Pepsico workers snared by change in unemployment rules


13 Investigates has discovered hundreds of people who've been receiving unemployment benefits are being asked to pay the money back. Many other workers may be at risk as well, due to a major change in the law.

13 Investigates uncovers what went wrong for workers at a west side Pepsico plant, and why the company is now under fire.

The big "G" - Gatorade - is packaged and shipped by the truck loads in Indianapolis at Pepsico.

But between October and December each year, production stops for the year and employees at the plant are sent home. No pay from two weeks up to several months.

It's a seasonal layoff. For years under Indiana law, Pepsico employees could file for unemployment.

George Lewis had done so for 12 years.

"It would pay the bills until you got your regular paycheck," said Lewis.

But months after last year's layoff, something unusual happened.

George got a call from work. It was urgent.

"They called me and told me that I was under investigation with the state and I'm suspended. And it was a shock to me," he recalled.

Indiana's Department of Workforce Development was accusing George of fraud for taking unemployment benefits during the layoff. The problem, they said, was Pepsico later gave George holiday pay for the same period he we collecting unemployment.

"I just couldn't believe it. It was just like I was in another world or something," said George Lewis.

George wasn't alone. According to his attorney, the alleged fraud was widespread at Pepsico and generally unintentional.

"We believe that the entire company, the entire workforce was following the process that had been laid out by the company in the past," said Kent, who told 13 Investigates George was not aware of any changes in the process.

George had been filing for unemployment the same way for 12 years with no problem.

But in 2011, the law changed. Indiana's Department of Workforce Development, the state agency that pays unemployment benefits, said workers on scheduled layoffs were no longer eligible for unemployment.

Joseph Frank with Indiana Workforce Development says the state wants unemployment checks to go to people who truly are not going back to work.

"A manufacturing plant that has a re-tooling for two weeks or whatever, those folks know that after that re-tooling is over they're going to go back to work, so they wouldn't be eligible for unemployment insurance benefits," he said, making a new distinction in the law.

Stunned, George paid back every dime of unemployment the state says he wrongly took.

The state said that was good enough.

"A change in the law is not necessarily those people committing fraud," said Frank, explaining why the state is not prosecuting everyone they asked to repay money.

But Pepsico fired George, even though his attorney says he was a model employee.

"Well, it really hurts. It really hurts. Twelve years with the company. I was there when it was dirt out there, and just to leave out like this it doesn't feel good at all," Lewis confided.

Emotions spill over as he recalled the day police officers escorted him out of Pepsico, like a criminal.

"I'm a godly man. I'm a hardworking man. I love and care about everybody, I treat everybody with respect," said Lewis with conviction, as tears rolled down his face.

George was among more than 70 employees terminated.

It turns out they had more than just the unemployment overpayments in common.

All were African Americans or Hispanics. They all had also previously used federally protected Family and Medical Leave.

On behalf of the fired workers, Daniel Kent is suing Pepsico for discrimination, alleging minorities were fired as part of the investigation while their white counterparts who took the same benefits, are still working.

"A number of Caucasian employees were allowed to repay the benefits and avoid scrutiny," said Kent, who listed the names of at least 24 Caucasian employees in the federal lawsuit.

So how did the state detect fraud at Pepsico in the first place?

13 Investigates tracked down the employee who first caught the state's eye.

"I know it's my fault from how it's trickling down, and got started. But I'm not the one that said anybody's name or anything like that," Moore insisted. He says any information about other employees came from the company.

Kelly Moore was a machinist at Pepsico for ten years. It wasn't just a change in law that brought his case to the state's attention.

The state caught Moore double dipping between 2008 and 2010. He filed for unemployment benefits after he went back to work. He was receiving both a paycheck AND unemployment benefits.

That's clearly against the law.

"It's pretty hard to prove you weren't committing fraud when you had another job or were making money from a job and you click a button that said 'I didn't have a job this week,'" added Frank.

The state admits fraudulent benefits were paid out despite alerts sent to companies informing them about employees filing unemployment, and despite quarterly payroll records submitted to the state.

Joe Frank says the agency wasn't previously set up to catch those who double dip.

"In the past there weren't as many safeguards in place and people could slip through the system," he acknowledged.

Workforce Development is now going after those illegally taking unemployment.

"It's important because this is taxpayer money, it's money that is meant for people that are really in need," explained Joe Frank.

While the agency can't talk about Pepsico or any company by law, Frank says workers who didn't understand the guidelines won't face criminal charges. Getting the money back is the state's focus.

"If they didn't understand the system, we're going to work with them, we're going to recoup those funds by federal law," reiterated Frank.

Still they're out of luck and jobs at Pepsico.

"I felt kind of bad for all the people that got fired," said Moore, who was not invited to join the lawsuit against Pepsico.

Kelly Moore regrets Pepsico lost a lot of good people - people like George Lewis.

"I didn't think I did anything wrong," Lewis explained. "I feel that everybody needs to be treated fairly. Right now we feel like our names have been defamed by the company," he said.

PepsiCo's North America office in New York City tells 13 Investigates:

"This issue arose in connection with an investigation conducted by the State of Indiana's Department of Workforce Development into the unemployment benefit claims of some of our employees. We have cooperated with the state's investigation and we strongly believe that our actions were lawful, thorough, and fair."

Pepsico is now facing a federal discrimination lawsuit in addition to a lawsuit in Marion County Court over workers' vacation pay.

The State of Indiana has recouped $10.8 million in fraudulent claims over the last two years, but won't say how much has been paid back from Pepsico due to confusion with the new law.