Federal-State Unemployment Compensation Program: Unemployment Insurance Program Letters Interpreting Federal Unemployment Insurance Law

DEPARTMENT OF LABOR

Federal-State Unemployment Compensation Program: Unemployment

Insurance Program Letters Interpreting Federal Unemployment Insurance

Law

The Employment and Training Administration interprets Federal law

requirements pertaining to unemployment compensation (UC) as part of

its role in the administration of the Federal-State UC program. These

interpretations are issued in Unemployment Insurance Program Letters

(UIPLs) to the State Employment Security Agencies (SESAs). The UIPLs

described below are published in the Federal Register in order to

inform the public.

UIPL 29-83 Change 2

Secondary adjustments are a part of many State experience rating

plans. This UIPL provides States with additional guidance concerning

those secondary adjustments which may be used in determining reduced

rates for employers.

UIPL 22-87, Change 1

UIPL 22-87, issued in 1987, consolidated several issuances

concerning the treatment of pensions received by claimants for UC. This

Change 1 to UIPL 22-87 provides further guidance on the subject.

Specifically, it deals with the requirements concerning pensions when

amounts are rolled over into eligible retirement plans. It was issued

in response to numerous questions on the subject which were raised by

States trying to determine how to deal with rollovers.

UIPL 17-95, Change 1

Public Law 103-465, commonly known as the legislation on ``GATT''--

The General Agreement on Tariffs and Trade, included a provision that,

effective with weeks beginning after January 1, 1997, requires States

to deduct and withhold Federal income tax from UC if the individual so

elects. UIPL 17-95 explained the change in UC law, discussed its

effective date and provided model language for States to use in

amending State UC law. Change 1 to UIPL 17-95 advised States of the

Department of Labor's position concerning priorities when a claimant

subject to withholding required under State law also requests the

withholding of income tax.

UIPL 35-95

As a result of the increased use of telephone or other electronic

methods of UC tax collection and benefit claimstaking, the Department

has found it necessary to issue this UIPL in order to ensure that

States are aware of the Department's position concerning the use of the

new technology as it relates to the UC program. This UIPL sets forth

the Department's position on the various issues involved and interprets

the relevant law and regulation.

UIPL No. 1-96

The Department issues several types of directives in order to set

forth official agency policy concerning the programs administered by

the Department. Questions have been raised by several groups regarding

what weight these directives carry as interpretations of Federal law.

As a result, this directive was issued to clarify the status of these

directives.

UIPL 2-96

It came to the Department's attention that several States restrict

the approval of training to that which is provided within the State.

Since 1974, it has been the express position of the Department that

such restrictions are contrary to the requirements of the Federal

Unemployment Tax Act. This directive was issued to restate and

reinforce that position.

[[Page 55605]]

Dated: October 26, 1995.

Timothy M. Barnicle,

Assistant Secretary of Labor.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI

Correspondence Symbol: TEURL

Dated: September 28, 1995

Directive: Unemployment Insurance Program Letter of No. 29-83 Change 2

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: Experience Rating--Permissible Secondary Adjustments

1. Purpose. To provide States with additional guidance concerning

those secondary adjustments which may be used in determining reduced

rates for employers.

2. References. The Federal Unemployment Tax Act (FUTA); the Social

Security Act (SSA); Unemployment Insurance Program Letter (UIPL) No.

29-83, dated June 23, 1983 and UIPL No. 29-83, Change 1, dated

September 24, 1991 (both published at 56 Fed. Reg. 54891 (October 23,

1991)); and Employment Security Memorandum (ESM) No. 9, dated July

1940.

3. Background. Secondary adjustments are a part of many State

experience rating plans. They are adjustments, permissible under

limited conditions, to the measure of an employer's experience which

bear no relation to the employer's experience. The most typical example

of a secondary adjustment is the triggering of a particular rate

schedule due to the unemployment fund's balance. Recently a question

has been raised as to whether payments by employers to funds other than

the State's unemployment fund may be used as secondary adjustments.

This UIPL provides the Department's position.

Rescissions: None

Expiration Date: September 30, 1996

4. Discussion.

a. Federal law. As a condition of employers in a State receiving

the additional credit, the State's law must be certified as meeting the

requirements of Section 3303, FUTA, which provides, in pertinent part,

as follows--

(a) STATE STANDARDS.--A taxpayer shall be allowed an additional

credit under Section 3302(b) with respect to any reduced rate of

contributions permitted by a State law, only if the Secretary of

Labor finds that under such law--

(1) no reduced rate of contributions to a pooled fund or to a

partially pooled account is permitted to a person (or group of

persons) having individuals in his (or their) employ except on the

basis of his (or their) experience with respect to unemployment or

other factors bearing a direct relation to unemployment risk during

not less than the 3 consecutive years immediately preceding the

computation date * * *.

