LANSING — State lawmakers have agreed to set aside $20 million to settle a lawsuit by thousands of people who were wrongly accused of fraud when seeking unemployment benefits.

The money was included in a larger bill recently signed into law by Democratic Governor Whitmer. It followed an agreement reached by the Attorney General’s Office and lawyers for people who said their constitutional rights were violated.

Their case got a boost in July when the Michigan Supreme Court said they could seek financial relief from the state.

An automated computer system used during the administration of Republican Governor Snyder was a disaster. People were accused of cheating to get jobless aid. They were forced to repay money, along with substantial penalties, before the Unemployment Insurance Agency finally acknowledged widespread errors that affected more than 40,000 people.

Some victims had to hire lawyers. Others filed for bankruptcy, lost wages, suffered poor credit ratings or had trouble finding a job and housing.

Lawyers argued that due-process rights — a right to be heard — were violated when people tried to untangle themselves from the mess.

An attorney for the plaintiffs, Michael Pitt, said thousands of people should benefit, but the exact number was not known yet.

“We need to do a deep dive into the records,” Pitt said Thursday. “We’re months away from getting the process set up so people will be able to start making claims.”

Attorney General Dana Nessel said it was time to close the case.

“This settlement honors my commitment to ensure those falsely accused by their government receive fair compensation for their suffering,” Nessel said.

The Michigan Supreme Court broke new ground with its 4-3 summer opinion, saying the state government can be held liable when constitutional rights are violated.

— AP report, edited for style.