State “Total Unemployment” Standards as a Predicate for CARES Act PUA Eligibility: Commentary on Matter of Klosterman

State “Total Unemployment” Standards as a Predicate for CARES Act PUA Eligibility:
Commentary on Matter of Klosterman v. New York State Dept. of Corr. & Community Supervision

I. Introduction

In Matter of Klosterman v. New York State Department of Corrections and Community Supervision, 2025 NY Slip Op 06960 (Dec. 16, 2025), the New York Court of Appeals addressed a central structural question about pandemic-era unemployment benefits: To what extent do state unemployment eligibility rules, specifically New York’s “total unemployment” requirement, control eligibility for federally funded CARES Act programs such as Pandemic Unemployment Assistance (PUA), Federal Pandemic Unemployment Compensation (FPUC), and Lost Wages Assistance (LWA)?

The claimants were full-time civil service teachers and instructors working in correctional facilities operated by the Department of Corrections and Community Supervision (DOCCS). They were paid annual salaries under a collective bargaining agreement, with an option to receive those salaries over 10 or 12 months. DOCCS also offered optional, additional-pay summer work in educational and vocational programs.

In summer 2020, due to COVID-19, DOCCS suspended its academic and vocational programs, eliminating the option of summer work. Claimants then applied for state unemployment benefits and, when PUA became available, for PUA, FPUC, and LWA. The New York State Department of Labor (NYSDOL) initially granted those benefits but later reversed course, finding that because claimants remained annually salaried full-time employees, they were not “totally unemployed” under New York’s Unemployment Insurance Law, and therefore not eligible for state unemployment compensation or for CARES Act benefits.

The Unemployment Insurance Appeal Board affirmed NYSDOL’s determinations, and the Appellate Division, Third Department, in a series of consolidated decisions, upheld the Board. The Court of Appeals granted leave and has now definitively resolved the legal issue.

The Court’s holding can be distilled as follows:

  • New York’s “total unemployment” requirement in former Labor Law §§ 522 and 591(1) validly governs determination of “unemployment” status for purposes of CARES Act PUA eligibility.
  • There is no conflict between the state “total unemployment” standard and the CARES Act’s requirement that a PUA claimant be “unemployed, partially unemployed, or unable or unavailable to work” due to COVID-19.
  • Accordingly, because the claimants were not “totally unemployed” under New York law (a finding they did not challenge on appeal), they were not “covered individuals” under the CARES Act and were properly charged with PUA, FPUC, and LWA overpayments.

The case establishes an important precedent: absent an express congressional override, federal emergency unemployment programs like PUA ride atop, and are constrained by, state eligibility rules that define what it means to be unemployed and that set disqualifications.

II. Summary of the Opinion

A. Holding

The Court of Appeals, per Judge Singas, held:

  1. NYSDOL properly applied New York’s former “total unemployment” requirement (Labor Law §§ 522, 591(1)) to determine claimants’ eligibility for CARES Act PUA benefits.
  2. The state “total unemployment” rule does not conflict with or get displaced by the CARES Act’s use of the terms “unemployed, partially unemployed, or unable or unavailable to work” in 15 U.S.C. § 9021(a)(3)(A)(ii)(I).
  3. Given the Board’s unchallenged factual determination that claimants were not “totally unemployed” under state law during summer 2020, they were not “covered individuals” under the CARES Act and therefore ineligible for PUA, FPUC, and LWA.
  4. NYSDOL therefore properly charged claimants with overpayments of these federal benefits.

B. Key Reasoning in Brief

  • The CARES Act did not define “unemployed” or “partially unemployed” and, by its structure, presupposed the continued role of state unemployment definitions and disqualifications.
  • Under New York law (pre-August 15, 2021 amendments), “total unemployment” is a term of art: one can still be “totally unemployed” even if one works up to three days in a week; conversely, being salaried and continuously employed, even if not working during a temporary break, can preclude “total unemployment.”
  • USDOL’s guidance (Unemployment Insurance Program Letters, or UIPLs) expressly instructed that state law rules, including disqualifications and ability/availability requirements, apply to PUA unless inconsistent with the statute.
  • The legislative history of the CARES Act shows Congress meant to expand benefits chiefly for those structurally ineligible for regular unemployment (self-employed, gig workers, insufficient work history, those who exhausted benefits), not to wipe away all state eligibility standards.
  • Thus, applying New York’s total unemployment requirement to PUA is consistent with both the text and purpose of the CARES Act and the federal-state unemployment framework.

