WASHINGTON, D.C. — The U.S. Department of Labor announced a Notice of Proposed Rulemaking last week aimed at tightening oversight of unemployment compensation programs and addressing widespread fraud that surged during the pandemic. The move supports President Donald J. Trump’s Executive Order 14243, which directs federal agencies to eliminate information silos and enhance transparency to better protect taxpayer dollars.
Under the proposal, states would be required — rather than merely permitted — to share unemployment compensation (UC) data with federal officials, including the Labor Department’s Office of Inspector General. The department says the change is designed to improve coordination in detecting fraud, closing system vulnerabilities, and preventing improper payments.
Secretary of Labor Lori Chavez-DeRemer emphasized the administration’s commitment to restoring integrity to unemployment insurance programs. “From recovering over $500 million in fraudulent unemployment insurance payments to clawing back billions in unspent and unusable COVID-era unemployment funds, the Labor Department is laser-focused on restoring integrity to our nation’s unemployment insurance programs and safeguarding Americans’ hard-earned tax dollars,” she said. “This commonsense proposal will further help us prevent criminals and fraudsters from ripping off taxpayers.”
During the pandemic, states faced increasingly sophisticated fraud schemes that overwhelmed verification systems and resulted in significant financial losses. The department’s inspector general estimates that up to $191 billion in unemployment insurance benefits may have been improperly paid during that period.
By making data sharing mandatory, the proposed rule would enable federal agencies to better investigate complex, multi-state fraud schemes, improve oversight of state-run programs, and strengthen defenses against future attacks on UC systems. Officials argue the enhanced access to information will also allow auditors to ensure that federal funds are distributed and managed in compliance with the law.
The Labor Department said the proposal reflects a broader strategy to safeguard unemployment insurance funds while holding accountable those who exploit the system. If adopted, the rule would represent one of the most significant steps in recent years to bolster federal-state collaboration in protecting taxpayer resources.
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