Overpayment case faces constitutional challenge

Rowan Hayes was cautiously optimistic when she read a Dec. 6, 2023, letter from the Oregon Employment Department saying she was eligible for unemployment benefits she received during the pandemic and would be getting a refund on money the department had ordered her to pay back.

The letter, dated 10 days after the Statesman Journal published a story about OED myriad rulings in her case, was a reversal of a 2020 department decision that Hayes had quit working without good cause and therefore had to pay the state back the $14,000 she received throughout the pandemic.

The Oregon Law Center sued OED and Director David Gerstenfeld in 2022 on behalf of six Oregonians who had been ordered to repay unemployment benefits, referring to the overpayment system as “impenetrable” and “fragmented” without “a clear explanation for why the government could take back benefits already paid.”

Multnomah County Circuit Court Judge Eric Dahlin is hearing the case to determine whether the process to inform Oregonians they were overpaid violates their constitutional rights to due process.

During a Jan. 23 hearing, Dahlin said: “This is maybe the most difficult case I’ve had as a judge.”

Thousands of Oregonians have been asked to pay back pandemic-related benefits. OED made nearly 80,000 overpayment decisions in 2022, according to data it shared with the Statesman Journal in December.

2020 Oregon unemployment overpayment decision overturned

Hayes, a 25-year-old Clackamas mom, has been on a payment plan that she expected to pay off in 2066.

She reached out to the Oregon Law Center after she got the OED letter saying she was instead owed money that she had paid back. (She submitted a written declaration in support of the Oregon Law Center case but is not one of the plaintiffs).

Her experience with the OED includes exchanging several emails with a claims specialist from December 2020 through March 2021 in which she was told she was eligible for pandemic unemployment benefits, that overpayments would be offset with different benefits and to ignore notices she received in the mail. She asked for a hearing, but it was held on her due date. Her appeal was later denied.

Hayes also was denied a waiver to forgive the overpayment, claiming she had “misreported information.” The new decision acknowledged quitting after the car required for her job was totaled meant she had no reasonable alternative but to quit.

Hayes described working with the agency again on the refund as “difficult.”

She said she is reviewing her bank statements to determine how much money she is owed because she is not confident the agency kept an accurate record of the payments she made.

Constitutionality of unemployment overpayment process in question

The Oregon Law Center lawsuit asked the court to declare that the agency’s overpayment processes violate the due process clause of the 14th Amendment. They also want the judge to order the state to immediately stop collecting overpayments until OED establishes and implements a new system.

OED contends changes are coming later this year. Lawyers with the OED said a new system is scheduled to go live on March 4. Part of the switch will change the current two-notice system used for overpayment decisions into one notice.

Both parties filed motions for summary judgment, asking for Dahlin to make his determination without a trial. Oral arguments were first heard on Nov. 30, and a second hearing was held on Jan. 23.

On Jan 23, the judge asked both sides to answer follow-up questions he sent them the day before. There are “obviously problems” with the system, Dahlin said, and he will have to decide whether they violate the constitution.

He asked for examples of when Oregon appellate courts made similar due process decisions related to notices. And he asked the Oregon Law Center lawyers whether they would concede that any of the problems related to the overpayment system in the complaint were pandemic-related.

The lawyers representing the six Oregonians said no.

Every claim concerns an OED policy that existed before the pandemic, lawyer Kelsey Heilman said. The pandemic brought the issues to the surface, she added.

Dahlin also asked if constitutional problems would remain once OED implemented its new system later in the year.

Heilman argued there was no way to know before it was in place.

“That means that a ruling in this case is critical to make sure that the new system doesn’t perpetuate existing constitutional violations in a shiny package,” Heilman said.

Dahlin also asked questions related to the agency’s practice of not translating entire notices sent to Oregonians in Spanish.

“I don’t know that best practices is the question before the court. I think it’s about, what is the minimum that the agency is required to do legally,” said Shaunee Morgan with the Oregon Department of Justice. “We’re here today on very specific allegations of due process violations.”

Morgan said the agency also was concerned that expanding what needs to be required on notices could create further confusion. Information that is constitutionally required is being met, Morgan argued.

Dahlin asked both sides to submit additional briefs by Feb. 12.

Dianne Lugo covers the Oregon Legislature and equity issues. Reach her at dlugo@statesmanjournal.com or on