III. Legal and Statutory Background

A. The Federal-State Unemployment Compensation Framework

Unemployment insurance in the United States operates under a cooperative federal–state scheme:

  • The federal government sets baseline requirements and provides financial support and tax incentives (see 42 U.S.C. § 501 et seq.; 26 U.S.C. § 3301 et seq.; 20 C.F.R. Part 601).
  • States design and administer their own unemployment insurance systems—determining eligibility, benefit amounts, duration, and disqualifications—so long as they meet minimal federal standards.
  • In Ohio Bureau of Employment Servs. v. Hodory, 431 U.S. 471 (1977), the U.S. Supreme Court recognized that states have “broad freedom” to structure their unemployment systems, subject only to compliance with federal law.

This structure is critical to Klosterman. It frames the presumption that where Congress does not clearly displace state eligibility rules, state law continues to define:

  • Who is “unemployed” or “partially unemployed,”
  • What constitutes a disqualifying condition (e.g., ongoing salaried employment), and
  • How ability to work and availability requirements are applied.

B. New York’s Pre-2021 “Total Unemployment” Scheme

During the relevant period (summer 2020), New York’s Unemployment Insurance Law included a distinctive, day-based “total unemployment” concept:

  • Former Labor Law § 522: “Total unemployment” was defined as “the lack of any employment on any day.”
  • Former Labor Law § 591(1): To receive benefits for a given week, a claimant needed more than three days of total unemployment in that week.
  • Former Labor Law § 523: After three full days of total unemployment, each additional day of total unemployment in the week became an “effective day.” Each effective day entitled the claimant to 25% of the weekly benefit amount:
    • 2 effective days → 50% of the weekly benefit;
    • 3 effective days → 75%;
    • 4 effective days → 100% (full weekly benefit).
  • Former Labor Law § 590(4): Caps benefits at 104 effective days per benefit year.

In addition to “total unemployment,” a claimant had to:

  • Lose employment through no fault of their own (Labor Law § 593);
  • Earn sufficient wages during the base period (Labor Law § 590(5)); and
  • Be ready, willing, and able to work and actively seeking employment (Labor Law § 591(2)).

The legislature later replaced the day-based formula with an hours-based system effective August 15, 2021 (L 2021, ch 277, §§ 1, 12–14). But Klosterman concerns the pre-amendment regime.

C. The CARES Act and Pandemic Unemployment Assistance

In March 2020, Congress enacted the CARES Act (Pub L 116-136, 134 Stat 281), creating several temporary unemployment programs, including:

  • PUA (15 U.S.C. § 9021): Pandemic Unemployment Assistance for “covered individuals” who are:
    • Not eligible for regular state or federal unemployment compensation or extended benefits (15 U.S.C. § 9021(a)(3)(A)(i)); and
    • “Unemployed, partially unemployed, or unable or unavailable to work” due to specified COVID-19-related reasons (id. § 9021(a)(3)(A)(ii)(I)).
  • FPUC (15 U.S.C. § 9023): Federal Pandemic Unemployment Compensation, providing an additional weekly payment (here, $300) to anyone who is already receiving qualifying unemployment benefits, including PUA.
  • LWA: Lost Wages Assistance, a supplemental benefit established by presidential memorandum and administered via federal disaster-relief authority (see UIPL 27-20; 42 U.S.C. § 5174(e)(2)). Eligibility for LWA also depended on the claimant’s eligibility for an underlying unemployment program such as PUA.

PUA was designed to reach categories of workers traditionally excluded from state unemployment programs, such as:

  • Self-employed individuals;
  • Gig workers and independent contractors;
  • Part-time job seekers; and
  • Workers lacking sufficient work history to qualify for regular unemployment.

However, the Act did not define the critical terms “unemployed,” “partially unemployed,” or “unable or unavailable to work.” Nor did USDOL’s disaster unemployment regulations in 20 C.F.R. Part 625 provide such definitions, even though the CARES Act imported those regulations “except as otherwise provided” (15 U.S.C. § 9021(h)).

