Labor Dept warns states, cut federal unemployment fraud

The U.S. Department of Labor has issued a sweeping warning to all 50 states and U.S. territories, demanding they take immediate action to combat fraud, waste, and abuse in their unemployment insurance programs or face the unprecedented penalty of losing federal administrative funding. The letters were sent to governors on Wednesday, June 17, 2026, by Acting Labor Secretary Keith Sonderling.

Sonderling stated the department is officially putting governors on notice, arguing that American taxpayers will no longer tolerate the mismanagement of their dollars. He warned that states which fail to act will suffer the consequences. The department plans to partner with the Office of the Inspector General, led by Inspector General Anthony D'Esposito, to enforce compliance.

In its announcement, the Labor Department blamed years of failed oversight, outdated technology, weak identity verification, and lax controls for allowing significant fraud to flourish. It specifically cited California, Illinois, and New York as examples of states with high improper payment rates, where funds were allegedly disbursed to ineligible parties or with insufficient documentation. The department characterized...