The Labor Department is planning to require states to hand over sensitive unemployment information in the name of fighting fraud. The plan, detailed in a notice of proposed rulemaking issued on Friday, would require states to hand over confidential unemployment claims information to federal officials.
The department is also considering creating a national claims database for oversight and audits, it says in the notice.
It’s the latest push for states to send more information to the federal government since Trump took office, some of which has been used for immigration enforcement.
Several news outlets have also reported that the administration is combining data into a master database, although the government’s federal chief information officer has said he doesn’t know of any such effort.
Labor is tying the move to a March executive order on data sharing that called for the Labor secretary to receive “unfettered access to all unemployment data and related payment records.” The order says that the data will help the department investigate fraud, detect vulnerabilities in the system and prevent future fraud attacks.
“This commonsense proposal will further help us prevent criminals and fraudsters from ripping off taxpayers,” Secretary of Labor Lori Chavez-DeRemer said in a statement. “Under the direction of President Trump, we’ll continue doubling down on our efforts to root out waste, fraud, and abuse to put the American Worker First.”
Longstanding concerns
In the unemployment insurance system, Labor’s inspector general has been asking for easier access to state data for years, since fraud in the program swelled during the pandemic. Although the administration made fighting fraud a top priority, that IG was among nearly 20 fired within the early days of the administration.
That OIG has estimated that the jobless aid system doled out $191 billion in improper payments in 2020 and 2021, with a “significant portion,” but not all, due to fraud. Since then, the pandemic-era programs that were especially vulnerable to fraudsters have ended.
“UI is still a target of organized crime, and DOL OIG getting access to this data for working with the attorney general to do multi-state fraud prosecutions is a legitimate use of data,” said Andrew Stettner, the former director of Labor’s Office of Unemployment Insurance Modernization during the Biden administration.
Barriers to ongoing and complete access to unemployment claims and wage records from state agencies are a “significant concern,” the OIG says, citing DOL’s interpretation of regulations — that access should be limited to specific instances of suspected fraud — as a primary hurdle.
The Labor Department tied data access for the watchdog to the since-cancelled grants doled out under the American Rescue Plan Act last fall, and also previewed regulations around the same time during the Biden administration that would require states to give the OIG access to data.
Equipping Labor’s watchdog with easier data access has been a bipartisan priority, Stettner said, although Trump 2.0’s controversial work collecting and centralizing more government data — and using it for immigration enforcement — may have broken that point of agreement. Narrow access for the OIG is also different from a national claims database, he noted.
The new regulatory filing appears to require states to send data not only to the OIG, but also to other, unidentified “federal officials” for “program oversight and audits.”
This follows DOL itself, as opposed to its watchdog, accessing sensitive claims data this spring for the first time, following the data sharing executive order.
The IG has cited the data-sharing executive order pointed to in the regulatory filing before, stating that “DOL should collect ongoing state UI records directly from [state workforce agencies] moving forward, in which case the OIG will obtain the data directly from [Labor’s Employment and Training Administration]” — another suggestion that DOL proper will access this data, not just its OIG.
‘Alarm bells’ and open questions
It’s not entirely clear what data the department is seeking.
In addition to paying out benefits, state unemployment agencies collect taxes and wage records, “which means they’ve got data on everybody who works in an unemployment insurance covered job, which is most of us,” said Michele Evermore, who also formerly served in the Office of Unemployment Insurance Modernization during the Biden administration.
It’s not clear if DOL is also seeking wage records, she said. But the rule does state that some states may need to update their technology to provide DOL with “additional data,” she noted, adding that forming a single database creates additional cybersecurity risks.
“This should be ringing alarm bells for folks,” said Quinn Anex-Ries, a senior policy analyst at the Center for Democracy and Technology.
“The Department of Labor is seeking to compel states to hand over sensitive information about their unemployment insurance programs against the wider backdrop of the Trump administration’s pretty sprawling efforts to amass large quantities of information about everyday Americans … largely under the guise of preventing quote, unquote fraud, waste and abuse, but as we’ve seen, it’s been repurposed to fuel surveillance and immigration enforcement,” he said.
“The critical thing here is we’ve seen that the administration is undermining or violating long standing privacy and security norms time and time again,” Anex-Ries added. “And there’s really no reason to believe that this effort’s going to be any different.