D. USDOL Guidance on State Law’s Role

Congress expressly authorized the U.S. Department of Labor (USDOL) to issue guidance to carry out the CARES Act unemployment programs (15 U.S.C. § 9032(b)). USDOL responded with a series of Unemployment Insurance Program Letters (UIPLs). Key instructions include:

  • UIPL 16-20 (Attachment I): Explains that “the terms and conditions of the state law of the applicable state for an individual which apply to claims for, and the payment of, regular compensation apply to the payment of PUA to individuals,” including, but not limited to:
    • Claim filing rules,
    • Due process, notice, and appeals,
    • “Disqualification,” and
    • “Ability to work and availability for work.”
  • UIPL 15-20: States that the CARES Act “operate[s] in tandem with the fundamental eligibility requirements of the federal-state [unemployment] program which must be adhered to.”
  • UIPL 09-21: Emphasizes that “States must ensure that individuals only receive benefits in accordance with federal and state law.”

The Court of Appeals views these guidance documents as reflecting a coherent federal understanding: PUA was to be superimposed on, not divorced from, each state’s underlying unemployment eligibility framework.

IV. The Facts and Procedural History

A. Employment Status of Claimants

The claimants were:

  • Full-time civil service employees of DOCCS,
  • Working as institutional instructors, teachers, or supervisors of such staff,
  • Providing educational and vocational services to incarcerated individuals.

They were employed under a collective bargaining agreement that:

  • Provided an annual salary,
  • Allowed employees to choose to receive that salary over:
    • a 10-month academic-year schedule, or
    • a 12-month calendar schedule,
  • Offered optional summer work for additional hourly pay (beyond the annual salary).

Relevant facts:

  • Claimants worked the full 2019–2020 academic year.
  • In June 2020, DOCCS notified them that, due to COVID-19, it was suspending all academic and vocational programs for the summer of 2020.
  • As a result, no optional summer work was available that year.
  • Claimants remained on DOCCS’s payroll throughout the summer and resumed work at the start of the 2020–2021 academic year (see footnote 4).

B. Initial Grant of Benefits and Subsequent Reversal

Following the suspension of summer programs, claimants applied for:

  • New York state unemployment insurance (UI) benefits, and
  • PUA, FPUC, and LWA under the CARES Act and related federal authority.

NYSDOL initially granted these applications and paid benefits. Later, upon further review, NYSDOL issued revised determinations that:

  • Claimants were not “totally unemployed” under New York law during the summer of 2020 because they:
    • Remained full-time employees,
    • Continued receiving an annual salary that, by definition, covers the full 12-month year, including summer recess.
  • They therefore did not qualify for state unemployment benefits.
  • Because they were ineligible for the underlying unemployment benefits, they were also ineligible for PUA, and thus for FPUC and LWA, which depend on eligibility for a qualifying base program.
  • NYSDOL charged claimants with overpayments of PUA, FPUC, and LWA (but ultimately did not seek recovery of any state UI benefits they had already paid).

The parties stipulated that the Department’s decision in the named claimants’ cases would bind over 200 additional claimants on the core issues of:

  • Whether those claimants were “totally unemployed,”
  • Whether they were eligible to receive UI or PUA, and
  • Whether they were entitled to LWA and FPUC for the relevant period (footnote 6).

C. Administrative Proceedings and Appeals

At the administrative hearings:

  • Claimants confirmed their full-time civil service status, their roles as teachers/instructors, and that they were paid an annual salary (on either a 10- or 12-month basis).
  • An Administrative Law Judge sustained NYSDOL’s revised determinations, holding that claimants were not totally unemployed and therefore not entitled to unemployment benefits.
  • The Unemployment Insurance Appeal Board affirmed in separate yet substantively identical decisions.

On judicial review:

  • The Appellate Division, Third Department, affirmed the Board’s determinations in a series of decisions (Almindo, Bruyere, Klosterman, Dunn, Lamphier, Dixon-Domines, cited at footnote 7).
  • The Third Department found substantial evidence that claimants were not totally unemployed, because:
    • They were paid full annual salaries compensating them for the entire year, including summer recess, and
    • They remained employed, with a temporary suspension only of optional summer programs.
  • The court held that, since claimants were ineligible for state UI, they were also ineligible for CARES Act PUA and related benefits.