The term ``pooled fund'' is defined in Section 3303(c)(2), FUTA, as

``an unemployment fund or any part thereof * * * into which the total

contributions of persons contributing thereto are payable, in which all

contributions are mingled and undivided, and from which compensation is

payable to all individuals eligible for compensation from such fund.''

Similarly, Section 3303(c)(3), FUTA, defines ``partially pooled

account'' as a ``part of an unemployment fund * * *.'' Section 3306(f),

FUTA, defines ``unemployment fund'' as ``a special fund * * * for the

payment of compensation * * *.'' These provisions establish an explicit

linkage between experience rating and payments to the unemployment fund

from which unemployment compensation (UC) is paid.

b. Secondary Adjustments. As noted in ESM No. 9 UIPL No. 29-83,

the Department and its predecessor agencies have approved experience

rating plans using secondary adjustments which are not related to an

employer's experience. The following explanation of secondary

adjustments (derived in part from ESM No. 9) is from page 10 of the

attachment to UIPL 29-83:

The requirement that a reduced rate must be based on the

employer's experience makes it necessary to maintain the influence

of that experience in the determination of the reduced rate granted

to an employer. The measurement of experience may be subjected to

adjustments by the application of other factors bearing no relation

to an employer's experience only if the basic experience factor has

not been so impaired by combination with such other factors that the

employer's own experience is no longer the basic determinant of his

reduced rate.

* * * * *

A secondary adjustment that results in a reduction of rates has

been found not to be an unreasonable distortion of the experience

factor if the reduction is the same for all rated employers and if

the reduction is not applied to employers not otherwise entitled to

a reduced rate based on their own experience. [Emphasis in

original.]

Although UIPL 29-83 is broadly written, it should not be read to

permit the introduction of any factor unrelated to an employer's

experience. It is the position of the Department that, to meet the

requirements of Section 3303(a)(1), FUTA, secondary adjustments must

directly serve the purpose of the unemployment fund.

A secondary adjustment, by definition, involves the intrusion of a

factor unrelated to experience into the State's experience rating

system. It does not follow that any intrusion is permissible. In fact,

these intrusions have in the past been limited as described in UIPL 29-

83. As discussed in item 4.a. above, experience rating is explicitly

linked to payments to the unemployment fund. Therefore, the

introduction of a factor which does not directly serve the purpose of

the unemployment fund (i.e., the payment of UC) is an unacceptable

intrusion into experience rating.

A payment to fund other than the unemployment fund is not a factor

directly serving the unemployment fund's purpose and may not be used in

determining the rate of an individual employer. This applies to

payments to State general funds (for example, income or sales tax

payments) as well as to payments which could potentially be used for

payments of UC.\1\ Similarly, the balance in another State fund may not

be used to trigger rate schedules for the unemployment fund since the

other fund does not directly serve the purpose of the unemployment

fund.

\1\The principal in certain State funds (often called reserve

funds) may be used for any or all of the following purposes: the

payment of UC, loans to the State's unemployment fund, or the

payment of interest on advances made under Title XII, SSA. Reserve

fund interest is used for non-UC purposes such as training or

economic development activities. To date, all State reserve funds

have been created with a concurrent reduction in the amount payable

to the State's unemployment fund. Thus, the reserve funds have

deprived the unemployment fund of assets and interest earnings.

Moreover, there is no guarantee that the State will not amend its

law to authorize use of reserve fund moneys for non-UC purposes.

This is because, unlike unemployment funds, reserve funds are not

subject to the ``immediate deposit'' with ``withdrawal'' standards

of Sections 3304(a) (3) and (4), FUTA, and Sections 303(a) (4) and

(5), SSA, which assure unemployment fund moneys will be used for the

payment of UC. Finally, payment of interest on advances made under

Title XII, SSA, from the unemployment fund is prohibited by Section

303(c)(3), SSA, and Section 3304(a)(17), FUTA. Thus, payments of

interest do not serve the purposes of the unemployment fund.

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A review of previously approved secondary adjustments indicates

that the Department has limited approval only to adjustments directly

serving the purpose of the unemployment fund.\2\

[[Page 55606]]

For example, the triggering of rate schedules generates sufficient

revenues for the payment of UC. Factors related to socialized costs,

including the experience factor in benefit-wage ratio States, serve to

make the fund whole for costs which are not otherwise funded through

experience rates. These costs include UC not charge to a specific

employer or charged to an employer who has gone out of business.

