, and the state where it happened.


Examples Of Unemployment Benefit Fraud

Baristas at work in the coffee shop.

Unemployment fraud happens in many ways. The coronavirus pandemic led to the creation of many unemployment benefits for eligible candidates. As people resume work or seek new jobs, it’s convenient to ignore the fact that they are no longer eligible for the benefits.

Many examples of this fraud exist, and we will examine some below.


  • Resuming work and still receiving unemployment insurance benefits:  In some instances, you may become eligible for unemployment insurance benefits because you’re currently unable to access your work or you have to be on a break. However, failing to notify the right agency once you resume work may lead to unemployment benefits fraud.


  • Working part-time but not reporting all days worked:  In this case, you will have provided inaccurate information if you worked part-time but refused to report all your work days. Since this information serves as the basis for the benefits you receive, it means you’re misrepresenting the facts.


  • Resuming full-time from part-time but still receiving UI benefits:  You may assume that you’re not running afoul by resuming full-time work, especially if such a full-time position is temporary. However, it’s important to understand that UI benefits were designed as unemployment compensation for eligible candidates, so you must let the appropriate agency know as soon as your circumstances change.


  • When you work off the books for a while: If you receive unemployment benefits but work off the books temporarily, you may be guilty of unemployment fraud. This is because you won’t be reporting the hours you’ve worked off the books, making it a misrepresentation of facts.


  • Lying about your inability to work:  Some people state that they are ready and willing to work but unable to because they are sick, out of town, or don’t have childcare arrangements. If you list any of these as the reason you can’t work, it must be true. If your statements are found to be false, you may be charged with unemployment fraud.


If you find yourself facing allegations of unemployment fraud, it’s crucial to contact an attorney to understand your rights and possible ways to defend them. Even a mere allegation of unemployment fraud can adversely affect you and your family members, and should be taken seriously.

Possible Penalties For Unemployment Fraud

A defendant in handcuffs being escorted by a police officer.

All states have their own specific unemployment fraud investigation processes. Nevertheless, you’ll receive the same form of punishment. The degree depends on the amount of fraud in question and the state in which the fraud was committed. This section will discuss the possible serious penalties you might face for unemployment fraud.


— Fines

If found guilty of unemployment fraud, you may have to pay fines. Fines are common across many states. They are less severe and do not lead to a misdemeanor record.

The minimum amount demanded by states is 15% of the fraudulent claim, though some states exceed this amount. 

For instance, if you’re found guilty of unemployment fraud in Minnesota, you’ll have a 40% penalty in addition to the required repayments. Alaska requires guilty parties to pay a 50% penalty. Yet, the District of Columbia and Florida fix their fines at the 15% threshold.

Given that states approach these issues differently, you should always check your state’s laws to assess the fine you may have to pay.


— Repayment Of Benefits

A repayment is the primary form of punishment for all overpayments. Whether the overpayment was induced by your fraudulent actions or not, you must repay the required amount. If your employer has also successfully claimed that you have been overpaid, you have a duty to repay the excess.

Your record will continue to reflect the excess amount until you’ve settled it. Failure to do so may affect your chances of securing unemployment benefits in the future. Therefore, you should ensure you repay the fund once you receive the notification.

You’ll receive a detailed email indicating the amount in excess, reasons why you have been overpaid, penalties (if applicable), and instructions for repayment. The email will also cover the process of appealing the repayment request if you feel it’s inaccurate.

You could apply for a waiver if the overpayment happened due to a mistake. However, you should understand that overpayment due to fraudulent misrepresentation by you means you have no right to a waiver of the charges. You must pay back the benefits you received as a result of the misrepresentation.


— Jail Time

You may go to jail for unemployment fraud. As established earlier, it all depends on the laws of the state where the offense has been committed and the amount in question.

Texas, California, and Utah may charge this offense at the felony level. So, you should check your state’s laws first. You should also speak with an attorney to understand your rights and potential forms of punishment. An attorney may help you avoid jail time and subsequently safeguard your criminal record.


— Probation

First-time and low-risk offenders often get probation. This is a less severe punishment compared to jail or prison, though you will still sacrifice some of your freedoms.