The Court of Appeals granted leave in several of the Third Department cases (footnote 8) and resolved them together in the Klosterman opinion, affirming all of the Appellate Division orders.

V. Analysis of the Court’s Reasoning

A. Central Legal Question

The Court of Appeals framed the issue as one of statutory compatibility and preemption:

Whether New York’s “total unemployment” requirement under former Labor Law §§ 522 and 591(1) may be applied to determine eligibility for CARES Act PUA benefits, or whether that state requirement conflicts with the CARES Act’s provisions making PUA available to individuals who are “unemployed, partially unemployed, or unable or unavailable to work” due to COVID-19.

Critically, the claimants did not contest on appeal the Appellate Division’s determination that substantial evidence supported the Board’s finding that they were not “totally unemployed” under state law. The only question for the Court was therefore legal: whether the federal CARES Act overrides or is inconsistent with the state “total unemployment” condition.

B. Precedents and External Authorities Cited

1. Ohio Bureau of Employment Servs. v. Hodory, 431 U.S. 471 (1977)

The Court invokes Hodory to underscore that:

  • States enjoy “broad freedom” to structure their unemployment systems (431 U.S. at 483).
  • Federal law sets basic parameters but largely leaves eligibility, benefit amounts, and duration to state legislatures.

Klosterman leverages Hodory to support a presumption that, unless Congress clearly dictates otherwise, state definitions of unemployment and related disqualifications remain operative even when federal funds are involved.

2. Federal PUA Fraud and Eligibility Cases

The Court cites two non-New York decisions to illustrate how courts have understood the interplay of PUA and state unemployment law:

  • United States v. Paiva, 2023 WL 4614505 (11th Cir. 2023):
    • In a criminal fraud case, the Eleventh Circuit upheld a guilty plea where the defendant had a full-time job but collected PUA, FPUC, and LWA.
    • The court concluded that because the defendant was not unemployed under state law, he was ineligible for those federal benefits.
    • New York’s high court cites this to show that other jurisdictions also tether PUA eligibility to state unemployment status.
  • Appeal of LaPadula, 2024 WL 5183712 (N.H. 2024) (nonprecedential), cert. denied, 145 S. Ct. 2795 (2025):
    • The New Hampshire Supreme Court reasoned that a claimant can be disqualified from regular state unemployment for a reason not expressly removed by the CARES Act and remain ineligible for PUA.
    • In other words, PUA does not erase all state disqualifications; only those inconsistent with, or overridden by, the CARES Act’s specific provisions are displaced.

These cases bolster the Court’s view that PUA fits within, rather than outside, the existing federal–state unemployment framework.

3. USDOL UIPLs and Disaster Regulations

The Court relies heavily on USDOL guidance letters:

  • UIPL 16-20: Clarifies that state law rules on disqualification and work availability apply to PUA.
  • UIPL 15-20: States the CARES Act operates “in tandem” with fundamental federal–state program eligibility requirements.
  • UIPL 09-21: Emphasizes that states must ensure payment only in accordance with both state and federal law.

Congress had directed that the existing disaster unemployment assistance regulations (20 C.F.R. Part 625) generally apply to PUA unless inconsistent with the Act (15 U.S.C. § 9021(h)). Those regulations also leave core definitions of “unemployment” to underlying state frameworks, reinforcing the Court’s approach.

4. Legislative History of the CARES Act

The Court consults legislative history not to override the statutory text, but to confirm its reading:

  • Rep. Pramila Jayapal described PUA as relief for those “ineligible for regular unemployment benefits, like gig workers and people who are self-employed” (162 Cong. Rec. E339 (Mar. 30, 2020)).
  • Sen. Roy Blunt said the Act would “create a temporary pandemic unemployment assistance program to give assistance to workers who normally wouldn't be eligible for unemployment yet” (166 Cong. Rec. S1995 (Mar. 24, 2020), emphasis added).
  • A Congressional Research Service report (Unemployment Insurance: Legislative Issues in the 116th Congress, 2021) similarly describes PUA as aimed at groups otherwise ineligible for regular state UI due to structural coverage gaps (e.g., self-employment) or exhaustion of benefits.

