Labor Department launches investigation into California over unemployment fraud claims

WASHINGTON (TNND) — The Department of Labor is launching an investigation into California’s Employment Development Department (EDD) based on allegations that billions of dollars in unemployment benefits were fraudulently distributed.

In a letter sent to EDD, The Labor Department shared with state officials that it would soon be deploying a “strike team” to the state, the New York Post reported.

“Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayers,” Chavez-DeRemer told the New York Post. “I look forward to restoring the California [Unemployment Insurance] program’s integrity and financial health.”

The investigation in California comes amid heightened scrutiny in the Golden Gate State as conservative commentators like Nick Shirley and Benny Johnson have posted videos alleging rampant fraud in the state administration of various government funded programs and voter rolls. Earlier this month, the Small Business Administration said it found billions of dollars of fraud in California.

“Financial issues and potential fraud in California’s unemployment insurance program will be fully examined,” Labor Secretary Lori Chavez-DeRemer told The Post in a statement.

“The previous administration turned a blind eye toward failing Labor programs: This ends now.”

The state’s Employment Development Department has been under scrutiny for years. In a 2023 report, the state auditor called the department a “high-risk agency,” because it had “inadequate fraud prevention” in place. The report estimated that tens of billions of unemployment payouts made during the pandemic could have been fraudulent.

Just last March, a former EDD employee was sentenced to 66 months in prison “for using her position to file $858,339 in fraudulent unemployment claims.” And then in April 2025 — a month later — four Southern California siblings were sentenced to prison for creating a nonexistent business in order to collect $1.1 million in unemployment benefits.

The deployment of the “strike force” also comes as the Labor Department’s Office of Inspector General found upwards of $900 million in unemployment fraud committed in COVID-19-era unemployment benefits.

The National News Desk reached out to California’s Employment Development Department for comment.