Thousands of Michiganders falsely accused of unemployment fraud get $20M settlement

About 3,000 Michiganders, as part of a class-action lawsuit, will split a $20 million settlement after Michigan’s long-criticized computerized unemployment system falsely accused them of fraud when accessing benefits, resulting in a host of problems for individuals navigating unemployment.

After almost nine years, a Court of Claims judge gave final approval to the settlement Monday for those who the Michigan’s Integrated Data Automated System (MiDAS) automatically accused of fraud between 2013 and 2015.

Michigan’s Unemployment Insurance Agency (UIA) has been the source of years of criticism, notably during the COVID-19 pandemic as thousands of Michiganders navigated the system for the first time only to be left frustrated and confused with the agency’s electronic resources. 

The state has already reimbursed millions of dollars for penalties it imposed on those who filed for unemployment benefits, but the settlement this week addresses other damages those people suffered: bankruptcies, wage garnishments and foreclosures. 

UIA Director Julia Dale, the latest of several individuals who have held the role in recent years, said in a news release from the Attorney General’s Office Tuesday that a new system to replace MiDAS is expected to be fully operational by 2025. 

“The lawsuit pointed out the limitations of our existing computer system, which was implemented in 2010 and does not meet the expectations or needs of today’s users,” Dale said. “The new system is expected to be fully functional in 2025 using plain language and intuitive, user-friendly design and will allow for quick updates in response to changing user demands and economic conditions.” 

About 40,000 people were estimated during the case to have been falsely accused of fraud and suffered financial consequences between 2013 and 2015 during the former Gov. Rick Snyder administration.

Attorney General Dana Nessel expressed her gratitude in a statement Tuesday for the court’s approval of the settlement where those involved in the settlement will begin receiving monetary relief.  

“This sad chapter in Michigan’s history is behind us,” Michael Pitt, an attorney on the plaintiffs’ side, said in a news release from the Attorney General’s Office.

“Class counsel, law firm staff, and our claims administrator worked tirelessly for more than a year to make sure every claimant was heard and properly compensated for the harm caused by the use of algorithms instead of people to adjudicate unemployment claims,” Pitt said.