Notably, nothing in the legislative history suggests Congress intended to supersede all state eligibility filtering mechanisms. Instead, it highlights targeted expansions (self-employment, gig work, insufficient work history, exhaustion of benefits) layered on top of the state framework.

C. Addressing Claimants’ Arguments

1. Alleged Conflict: “Total Unemployment” vs. “Unemployed, Partially Unemployed…”

Claimants argued that New York’s “total unemployment” requirement conflicts with 15 U.S.C. § 9021(a)(3)(A)(ii)(I) because:

  • The CARES Act defines PUA eligibility for individuals “unemployed, partially unemployed, or unable or unavailable to work” due to COVID-19.
  • If the state applies a “total unemployment” requirement, that would purportedly:
    • Read the words “partially unemployed” and “unable or unavailable to work” out of the statute, and
    • Limit PUA to those who satisfy the state’s potentially narrower condition, contrary to Congress’s broader language.

The Court rejects this as based on a misapprehension of the New York statutory term:

  • “Total unemployment” is a term of art in New York law. It does not mean “having no work or income for the entire week.”
  • Instead, under former §§ 522 and 591(1), one could be considered “totally unemployed” on particular days and thereby qualify for benefits even if one worked up to three days in that week.
  • Thus, the state rule does not contradict the CARES Act’s recognition of partial unemployment. It is, in effect, a mechanism for quantifying partial unemployment via “effective days.”

As for “unable or unavailable to work,” the Court reads that phrase as consistent with:

  • CARES Act coverage for new categories of individuals not typically regarded as “unemployed” under ordinary state law definitions—such as:
    • Those who are self-employed or have lost contract work (15 U.S.C. § 9021(a)(3)(A)(ii)(II));
    • Those who still have jobs but cannot go to work due to personal or family COVID-19 illness, quarantine, or caregiving needs (id. § 9021(a)(3)(A)(ii)(I)(aa)-(gg)).

In other words, “unable or unavailable to work” allows eligibility for people whose work status does not fit traditional unemployment categories but whose labor-market participation is nonetheless impaired by pandemic conditions. It does not erase the foundational rule that state unemployment status and disqualifications still matter.

2. Alleged Absurdity: PUA Meant for Those Ineligible under State Law

Claimants pressed an “absurd results” argument: if state eligibility rules like New York’s total unemployment requirement still apply to PUA, then PUA cannot serve its core purpose, which is to provide relief for those not eligible for regular state unemployment.

The Court responds by unpacking the multiple, cumulative filters in New York’s UI eligibility determination. Under state law, to receive regular UI, a claimant must:

  • Be “totally unemployed” (as defined in former §§ 522, 591(1));
  • Have sufficient qualifying wages (Labor Law § 590(5));
  • Be able, available, and actively seeking work (Labor Law § 591(2)); and
  • Not have exhausted the maximum effective days of benefits (former § 590(4)).

The CARES Act plainly expands eligibility beyond what state systems reach, even while retaining core state conditions:

  • It opens PUA to:
    • Self-employed individuals,
    • Those with insufficient work history, and
    • Those who exhausted state benefits.
  • It removes some state disqualifications (for example, it permits benefits for people who cannot work due to COVID-19 illness or caregiving, even if they would otherwise fail “able and available” requirements), while leaving others in place.

Therefore, applying the state “total unemployment” requirement still leaves PUA as a significant expansion over traditional unemployment compensation. The Court finds nothing absurd in this arrangement; it sees it as fully consistent with both:

  • The cooperative structure of federal-state unemployment law, and
  • The targeted nature of the CARES Act’s expansions, as reflected in the legislative history.

D. Compatibility, Not Conflict

Given the absence of a direct textual definition in the CARES Act and the clear USDOL guidance, the Court concludes:

  • Congress did not intend to create a stand-alone federal definition of “unemployed” for PUA that would displace state frameworks.
  • Instead, CARES Act eligibility for “unemployment, partial unemployment, or inability/unavailability” is implemented through state law, except to the extent the Act expressly broadens eligibility.
  • New York’s “total unemployment” rule fits within that framework: it is a definitional and quantification device for determining when a reduction in work supports partial or full benefits.
  • Because claimants were found, as a factual matter, not to be totally unemployed (they remained salaried employees, compensated for the full year), they did not meet the threshold condition of being “unemployed or partially unemployed” under New York law, and thus could not be “covered individuals” under § 9021.

