The Michigan Unemployment Insurance Agency (UIA) has announced it will seek $2.7 billion in repayments from about 350,000 residents who it says were overpaid unemployment benefits during the COVID-19 pandemic, according to the Michigan Chronicle.

The UIA explained that while many of these overpayments date back to claims filed in 2020 and 2021, the agency was unable to collect due to a court order linked to a class-action lawsuit. That lawsuit, filed by claimants who had been told they owed money back and in some cases had wages garnished or tax refunds seized, resulted in a $55 million settlement in May.

As part of the settlement approval, the court dissolved a preliminary injunction that had blocked collections. The UIA said collection efforts will resume on Sept. 12, with the first payments due by Sept. 29. Claimants unable to repay immediately can apply for a financial hardship waiver.

"It's an incredibly difficult position for these people to be in and it's a difficult position for the UIA because we have a duty to collect this money by law," UIA Director Jason Palmer told the Detroit Free Press. "We could not collect for essentially five years worth of payments. So we are trying to balance that with empathy and giving people notice and giving them a chance to apply for these waivers and trying to communicate as best as we can."

According to the UIA, most affected claims were processed through the federal Pandemic Unemployment Assistance (PUA) program, which extended benefits to freelancers, gig workers, and the self-employed during the early months of the pandemic. Overpayments often happened because of incorrect wage reporting or shifting federal eligibility rules.

Palmer noted that penalties and interest will be waived for most claims that do not involve fraud. Workers will receive reminders in their MiWAM accounts and follow-up notices detailing the amount owed and instructions for requesting a waiver.