\2\Voluntary contributions were originally considered to be

acceptable secondary adjustments since they are paid into the

unemployment fund, thereby directly servicing the fund's purpose.

Since Section 3303(d), FUTA, now contains specific authorization for

voluntary contributions, their status as secondary adjustments is

moot. Section 3303(d) was added to FUTA in 1947 to ``give express

statutory sanction to the administrative interpretation which has

permitted voluntary contributions . . .'' and to ``provide for a

definite period within which voluntary contributions must be made .

. .'' (H. Rep. No. 759, 80th Cong., 1st Sess. (1947)).

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5. Action Required. State agency administrators are requested to

review existing State law provisions to ensure that Federal law

requirements as set forth in this UIPL are met. Prompt action,

including corrective legislation, should be taken to assure Federal

requirements are met.

7. Inquiries. Direct questions to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI

Correspondence Symbol: TEURL

Dated: June 19, 1995

Directive: Unemployment Insurance Program Letter No. 22-87 Change 1

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: Whether Unemployment Compensation must be Reduced when Amounts

are Rolled Over into Eligible Retirement Plans

1. Purpose. To provide guidance concerning the Federal unemployment

compensation (UC) law requirements relating to the deduction from UC of

``rollovers'' of retirement funds.

2. References. The Internal Revenue Code of 1986 (IRC), including

section 3304(a)(15) of the Federal Unemployment Tax Act (FUTA) and

section 402; and Unemployment Insurance Program Letter (UIPL) No. 22-

87, 52 Fed. Reg. 22546 (1987). UIPL 22-87 was released April 30, 1987,

but erroneously dated April 30, 1988.

3. Background. Section 3304(a)(15), FUTA, requires, as a condition

for employers in a State to receive credit against the Federal

unemployment tax, that the amount of UC payable to an individual be

reduced for any week which begins in a period with respect to which the

individual is ``receiving a governmental or other pension, retirement

or retired pay, annuity, or any other similar periodic payment which is

based on the previous work of such individual . . .'' This section of

FUTA goes on to provide certain exceptions to this requirement not

relevant to this Change 1.

Rescissions: None.

Expiration Date: June 30, 1996.

Section 402(c), IRC, provides for the transfer of ``eligible

rollover distributions'' from a ``qualified trust'' to an ``eligible

retirement plan.'' (Section 402(c)(8) of the IRC provides definitions

of ``qualified trust'' and ``eligible retirement plan.'' Section

402(c)(4) defines ``eligible rollover distribution.'') If all the

requirements of Section 402, IRC, are met, including that the transfer

of the payment is made within 60 days of receipt by the individual,

then the payments will not be included in gross income for Federal

income tax purposes.

In light of the retirement pay provisions of Section 3304(a)(15),

FUTA, the question has arisen whether States are required to reduce UC

when distributions are rolled over. This Change 1 is issued to provide

the Department of Labor's position on this question.

4. Effect of Rollovers. If a rollover from a qualified trust into

an eligible retirement plan is not subject to Federal income tax, then

it is not considered to be ``received'' by the individual for purposes

of Section 3304(a)(15), FUTA. A non-taxable rollover does not represent

a payment to the individual for purposes of retirement. Instead, it

merely effectuates a change with respect to the retirement plan under

which the amounts are maintained. Therefore, it is not considered to be

``received'' and States are not required to reduce UC due to such

rollovers. However, if any distribution (or part of a distribution)

from a qualified trust is subject to Federal income tax, then that

amount is considered to be ``received'' for purposes of the FUTA and UC

must be reduced if otherwise required by Section 3304(a)(15).

States should also be aware that, when any distribution is paid as

a lump sum, FUTA does not require a reduction in UC. In this case, it

is not necessary to determine if the payment is ``received'' by the

individual. As discussed on page 6 of UIPL 22-87, FUTA does not require

UC to be reduced due to the receipt of non-periodic, lump sum

retirement payments. Further, FUTA only requires reduction of UC due to

receipt of amounts based on the previous work of the individual.

Therefore, for example, if a distribution is paid to a surviving

spouse, the spouse's UC need not be reduced.

5. Action Required. State Administrators should provide this

information to appropriate staff.

6. Inquiries. Inquiries should be directed to the appropriate

Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI

Correspondence Symbol: TEURL

Dated: September 28, 1995

Directive: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 17-95 CHANGE 1

To: ALL STATE EMPLOYMENT SECURITY AGENCIES

From: MARY ANN WYRSCH, Director, Unemployment Insurance Service

Subject: Priority of Withholding from Unemployment Compensation (UC)

1. Purpose. To advise States of the Department of Labor's position

concerning priorities when a claimant subject to withholding required

under State law also requests the withholding of income tax.

