Using words like “cutting-edge,” “a fair day’s pay for a fair day’s work,” and “at the forefront,” state Labor Commissioner Roberta Reardon nevertheless gave state lawmakers a gloomy picture of the inner workings of the Labor Department beset with fraud, theft, and abuse.
“In 2022 our worker protection and labor standards teams oversaw wage theft investigations that recovered $25 million in wages for nearly 18,000 workers,” Reardon said during a two-hour budget hearing. “We are not a law enforcement agency but we’re very happy to work with every law enforcement agency that will let us.
“We have referred more than one million claims to the federal government. It is a federal crime to steal this money. We are working with the FBI. We work with OIG [Office of Inspector General] on the national level. We work with the state’s attorney general. We work with the district attorneys. We have pulled back a half billion dollars and counting, and it will take a long time. I want everybody to understand: The money that was stolen by the international cyber rings, very little of that will probably be recovered because it is not here and those people are not here. That is a hard pill to swallow. If they are in the United States and we have a way to identify them we go after them and there is no time limit.
“If you stole the money in 2020 and we discover in 2045 that’s who you are, we will go after you,” Reardon said.
The theft adds up to a multi-billion dollar scheme that began in March of 2020 to steal unemployment insurance money when the pandemic hit New York. Reardon blamed the federal government for being the impetus for the fraud.
“We began to realize there was a new kind of fraud that was hitting our system, one that we had never seen before. This was identity fraud and it was done by international fiber [sic] rings. They had people’s personal identifications. Your name, your Social Security number, your address, your last employer, your salary range, perhaps. Your claim looks like a real claim to our system. That presented a huge hurdle for us to figure out how to stop it. We worked with other states, we worked with the federal government. We quickly realized we needed technology so we worked with Google and other places to figure out ways that we could do better geo-sensing and matching and the kinds of things that we did.
“The problem with the CARES [Coronavirus Aid, Relief, and Economic Security Act] package was they intentionally reduced the eligibility criteria meant for people who were eligible for those new federal programs. The first year of PUA [Pandemic Unemployment Assistance] all you had to do was essentially check a box that said I was unemployed by the pandemic and you were eligible. We had no employer to talk to. We had no wage records to pull. This is how we usually verify claims. At the end of that year the federal government changed the requirements and that’s why people then had to send in more proof of employment. That first year we had more than $300 million a month going out the door in fraud because it was so easy to do,” Reardon explained.
She acknowledged that the state is on the hook to pay back the federal government eight billion dollars over the next six years for the fraud. Assemblyman Robert Smullen (R – Meco, Fulton County) asked Reardon: Who will ultimately be stuck with the bill? To that she gave a convoluted answer. “The FUTA bill, the Federal Unemployment Tax Act, dictates what the state’s businesses have to pay in order to pay down the balance of the debt. We had to borrow money from the federal government, which is a federal law. We cannot not pay UI [Unemployment Insurance] benefits. It’s to make sure that steady payments are made into the system on a regular basis. It will be five or six years and then we will be out of that situation,” Reardon said. “We pay the money that was borrowed from the federal government and then the funds need to be rebuilt.”
She also defended and justified her decision to borrow the money to pay the unemployment insurance claims. “When this pandemic hit, almost two million people lost their jobs by the end of April [of 2020],” Reardon recalled. “They didn’t do it because they wanted to. They were shut down. We were the epicenter of the pandemic in this country. We were the bleeding edge. We took it on the chin. Unemployment insurance was the only lifeline these people had.”
Senator Steve Rhoads (R – Bellmore, Nassau County) was not buying what Reardon was selling.
“We took it on the chin in terms of our workforce. Our employers also took it on the chin,” Rhoads challenged. “They didn’t shut their businesses down. We shut their businesses down. Now that this unemployment insurance has to be repaid, I think the state should have some increased responsibility in helping shoulder that burden, especially since we did receive Covid relief money, which is what is now, in part, funding a projected surplus that we have for this particular year.”
Reardon threw the ball back into the lawmakers’ court. “That was part of the problem during the pandemic. Through PUA there were no employers. There were no records to pull. We didn’t have any way to verify one and a half million people who were getting benefits had actually been employed the way they said they were,” she said. “The way the law reads for unemployment insurance in New York state, you have to have an employer and we contact them about your employment and we contact them for your wage data. That’s the way the law is written, so you have to change that law.”
Reardon is a former president of the American Federation of Television and Radio Artists (AFTRA), where she served from 2007 through 2012. She was the founding co-president of SAG-AFTRA, a 165,000-member union for the entertainment industry, when the Screen Actors Guild (SAG) merged with AFTRA in 2012.
Reardon, 75, who lives on the Upper West Side of Manhattan, told lawmakers the Labor Department had to take matters into its own hands in 2021, costing taxpayers millions of dollars to prevent millions of dollars of fraud.
“We now have ID.me. The moment we got ID.me up and running, fraud began to decline. About six to eight months later we got multi-factor identification. Again, fraud immediately began to come down. We have other very sophisticated systems that I won’t talk about in public because I don’t want to tell them what we have,” Reardon revealed. “It really began to reduce the fraud. In 2022 we paid out $2.5 billion in benefits. We only lost $388,000 to fraud. In the third year, without the federal benefits, and with all the other stuff we were able to put on the system, it tightened it up a lot.”
“There’s always fraud. It’s always a problem. We are on top of it and the modernization system will be even better,” she said. The new modernization system is expected to be rolled out at the end of this year but it could have been sooner. “We are in the last part of the modernization. The contractor had to slow down the modernization process to stabilize the old mainframe system so it wouldn’t just blow up. We are getting there and we hope by the end of the year it will be online. Our aim is to roll it out at the end of this year. However, I want to say to everybody clearly: This system will not go live until it is completely tested. We know of other states that have failed because they did not test their systems. I will not allow it to fail our citizens. So, by the end of the year. But it has got to be tested.”
While employers will have to pay higher unemployment insurance rates to cover the cost of the fraud, business owners will likely pass that higher cost along to their customers, increasing the impacts of inflation. On top of that, lawmakers voted to hike the minimum wage, with that cost being passed on to the consumers as well.
“We support indexing the minimum wage to inflation. The plan will help low-wage New Yorkers meet the rising cost of living. We continue to prioritize workforce development and find innovative ways to provide training opportunities to connect New Yorkers with careers they love,” Reardon noted.
Milk and fruit prices are likely to increase because the Labor Department implemented a lower overtime threshold for farm workers from 60 hours to 40 hours a week over a ten-year period. In ten years, farm workers will be paid overtime for working more than 40 hours a week. Currently the rate for overtime pay is any time above 60 hours.
After the hearing, The Jewish Press caught up with Reardon to ask her to clarify her answers and decisions. Walking down a marbled hallway in the Legislative Office Building in Albany, the commissioner was surrounded by six senior advisers who unsuccessfully attempted to block this reporter’s efforts for five minutes of the commissioners’ time. Reardon ducked into a nearby ladies’ room to escape the trail of questions and refused to emerge. Security was called and this reporter left the scene unable to speak to the Labor Commissioner about these important issues.
