U.S. Department of Labor Launches Targeted Review of Minnesota's Unemployment Insurance Program Amid Widespread Fraud Concerns

Federal Scrutiny on Minnesota's UI Program

The U.S. Department of Labor (DOL) announced on December 15, 2025, that it will conduct a targeted review of Minnesota's Unemployment Insurance (UI) program. This decision comes in the wake of recent discoveries of widespread fraud impacting several state benefits programs within Minnesota. The DOL will deploy an onsite specialized UI strike team to investigate the matter.

In a letter addressed to the Minnesota Department of Employment and Economic Development (DEED), the federal department expressed concerns that reports of fraud, waste, and abuse in other state programs might compromise the integrity of Minnesota's UI system. The identified fraud extends beyond unemployment benefits to include programs such as Minnesota's Federal Child Nutrition Program, the Early Intensive Developmental and Behavioral Intervention Autism Program, and the Housing Stability Services Program.

Labor Secretary's Strong Stance

Labor Secretary Lori Chavez-DeRemer issued a strong statement regarding the situation. 'I am appalled at what we are hearing about potential fraud coming from numerous benefits programs in Minnesota,' said Secretary Chavez-DeRemer. She emphasized that any related abuse of the UI systems 'will not be tolerated,' and expressed confidence in the specialized strike team to 'get to the bottom of this and report their findings directly to me.' The Secretary reiterated the DOL's mission to protect American workers and prevent malicious actors from undermining the integrity of trusted programs.

The review, to be conducted by the DOL's Employment and Training Administration's Chicago regional office, will specifically focus on the state's Benefit Payment Control operations and integrity functions. Its primary objective is to ascertain that the fraud, waste, and abuse identified in other Minnesota state programs are not present within the UI or pandemic UI programs. The DOL has also requested critical documents from the state to aid the strike team, which comprises staff from national and regional ETA offices.

Context of Past Fraud in Minnesota

Minnesota has faced significant challenges with benefits fraud, particularly during the pandemic era. Reports indicate that the state overpaid approximately $430 million in pandemic unemployment benefits between July 1, 2020, and June 30, 2023. While the U.S. Department of Labor estimated that 95% of these overpayments were due to errors by claimants, employers, or a combination, the U.S. Government Accountability Office (GAO) estimated $26.3 million in fraudulent UI overpayments in Minnesota during the pandemic.

Despite these figures, the DOL also noted that Minnesota's unemployment insurance overpayment and fraud rates were among the lowest nationally. The state's improper payment rate was recorded at 10.06% from July 1, 2019, through June 30, 2022. However, other significant fraud cases have plagued Minnesota, including a $250 million fraud in the Feeding Our Future program and issues within the $500 million Frontline Worker Pay program, where 41% of applicants could not be verified.

State's Role and Previous Findings

The Minnesota Department of Employment and Economic Development (DEED) is responsible for administering the state's UI program, with federal oversight from the DOL. The Office of the Legislative Auditor (OLA) in Minnesota has previously evaluated UI fraud, highlighting issues such as incomplete reporting of fraud to the DOL and a low number of referrals to law enforcement for investigation. The OLA also noted that the UI Division's new imposter screening processes led to delayed payments for some genuine applicants. The current DOL review aims to address these systemic vulnerabilities and ensure the integrity of the state's unemployment benefits system.