May 23, 1986

Ms. Julie M. Johnson 
Secretary of Labor 
Kneip Building 
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 86-18

Interest charges on overpayments of unemployment insurance benefits

Dear Ms. Johnson:

You have requested an official opinion based on the following:

FACTS: 

Unemployment insurance benefits payments are received by individuals, on occasion, while conditions for receipt of such payments were not fulfilled or while the individual was disqualified from receiving such payments.  Such payments are caused by one or more or the following circumstances:  non- disclosure or misrepresentation of a material fact by the individual or another, or through error of the Labor Department. 

The Labor Department has the following options as to such payments:  waive the right of recovery; deduct the amount from any future benefits; or compel repayment through collection remedies. Collection efforts frequently include filing of a lien on the individual's property. 

No specific provision is made by State law for collection of interest on such overpayments.  Various statutes create an obligation to pay interest on sums of money owed under several different circumstances.

On the basis of those facts you have asked the following questions:

QUESTIONS: 

1.  Does State law require payment of interest on overpayments of unemployment insurance benefits? 

2.  If interest is payable, what rate applies? 

3.  Does the interest rate change if and when a judgment is obtained or a lien filed?

IN RE QUESTION NO. 1 AND NO. 2:

SDCL 61-5-38 is as follows: 

Contributions unpaid on the date on which they are due and payable, as prescribed by the department of labor, shall bear interest at the rate of one percent per month, or fractional part of a month from and after such date until payment plus accrued interest is received by the department.  Interest collected pursuant to this section shall be paid into the employment security contingency fund.

SDCL 61-5-40 through 61-5-47 provide various methods and procedures available to the Department of Labor for collection of delinquent employer contributions and interest (emphasis added).

SDCL 61-6-23 is as follows: 

Any person who, by reason of the nondisclosure or misrepresentation by him or by another of a material fact (irrespective of whether such nondisclosure or misrepresentation was known or fraudulent), or who through error of the department, has received any sum as benefits under this title while any conditions for the receipt of benefits imposed by this title were not  fulfilled in his case, or while he was disqualified from receiving benefits, shall, unless recovery of such sum is waived as provided in §  61-6-23.1, either be liable to have such sum deducted from any future benefits payable to him under this chapter or shall be liable to repay to the department, as the department may elect, a sum equal to the amount so received by him and such sum shall be collectible in the manner provided in § §  61-5-40 to 61-5-47, inclusive, for the collection of past-due contributions.

The fact that this statute, which is the authority for recovering of such overpayments, provides such sum '. . . shall be collectible in the manner provided by 61-5-40 through 61-5-47, inclusive, . . .' and the fact that those statutes authorize collection of interest at the rate set forth in 61-5-38, compel the conclusion that, by necessary implication, the provisions for interest recovery apply also to overpayments of unemployment insurance benefits.

It is my opinion that the answer to your question No. 1 is 'yes,' and the answer to question No. 2 is to apply to the rate prescribed in SDCL 61-5-38 for unpaid employer contributions, which is 'one percent per month.'

IN RE QUESTION NO. 3:

My predecessor had occasion, 1947-48 Attorney General's Reports at page 335,  to answer a similar inquiry as to delinquent employer's contributions.  His conclusion was that, as to such delinquent accounts, the filing of a lien against the property of the employer had no effect on the rate of interest due.  He also concluded that, where the claim was reduced to judgment in a civil action, the judgment would carry the same interest rate as any other judgment. I agree with my predecessor's conclusions and find the same applicable to overpayments of unemployment insurance benefits.

My opinion is, therefore, as to question No. 3, 'the interest rate is not affected when the lien is filed, and changes to the same rate, if reduced to judgment, as any other judgment.'  The rate of interest on judgments is presently set by SDCL 54-3-5.1 and 54-3-16 as fifteen percent (15%) per year.

Respectfully submitted,

Mark V. Meierhenry
Attorney General