E. Overpayments and Recoupment

Once the Court determines claimants were ineligible for PUA, FPUC, and LWA, the consequence under federal and state law is straightforward:

  • Under 15 U.S.C. §§ 9021(d)(4) and 9023(f)(2), and implementing regulations (20 C.F.R. § 625.14; 44 C.F.R. § 206.120(f)(5)), states must treat improperly paid CARES Act benefits as overpayments.
  • NYSDOL therefore acted within its authority in charging claimants with overpayments for those federal programs.
  • NYSDOL chose, as a matter of policy or discretion, not to recover state UI funds already paid, but that does not affect its duty under federal law to address PUA, FPUC, and LWA overpayments.

VI. Impact and Implications

A. New Legal Principle Clarified

Matter of Klosterman establishes a clear principle for New York:

State unemployment eligibility standards, including New York’s “total unemployment” requirement, apply to determine eligibility for CARES Act PUA, FPUC, and LWA, unless expressly inconsistent with or overridden by federal law. The CARES Act’s reference to “unemployed, partially unemployed, or unable or unavailable to work” does not itself displace those state standards.

This principle has ripple effects each time Congress ties a federal unemployment benefit to “unemployment” status without defining that term.

B. Consequences for New York Claimants and Public Employees

  • Salaried employees with guaranteed annual pay:
    • Workers who remain on the payroll and receive an annual salary covering the full year are unlikely to qualify as “totally unemployed” during scheduled breaks (e.g., academic recesses), absent a termination, layoff, or other severance of the employment relationship.
    • If optional or supplemental work (like summer school) is canceled, that alone will not convert them into “unemployed” or “partially unemployed” for purposes of PUA and similar programs, as long as the core salaried employment endures.
  • Overpayment risks:
    • Claimants who receive PUA, FPUC, or LWA while still meeting state law criteria for “employment” may later face overpayment determinations if their underlying eligibility is challenged.
  • Education and correctional sectors:
    • The decision will be particularly relevant to teachers, instructors, and other annually salaried public employees who experience temporary program suspensions or schedule reductions but remain under an ongoing employment contract.

C. Guidance for Future Federal Emergency Programs

Although the CARES Act programs at issue have expired, Klosterman offers a roadmap for future federal emergency unemployment schemes:

  • Where Congress uses general terms (e.g., “unemployed,” “partially unemployed”) without defining them, courts are likely to:
    • Look to state unemployment law to supply content,
    • Refer to agency (USDOL) guidance indicating that state eligibility rules apply, and
    • Presume Congress did not intend to override state standards wholesale unless it says so expressly.
  • Legislators seeking to expand eligibility beyond state norms will need to:
    • Specify exactly which state disqualifications are to be displaced, or
    • Provide a truly independent federal definition of “unemployment” applicable to the program.

D. National Persuasive Authority

While binding only in New York, the decision is likely persuasive in other states grappling with:

  • Retrospective disputes over pandemic-era overpayments;
  • Interpretation of similar federal language in future emergency statutes; and
  • The interplay between state disqualifications (e.g., ongoing salaried employment, refusal of suitable work) and federal benefit expansions.

Courts in other jurisdictions may look to Klosterman for its structured analysis of:

  • How to harmonize federal and state statutes in cooperative schemes;
  • The weight to give federal agency guidance; and
  • The proper use of legislative history to confirm, rather than create, statutory meaning.

VII. Simplifying the Key Legal Concepts

A. “Total Unemployment” under Former New York Law

Despite its name, “total unemployment” in New York’s pre-2021 framework did not mean “no work at all in a week.” It meant:

  • On any day you perform no work and earn no income for that work, you are “totally unemployed” for that day (former § 522).
  • If, in a given week:
    • You have four or more such days, you can collect full benefits (through four effective days);
    • You have fewer such days, you may collect partial benefits (through fewer effective days);
    • You have three or fewer total unemployment days, you are not eligible for benefits at all that week.

