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The Virginia Employment Commission has agreed to pay $200,000 to three legal aid organizations to settle a federal lawsuit filed almost a year ago to force the state agency to promptly handle claims for unemployment benefits filed by Virginians who lost their jobs during the COVID-19 pandemic.

The VEC reached an agreement on Wednesday with the Legal Aid Justice Center in Charlottesville, the Virginia Poverty Law Center in Richmond and Legal Aid Works in Fredericksburg on the size of attorneys’ fees for the three organizations, resolving the last outstanding issue from the settlement of the case in U.S. District Court in early January.

The state agency issued a statement on Thursday announcing the settlement, which it said is less than the amount the three organizations sought. Two other private law firms that were plaintiffs in the suit — Consumer Litigation Associates in Newport News and Kelly Guzzo PLC in Fairfax City — provided their services pro bono.

“The VEC is satisfied to have this matter resolved, and continues with the significant efforts required to address any remaining issues and transform the agency to be better position for any future events,” the agency said in its statement.

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The VEC has come under fire from all directions for its handling of unemployment claims during the pandemic with some 2 million applications for benefits overwhelming an underfunded and understaffed agency that relies on a portion of payroll taxes reimbursed through the federal government.

Pat Levy-Lavelle, an attorney at the Legal Aid Justice Center, said the state acknowledged it owed legal fees to the nonprofit organizations because they were “the prevailing parties” in the lawsuit filed last May against the agency and its commissioner, Ellen Marie Hess, who retired earlier this year.

“This case achieved important progress for thousands of Virginians struggling with unemployment,” Levy-Lavelle said in a statement on Thursday that noted the fee settlement “helps fund legal aid’s work on behalf of low-income Virginians.”


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“Although the case is formally closed, ongoing reporting continues, and Legal Aid Justice Center and other advocates remain committed to seeing progress in Virginia’s unemployment system,” Levy-Lavelle added. “We know that many people are still suffering, and that is a problem that requires resolution.”

The Joint Legislative Audit and Review Commission concluded in early November that the VEC was unprepared for the pandemic and slow to respond to a surge of almost 2 million claims for unemployment assistance.

“Significant weaknesses in VEC’s operations — particularly its deficient staffing levels, antiquated UI [unemployment insurance] IT system, performance monitoring, and oversight — were revealed during the COVID-19 pandemic,” states the 200-page report by JLARC, the state’s legislative watchdog over government agencies and operations.

The result was backlogs of tens of thousands of unemployed Virginians awaiting adjudication of claims deemed ineligible, primarily because employers hadn’t reported why they lost their jobs, or waiting on hearings on appeals of their claims. Millions of calls went unanswered from frantic people seeking answers about their claims because they were unable to find them online in the state’s outdated IT system.

Gov. Glenn Youngkin had used the VEC’s struggles under Democratic Gov. Ralph Northam as a political weapon against former Gov. Terry McAuliffe, his Democratic opponent in the gubernatorial election last year. Youngkin replaced Hess with Carrie Roth, a longtime Republican appointee who had served as aide to Gov. George Allen and deputy secretary of commerce and trade under Gov. Bob McDonnell.


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Youngkin issued a statement in February touting progress in reducing the backlog of unprocessed reports from employers and disputed claims during his first month in office. He added then, “We have a lot more work to do, but I want Virginians to know we are serious about making the VEC, along with all other state agencies, work for them.”

Roth said in an interview then, “We are not declaring victory.”

The legal advocacy organization had filed the lawsuit on behalf of five Virginia women they said had been denied their lawful due process of claims for unemployment benefits after losing their jobs during the pandemic.

U.S. District Judge Henry Hudson signed an order in January to dismiss the suit, including the claims of the five women because the VEC had settled them.

The order dismissing the case found that “the disputed issues have been substantially resolved,” and said the court “has been encouraged and satisfied with the changes made and actions taken” during the long dispute it mediated.


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It praised the work of the advocacy organizations as “instrumental in raising awareness” about the obstacles facing Virginians seeking state and federal unemployment insurance benefits. It also credited the VEC for “significant progress in processing and adjudicating unemployment claims.”

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