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Workers sued after unemployment aid ended early. Some are winning.

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Since early May, 26 governors around the U.S. have announced they are shutting off enhanced unemployment benefits, blaming the extra $300 in weekly aid for keeping workers on the sidelines. In several states, workers and their advocates have sued to restore those benefits — successfully in some cases. 

Judges in Indiana and Maryland have ruled that those two states must restart pandemic jobless benefits that had been halted until lawsuits over the issue are resolved. That means more than 500,000 out-of-work adults in those states should see a resumption of their jobless benefits, according to an estimate from the National Employment Law Project (NELP).

The rulings could also spur workers in other states to sue on similar grounds, according to unemployment experts. That's because the litigation in Indiana and Maryland are based on common provisions requiring states to cooperate with the U.S. Department of Labor and maximize benefits for unemployed residents. In both Maryland and Indiana, the judges ruled that the benefits must continue until the lawsuits are resolved because jobless workers could suffer "irreparable harm" if they were to lose the aid until then. 

"There is a requirement for the state government to be concerned about the welfare of the unemployed," said Andrew Stettner, an expert on unemployment with the left-leaning Century Foundation. "The judges were sympathetic that there was a midway change in this approval of benefits — a denial of benefits based on nothing that the workers had done."

He added, "In both cases, the judges were like, 'It's a cruel thing to do given what the statutes state, and it's 100% federal money."

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Two additional states — Ohio and Texas — are also facing lawsuits over their early termination of unemployment aid. The Ohio suit argues that the state is required to seek the maximum benefits available to its residents, according to the Columbus Dispatch. In Texas, more than 30,000 workers are suing, claiming that Governor Greg Abbott overstepped his authority in curtailing the benefits. 

As the economy regains its footing after the pandemic , unemployment aid has become a lightning rod among some lawmakers and business owners. In the 26 states that are ending enhanced federal unemployment before it is due to expire in early September, governors blamed the benefits for keeping people from seeking work. All but one of the governors are Republicans.

Yet the shortage of workers in restaurants and retail sectors are due to a number of factors beyond jobless aid, economists say. For instance, a shortage of childcare and continuing concerns about COVID-19, especially in regions with low vaccination rates, are hampering the labor force. About 1.6 million people said they didn't look for work in June due to fears of contracting the virus, though that figure dropped from 2.5 million the previous month. 

The unemployment programs, which stem from stimulus efforts aimed at helping millions of workers when the pandemic shuttered the economy last year, were renewed in March under President Joe Biden's American Rescue Plan.

One program helps self-employed workers who otherwise don't qualify for jobless benefits, while another extends aid for long-term unemployed workers. A third program pays $300 per week in additional benefits since the typical unemployment check is about $387 per week, which worker advocates say is too low to support a family across much of the nation. 

"Pushed into poverty"

A spokesperson for Governor Eric Holcomb said that the state is appealing the ruling and is asking for a motion to stay. 

Jerron Spencer, 47, an unemployed worker in Indiana who had been receiving Pandemic Unemployment Assistance benefits before the program was cut off on June 19, said he was told by the Department of Workforce Development that it was waiting for the appeals process before restarting the pandemic benefits. He said that in his view, it appears the agency is defying the judge's order. 

"The order is clear," said Jenna Gerry, senior staff attorney at NELP. "The Department of Labor has made it clear they will accept any rescinding of the termination of these benefits."

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Indiana's Department of Workforce Development, which handles unemployment benefits, declined to comment. In a statement last month to CBS MoneyWatch, the agency said it is "determining how to proceed because the federal programs no longer exist after their termination on June 19."

The legal wrangling in Indiana began last month when Indiana Legal Services sued to halt the early termination of benefits, claiming it would violate an Indiana law requiring the state to provide all available federal insurance benefits to citizens. On June 25, Marion Superior Court Judge John Hanley ruled that Indiana must continue to provide the enhanced jobless aid until the lawsuit is decided.

He added that "a preponderance of evidence" indicates that the early termination of extra federal unemployment benefits violates state law, and noted that curtailing the aid could cause hardship for some. About 225,000 people lost pandemic jobless benefits when Indiana cut the programs on June 19. 

The delay in Indiana is concerning because a gap in unemployment checks can "create huge problems" for unemployed workers, Gerry noted. "They cannot now pay their rent and are pushed into poverty by any delay in benefits."

Defending the cuts

Maryland's Department of Labor told CBS MoneyWatch that it is complying with the judge's July 3 order and has extended pandemic unemployment programs until July 14. The state had cut them off on July 4, a decision that impacted more than 300,000 workers there, according to NELP. 

"We remain confident that our action — which most states have now taken — will ultimately be upheld in the courts," Fallon Pearre, director of communications at the Maryland Department of Labor, said in an email to CBS MoneyWatch. 

Of all the states slated to curtail jobless benefits early, Maryland had the highest percentage of workers who stand to lose benefits, wth almost 9 in 10 set to lose all aid, Gerry of NELP said. 

The early curtailment of benefits has a larger impact on people of color than White workers given the higher unemployment rates for Black and Latino workers, she added. Across the U.S., the jobless rate for Black workers was 9.4% in June, compared with 5.4% for White workers, labor data show.

Gerry said the decision to end aid early in more than two dozen states is "cruel and ill-informed." Every $1 of jobless benefits has a wider economic impact of more than $1.60 because recipients typically spend the money on rent, groceries and other essentials. 

"Republican governors say, 'Everything is back and we need to get back to work," she said. "It's not like we don't have communities that are still struggling."

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