A potential class-action lawsuit claims Governor Kim Reynolds’ refusal to pay pandemic-related jobless assistance to 30,000 Iowans was unlawful and deprived those individuals of “life-sustaining benefits.”
Lawyers for Karla Smith of Pleasantville and Holly Bladel of Clinton have filed a lawsuit in U.S. District Court for the Southern District of Iowa claiming the two women and thousands of other Iowans were illegally denied unemployment benefits in 2021 due to the actions of Reynolds and Iowa Workforce Development Director Beth Townsend.
The lawsuit alleges Reynolds and Townsend violated Iowa’s Employment Security law, which requires the state to “cooperate with the United States Department of Labor to the fullest extent” and make available to Iowans “all advantages available under the provisions of the Social Security Act that relate to unemployment compensation.”
Lawyers for Smith and Bladel are also seeking class-action status in the case in an effort to recover damages for thousands of Iowans who may have been harmed by Reynolds’ decision.
The state has yet to file a response to the lawsuit.
Iowa was one of at least 25 states, all led by Republican governors, that chose to terminate federal, pandemic-related unemployment assistance before the programs expired in 2021. The states did so largely in response to labor shortages, claiming the enhanced benefits were encouraging people to remain unemployed rather than return to the workforce.
At the time, the U.S. Congress Joint Economic Committee warned that the states that pulling out of the unemployment programs stood to lose up to $13 billion in economic activity by refusing the infusion of federal money.
LAWSUIT: REFUSAL OF MONEY VIOLATED STATE LAW
In March 2020, at the outset of the COVID-19 pandemic, Congress passed the passed the Coronavirus Aid, Relief and Economic Security—better known as the CARES Act—to address mass layoffs, business closures and soaring unemployment.
The act provided enhanced unemployment benefits, provided for cash payments to be made to qualified recipients, extended the period of eligibility for benefits, and allowed for benefits to be paid to people who wouldn’t otherwise have been eligible.
Iowa then entered into an agreement with the U.S. Department of Labor to provide the state’s residents with Pandemic Emergency Unemployment Compensation (PEUC), Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Unemployment Assistance (PUA) benefits, effective March 29, 2020.
Iowans later received letters from Iowa Workforce Development stating they would be eligible for the benefits through September 4, 2021. However, in a May 10, 2021, memorandum, Townsend recommended that Reynolds terminate Iowa’s participation in the federal programs effective June 12, 2021.
The next day, Reynolds officially adopted the recommendation and announced that IWD, which administers many elements of Iowa’s unemployment programs, would be withdrawing from participation in the federal, pandemic-related unemployment programs, despite the fact that they were entirely funded by the federal government.
Iowa’s participation in the programs was terminated on June 12, three months before the programs were set to expire.
The lawsuit alleges Reynolds’ “refusal to ensure continued access to federal pandemic-related unemployment benefits” deprived approximately 30,000 Iowans, including the two named plaintiffs, of “life-sustaining benefits” to which they were entitled. The lawsuit also notes that the number of Iowans affected by Reynolds’ decision may exceed 55,000.
The governor’s decision to prematurely terminate Iowa’s involvement in the programs “violated clear legislative mandates and constituted an unlawful exercise of executive authority,” the lawsuit claims.
The plaintiffs allege Iowa’s Employment Security Law specifically requires the state to provide citizens with “all advantages available under the provisions of the Social Security Act that relate to unemployment compensation,” which directly contradicts Townsend’s published claim that “Iowa can elect to participate in some federal programs and not others.”
PLAINTIFFS’ BENEFITS WERE CUT OFF IN JUNE 2021
Smith, who worked at Casey’s General Store when the pandemic hit, alleges that in mid-March 2020, her doctor told her a preexisting lung condition made it dangerous for her to continue working in a retail setting that had yet to install Plexiglas dividers at workstations and didn’t require face masks.
Smith alleges she quit her job to self-quarantine and began collecting PEUC benefits of $408 per week in addition to FPUC benefits to pay for food, housing, and other monthly expenses. Reynolds’ and Townsend’s decision to terminate Iowa’s involvement in the federal programs left Smith without a critical source of income just as the Delta variant surged, the lawsuit claims.
Bladel worked for a restaurant and gas station but was replaced after seeking time off to care for an elderly relative who was immunocompromised and at risk for COVID-19. She then began collecting PUA and FPUC benefits until Iowa terminated its involvement in the programs.
The lawsuit alleges the federal Social Security Act through which the unemployment programs are administered requires that the states’ administration of benefit programs “be reasonably calculated to insure full payment of unemployment compensation when due.”
According to the plaintiffs, the federal government pays the full cost of PUA, PEUC, and FPUC benefits, and alleges the U.S. Department of Labor had instructed the states that unemployment benefits provided under the CARES Act were nondiscretionary and must be promptly paid to any individual who was determined to be eligible.
The lawsuit goes on to allege that Iowans were not given a hearing or opportunity to contest the termination of their benefits. In fact, the lawsuit alleges, the form letter received by some beneficiaries specifically instructed them not to call IWD unless they needed assistance filing claims.
The lawsuit accuses the governor and Townsend of the unconstitutional taking of benefits the plaintiffs were eligible to receive, the denial of due process, and the violation of Iowa’s Employment Security Law.
The plaintiffs are asking a federal judge to declare Reynolds’ actions unlawful and order the benefits to be paid.
Editor’s note from Laura Belin: In a statement released on May 12, Reynolds commented, “The federal government doesn’t get to run the state of Iowa or impose policies that damage our economy. Paying people to stay home at a time when there are more jobs available than people to fill them defies common sense. Iowans know there is dignity in work.”
Here is the full court filing, dated May 10:
Top image: Official photos of Governor Kim Reynolds (left) and Iowa Workforce Development Director Beth Townsend.