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Biden’s Pick for Top Labor Spot Oversaw Fraudulent, Broken Unemployment System

California labor secretary Julie Su / senate.gov screenshot
• March 31, 2021 5:30 pm

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California's unemployment system paid out billions of dollars of fraudulent claims under the leadership of President Joe Biden's nominee for the number two post at the Labor Department.

As California's secretary of labor, Julie Su oversaw an unemployment website plagued by glitches and improper payments. The website repeatedly crashed throughout the COVID-19 pandemic and was down as recently as this month. These systemic failures pose a challenge for Su, whom Biden has nominated to serve as deputy labor secretary.

Su has faced bipartisan pushback during her confirmation hearings, with moderate Democratic senators, including Joe Manchin (W. Va.), under pressure to join Republicans in opposing Su's nomination. The Senate recently confirmed former Boston mayor Marty Walsh as secretary of labor with significant bipartisan support.

California's unemployment site had more than 1 million unprocessed claims in March. The California Employment Development Department (EDD), which manages the unemployment claim process, did not respond to a request for comment on the backlog or on Su's handling of the problems with the unemployment system. The department did acknowledge "an intermittent issue" with the site after multiple reports of crashing.

In January, California officials said that more than $11 billion of unemployment benefits paid during the coronavirus pandemic were fraudulent, with another $19 billion still under investigation by state officials. In addition to these payments, Su oversaw the fraudulent payments of nearly $1 billion to prison inmates in what the Sacramento County district attorney described as "one of the biggest frauds of taxpayer dollars in California history." The fraud involved the filing of more than 35,000 unemployment claims under the names of California prison inmates that were paid out between March and August of 2020.

Senate Republicans criticized Su's role in the unemployment fraud during her confirmation hearing. Sen. Richard Burr (N.C.) said, "California is not a model to emulate for the rest of the country."

"California suffered some of the largest fraud in our nation's history during the pandemic," Burr said. "What's worse about the fraud committed on California and the U.S. taxpayer is that it was entirely preventable."

In a report released in January, a California state auditor found that Su's department mishandled the processing of unemployment payments in large part because Su had waived eligibility considerations for the payments.

"EDD responded to the claim surge by suspending its determinations of eligibility for most claimants, thereby compromising the integrity of the [unemployment insurance] program," the auditor said. "In spring of 2020, the secretary of the Labor and Workforce Development Agency directed EDD to pay certain claimants [unemployment insurance] benefits without making key eligibility determinations and to temporarily stop collecting biweekly eligibility certifications."

Su defended her handling of the unemployment system's problems, arguing that the department was focused on quickly making payments and noting that unemployment fraud is a nationwide issue.

Su's nomination could have larger implications for the Biden administration amid criticisms about the lack of representation of Asian-American nominees in the cabinet. Asian Americans Advancing Justice endorsed Su, calling her selection "a win for all working people, including people of color, immigrants, and women." The group described her nomination as vital because of the lack of representation in other parts of Biden's cabinet.

"Especially given the lack of Asian American and Pacific Islander cabinet secretaries, we will keep up the pressure to ensure that more of our community is visible at the highest levels of government," the organization said.

The White House did not respond to a request for comment.