External Control Layer

An unemployment system decides fraud cases with no one reviewing them

According to the class actions, as the courts have described them, Michigan’s unemployment benefits system decided fraud cases automatically for almost two years, and a claimant’s failure to answer a questionnaire could by itself result in a fraud finding.

Date
2013–2015
Kind of system
Conventional automation, included as a precedent
Outcome
Harm

Gaps found

G1G2G3G4G5G6G7G8G9G10G11G12G13

G6 No independent evidence G8 No human decision

What happened

The class actions allege that MiDAS made all fraud determinations in Michigan’s unemployment program between October 2013 and August 2015. In the process they describe, claimants it flagged were sent questionnaires. Certain answers, or no answer within 10 days, produced a fraud finding, a penalty of four times the amount at issue, and collection through tax refund intercepts and wage garnishment.

The agency added staff oversight in August 2015. In 2022 the Michigan Supreme Court held that claimants could sue the state for damages, and the state settled for $20 million, with final approval in January 2024. Michigan law now bars a fraud finding “based solely on a computer-identified discrepancy.”

What allowed the action to take effect

  • G6 No independent evidence

    The action, or the approval of it, was based on the system’s own output or on a single unverified input. Evidence that would have shown the error was never gathered, was thrown away, or was available and not consulted.

    A finding could be based on a questionnaire default rather than evidence of fraud: “A claimant’s failure to return the fact-finding questionnaire, for example, led to a fraud finding, as did the claimant’s selection of certain multiple-choice responses.”

    Kind of evidence: allegation. Source: U.S. Court of Appeals for the Sixth Circuit, 15 June 2023, majority opinion.

    Related guidance: P6 Signer independence and P4 Reviewable policy. Contract clause C-6.

  • G8 No human decision

    A decision that needed a person went through without one. The need can come from law, from policy, from the product’s own design, or from the user’s explicit instruction.

    “Between October 2013 and August 2015, MiDAS made all fraud determinations,” as a federal court summarized the plaintiffs’ complaint. Michigan law now requires an agency employee or agent to “examine the facts and independently determine” fraud before any finding.

    Kind of evidence: allegation. Sources: U.S. District Court, Eastern District of Michigan, 2 March 2018; Michigan Legislature. References: district court opinion, p. 6; MCL 421.62(f).

    Related guidance: P5 Human authority. Contract clause C-5.

Considered and left out

G9 Warning with no authority
A U.S. Department of Labor report found the agency’s practices unlawful in November 2015, after the fully automated period had ended. It is not counted as a warning ignored during the harm.

Entries with gaps in common

Sources

Cite this entry

External Control Layer. (2026). Entry 2: An unemployment system decides fraud cases with no one reviewing them. In Control Gap Record (Version 0.3). G-14, Inc. https://externalcontrollayer.ai/record-2

@misc{ecl_cgr_2,
  author = {{External Control Layer}},
  title = {Entry 2: An unemployment system decides fraud cases with no one reviewing them},
  howpublished = {Control Gap Record, version 0.3},
  publisher = {G-14, Inc.},
  year = {2026},
  url = {https://externalcontrollayer.ai/record-2},
  note = {Released 2 November 2026}
}

Uses Control Gap Classification 0.2.

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