Individuals under probation must follow certain rules, including reporting to their probation officer. You must meet all probation requirements. If you fall short of these requirements, the court may terminate your probation.

Texas operates a form of probation called Deferred Adjudication, which may span between 6 months and 10 years. Every state that supports the probation term has its own framework.

If you’re on probation, you still have to pay your fines, make restitution, and engage in community service as requested by the court.


— Ineligibility For Future Benefits

The increasing number of unemployment fraud claims has made different states include this option as one of the forms of punishment for offenders. If you knowingly commit unemployment fraud, you might have just forfeited your opportunity to secure future benefits.

You may also find it difficult to receive benefits from other states until you’ve paid all your excess amount and fines. Therefore, you should always check with your state’s office to assess your unpaid balance and pay it back as soon as possible. Remember that it’s immaterial whether the excess you’ve received was intentional or innocent. You must pay it back.

Another consequence of unemployment benefits fraud is that you may also be ineligible for income tax refunds until all the funds have been paid back.


The Bottom Line

Getting away with collecting unemployment while working may be possible. However, it can only go on for so long. Each state has its own investigation process to detect these false claims, especially given the recent uptick in fraudulent unemployment claims. You should contemplate the consequences of receiving benefits when you’re no longer eligible.

Punishment ranges from fines to jail time depending on the amount in question and the state where the offense has been committed. You must also check your state’s laws to fully understand the approach to unemployment fraud claims. Additionally, you should speak with an attorney if you find yourself in such a situation.


Frequently Asked Questions


What happens if you lie about being unemployed?

If you lie about being unemployed to get unemployment benefits, you are misrepresenting facts and offering inaccurate information. If you received UI benefits on this basis, you knowingly committed unemployment fraud. The law frowns on this and will punish offenders accordingly.

Notably, there has been an increase in the number of identity theft claims in the country. Therefore, each state has been more stringent about deploying benefits. Consequently, states have also become more proactive in identifying offenders and punishing them.

Punishment includes fines, repayments, ineligibility for subsequent benefits, and even jail time. The punishment will be based on the amount in question and the state where the fraud happened.

The best option is to avoid intentional or negligent unemployment fraud. You should always check with the state to see whether you have an unsettled balance or excess that’s unaccounted for. This way, you can be on the safe side of the law without forfeiting future benefits.


How does the government find out about unemployment fraud?

The government has an investigation process through which it detects unemployment fraud and finds offenders. The government has details on every person who files for unemployment benefits. This makes it easy to verify the details accordingly.

For instance, when a person works part-time but refuses to disclose it, the government can obtain verification from the employer.

Additionally, given the increase in the number of identity theft claims, the government has also become more proactive about protecting the interests of innocent citizens. Therefore, steps are now in place for citizens to follow when they notice any irregularity with their accounts.

For instance, receiving a notification about a determination letter without applying for UI benefits is considered a red flag. You’re expected to report this as fraud. All these steps make it rather convenient for the government to detect unemployment fraud.


Can you go to jail for EDD overpayment?

The straightforward answer is yes. However, it depends on the amount in question and the state. For many states, criminal prosecution is not a first-time punishment. Other forms of punishment include fines, probation, and repayments.

However, a person may receive a jail term in an extreme case. States have certain thresholds for the amount you may have fraudulently claimed that could get you jail time.

Moreover, you can be prosecuted whether the overpayment is an innocent mistake or due to a fraudulent claim. You should always check your unsettled balance, and you may file for a waiver if the EDD overpayment is not your fault.

Not making your repayments may also adversely affect your eligibility for subsequent benefits and even your future job applications. Although EDD overpayment could get you prison time, first-time offenders will likely get probation.


How does EDD find out about overpayments?

EDD fraud is a form of UI fraud. The Department of Labor’s Investigation Unit is always ready to take up fraud allegations from people who find red flags on their accounts or feel victimized. The state has its own investigation process through which it detects red flags, conducts audits, and investigates.

Additionally, the EDD works with other state departments to verify details and ensure that people applying for unemployment benefits are eligible by way of verifiable identities, social security numbers, and other relevant contact information.