$11K sanction for unemployment fraud not excessive, 7th Circuit affirms

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A woman who failed to report part-time income on her unemployment applications didn’t get an excessive sanction when she was required to repay $11,190 to the state, the 7th Circuit Court of Appeals ruled Tuesday.

Plaintiff-appellant Susan Grashoff lost her job at McDonald’s in 2016. She applied for and received unemployment benefits beginning in December 2016, and the state’s Department of Workforce Development paid her $373 per week for 24 weekly claims through May 2017.

Grashoff continued to work part time at a local YMCA during that time frame. But according to court records, Grashoff never disclosed her part-time income to the DWD when she submitted claims for unemployment benefits.

The department eventually determined Grashoff knowingly violated the law and needed to pay $11,190, which included the unemployment benefits she received, plus a 25% penalty.

Grashoff filed suit in the United States District Court for the Northern District of Indiana that alleged the sanction violated the Eighth Amendment’s excessive fines clause. The district court rejected that claim and the 7th Circuit affirmed.

Writing for the appellate court, Chief Judge Diane Sykes said the amount Grashoff had to repay was appropriate and not unconstitutionally excessive.

Sykes noted Grashoff had knowingly failed to disclose her income on 24 applications for public benefits.

“Put another way, on 24 occasions Grashoff knowingly withheld information about her income to obtain a higher benefit from a limited fund meant to support economically vulnerable people in Indiana,” Sykes wrote.

Further, Grashoff’s assertion that her offense constituted a single administrative violation was contradicted by the finding that she knowingly and repeatedly violated the income reporting requirement, the court found.

In her appeal, Grashoff had also argued that the Eighth Amendment inquiry needed to consider her ability to pay.

The court’s opinion stated that the U.S. Supreme Court has declined to address whether a sanctioned person’s financial condition is relevant to the excessiveness inquiry.

The court also noted the DWD had showed evidence that Grashoff had more than $500,000 in a retirement account in 2020 and significant equity on her home.

“Even if her personal circumstances are a relevant factor in the constitutional analysis, she has the ability to pay the sanction,” Sykes concluded.

Judge Michael Scudder and Judge Thomas Kirsch concurred.

The case is Susan Grashoff v. David Adams, Commissioner of the Indiana Department of Workforce Development, 20-2739.

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