Thus, “total unemployment” is a technical term of art that functions as a counting and qualification rule for benefit weeks.

B. “Effective Days”

An “effective day” is any day of “total unemployment” in a benefit week after the first three such days. Each effective day:

  • Is worth 25% of the weekly benefit amount;
  • Is capped at four per week and 104 per benefit year.

C. “Covered Individual” under the CARES Act

For PUA, a “covered individual” (15 U.S.C. § 9021(a)(3)(A)) must:

  1. Be not eligible for regular state or federal unemployment compensation or extended benefits (e.g., because they are self-employed, have insufficient work history, or exhausted benefits); and
  2. Be “unemployed, partially unemployed, or unable or unavailable to work” because of one of several specified COVID-19-related reasons, such as:
    • Being diagnosed with COVID-19;
    • Quarantine or caretaking duties;
    • Loss of work because the place of employment closed due to COVID-19 (the subsection claimants invoked: § 9021(a)(3)(A)(ii)(I)(jj)).

Klosterman holds that whether someone is “unemployed or partially unemployed” is still determined by state law, absent explicit federal override.

D. Federal Pandemic Programs Explained Briefly

  • PUA (Pandemic Unemployment Assistance):
    • Temporary program for those not normally eligible for regular unemployment (self-employed, insufficient work history, etc.),
    • Available only if unemployment (or inability to work) is tied to COVID-19 reasons listed in the statute.
  • FPUC (Federal Pandemic Unemployment Compensation):
    • Weekly supplemental payment (e.g., $300) on top of existing unemployment benefits, including PUA;
    • If you are not eligible for the underlying benefit (e.g., PUA), you cannot receive FPUC.
  • LWA (Lost Wages Assistance):
    • Additional temporary benefit funded through disaster relief, for those already receiving PUA or other qualifying unemployment benefits;
    • Again, no underlying eligibility, no LWA.

E. “Substantial Evidence” and Scope of Judicial Review

“Substantial evidence” is a deferential standard used when courts review administrative agency fact-finding:

  • Courts do not reweigh evidence or decide facts anew.
  • They ask only if there is “relevant proof as a reasonable mind may accept as adequate” to support the agency’s conclusion.

In Klosterman, the Appellate Division held that substantial evidence supported the Board’s finding that claimants were not “totally unemployed.” The claimants did not challenge that ruling; instead, they challenged only the legal significance of that finding in light of the CARES Act.

F. Overpayments

An “overpayment” occurs when a claimant receives benefits to which they were not legally entitled. Under both federal and state law:

  • Such amounts are typically subject to recoupment,
  • Though there can be provisions for waiver in cases of agency error or hardship, depending on the specific statutes and regulations.

In this case, the Court simply confirms that NYSDOL correctly characterized the PUA, FPUC, and LWA payments as overpayments in light of the legal ineligibility for those programs.

VIII. Conclusion

Matter of Klosterman provides a definitive and carefully reasoned resolution to a class of disputes that arose nationwide during the COVID-19 pandemic: whether federal emergency unemployment benefits decouple eligibility from state unemployment definitions and disqualifications.

The Court of Appeals holds that they do not. Instead:

  • State law continues to define what it means to be “unemployed” or “partially unemployed,” including nuanced concepts such as New York’s former “total unemployment” and “effective days,” unless Congress clearly dictates otherwise.
  • The CARES Act’s PUA program expands the universe of potentially eligible individuals but remains anchored in state unemployment frameworks for core eligibility determinations.
  • Being unable to perform optional or supplemental work—while still holding a salaried, ongoing position covering the full year—is insufficient, under New York law, to establish “total unemployment,” and thus insufficient to open the door to PUA, FPUC, or LWA.

In broader terms, Klosterman affirms the resilience of the cooperative federal–state unemployment model, even in times of national emergency. It signals that where Congress intends to override state eligibility rules, it must say so explicitly. Otherwise, federal benefit expansions, like PUA, are presumed to operate in tandem with—and not in derogation of—state unemployment structures.

Case Details

Year: 2025
Court: New York Court of Appeals

Judge(s)

Singas, J.

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