US Department of Labor Probes California UI Program for Fraud

DOL News Releases

Filed February 18th, 2026

Detected February 19th, 2026

Summary

The U.S. Department of Labor announced it will probe California's Unemployment Insurance program due to concerns over fraud and improper payments. A specialized strike team will investigate potential fraud and abuse, aiming to restore the program's integrity and financial health.

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What changed

The U.S. Department of Labor has initiated a probe into California's Unemployment Insurance (UI) program, citing significant concerns regarding fraud, improper payments, and the program's financial health. The department has sent a letter to California's Employment Development Department detailing issues such as an increasing improper payment rate, insufficient payment timeliness, and data quality concerns. This action follows a report by the California state auditor identifying the UI program as high-risk and noting over $30 billion in potentially fraudulent claims during fiscal years 2019-20 and 2020-21 due to inadequate internal controls. California also faces a $21 billion debt to the federal government for its UI trust fund, leading to increased employer taxes.

A specialized strike team from the Department of Labor will be deployed to uncover potential fraud and abuse within the California UI program. This investigation aims to address the identified financial issues and restore integrity to the system. While no specific compliance deadline for regulated entities is mentioned, the probe signifies increased scrutiny on program administration and financial management. The implications for employers include continued pressure from increased UI taxes due to the state's outstanding federal loan. The department's stated goal is to protect workers and taxpayers by ensuring the responsible use of funds.

What to do next

Review internal controls for unemployment insurance programs.
Assess current fraud detection and prevention mechanisms.
Monitor communications from the U.S. Department of Labor regarding the California UI program probe.

Penalties

The document mentions potential fraud and abuse, and the state's UI program is identified as high-risk with over $30 billion in potentially fraudulent claims. While specific penalties for this probe are not detailed, the context implies significant financial and reputational consequences for mismanagement and fraud.

Source document (simplified)

News Release

US Department of Labor to probe California’s Unemployment Insurance program to address fraud and improper payment concerns

WASHINGTON – The U.S. Department of Labor today announced steps it will take to address fraud and improper payment concerns related to California’s Unemployment Insurance program.

In a letter to California’s Employment Development Department, the Labor Department cited the state’s poor performance in key areas, including an increasing improper payment rate, insufficient timeliness of payments, and the accuracy and quality of the state’s data – quality that matters for accountability, eligibility of participants, and responsible use of taxpayer and employer dollars.

In addition to performance concerns, California also has a depleted UI trust fund. The unemployment trust fund holds state-collected payroll taxes used strictly to pay the state portion of unemployment benefits. California currently carries $21 billion in borrowed funds from the federal government to keep the state unemployment system afloat. The Labor Department previously announced that, because of this continued debt, California employers are now subject to increased UI taxes to repay the outstanding loan balance to the federal government.

“Financial issues and potential fraud in California’s unemployment insurance program will be fully examined. The previous administration turned a blind eye toward failing Labor programs: This ends now,” said U.S. Secretary of Labor Lori Chavez-DeRemer . “Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayers. I look forward to restoring the California UI program’s integrity and financial health.”

The California state auditor has also identified the state’s UI program as high-risk. The auditor noted that inadequate internal controls failed to prevent suspected fraud during fiscal years 2019-20 and 2020-21, allowing the payment of more than $30 billion in potentially fraudulent claims.

The UI strike team will be comprised of specialists from the department’s national and regional offices.

Agency Office of the Secretary Date February 18, 2026 Release Number 26-264-NAT Media Contact: Courtney Parella Phone Number (202) 693-4676 Email parella.courtney.e@dol.gov Share This
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