2. References. The Internal Revenue Code of 1986 (IRC), as amended,

including the Federal Unemployment Tax Act; Title III of the Social

Security Act (SSA); Section 702 of P.L. 103-465; 26 C.F.R. 31-3402(i)-

2; and Unemployment Insurance Program Letter (UIPL) 17-95.

3. Background. UIPL 17-95, dated February 28, 1995, provided

guidance concerning the withholding of income tax from UC. This Change

1 provides guidance on a matter left unresolved in that UIPL: the

priority of withholding when other amounts are also to be withheld from

the same payment of UC.

4. Discussion. Federal law requires withholding from UC in certain

cases. Under Section 303(a)(1), SSA, States must have ``methods of

administration'' for enforcing amounts owed to the unemployment fund.

The principal ``method of administration'' for collecting these

overpayments is the offsetting of amounts from future payments of UC.

Also, States are required to withhold certain child support obligations

under Section 303(e)(2), SSA.

Rescissions: None

Expiration Date: September 30, 1996

Additional provisions of the SSA gives States the option of

withholding other amounts from UC. Section 303(d)(2), SSA, provides for

the withholding of Food Stamp

[[Page 55607]]

overissuances from UC. Section 303(g), SSA, authorizes interstate

offset of overpayments as well as offsets of overpayments between State

UC and Federal UC programs where the State acts as an agent for the

Department of Labor.

Unlike the above forms of withholding, withholding of income tax is

voluntary on the part of the claimant. Giving priority to the voluntary

withholding of income tax would frustrate the ``involuntary''

withholding requirements.

Section 3402(p)(2), IRC, provides that, for withholding purposes, a

payment of UC shall be treated as if it were a payment of wages by an

employer to an employee. Implementing regulations at 20 C.F.R.

31.3402(i)-2 provide that an employee may request the employer to

withhold an additional amount from the employee's wages. The employer

must comply with the employee's request, but only to the extent that

the requested amount does not exceed the amount remaining after the

employer has withheld all amounts required to be withheld by Federal,

State and local laws.

Based on the above, the Department has concluded that amounts

required to be withheld under State law must be withheld prior to any

voluntary withholding requested by the claimant. The Department

continues to leave to the States the matter of priorities among amounts

that are required to be withheld. Although States are encouraged to be

more specific on this point, Section (4) of the attached revised draft

language does not specify any priorities among the required

withholdings. States may, of course, also make any changes to the draft

language necessary to conform with State usage.

5. Action Required. State agencies should take action to assure

that the above position is reflected in State law. States not using the

draft language are reminded that they will need to submit a plan to the

appropriate Regional Office no later than September 30, 1996.

6. Inquiries. Inquiries should be directed to the appropriate

Regional Office.

7. Attachment. Revised Draft Language to Implement a Voluntary

Withholding Program.

Attachment to UIPL 17-95, Change 1--Revised Draft Language To Implement

a Voluntary Withholding Program

(1) An individual filing a new claim for unemployment

compensation shall, at the time of filing such claim, be advised

that:

(A) Unemployment compensation is subject to Federal, State and

local income tax;

(B) Requirements exist pertaining to estimated tax payments;

(C) The individual may elect to have Federal income tax deducted

and withheld from the individual's payment of unemployment

compensation at the amount specified in the Federal Internal Revenue

Code;

(D) The individual may elect to have State income tax deducted

and withheld from the individual's payment of unemployment

compensation at the rate of ____ percent;

(E) The individual may elect to have local income tax deducted

and withheld from the individual's payment of unemployment

compensation at the rate of ____ percent;

(F) The individual may elect to have State and local income

taxes deducted and withheld from the individual's payment of

unemployment compensation for other States and localities outside

this State at the percentage established by such State or locality;

and

(G) The individual shall be permitted to change a previously

elected withholding status.

(2) Amounts deducted and withheld from unemployment compensation

shall remain in the unemployment fund until transferred to the

Federal, State or local taxing authority as a payment of income tax.

(3) The commissioner shall follow all procedures specified by

the United States Department of Labor and the Federal Internal

Revenue Service pertaining to the deducting and withholding of

income tax.

(4) Amounts shall be deducted and withheld under this section

only after amounts are deducted and withheld for any overpayments of

unemployment compensation, child support obligations, food stamp

overissuances or any other amounts required to be deducted and

withheld under this Act.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI

Correspondence Symbol: TEUMI

Dated: June 28, 1995

Directive: Unemployment Insurance Program Letter No. 35-95

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: The Department of Labor's Position on Issues and Concerns

Associated With the Utilization of Telephone and Other Electronic

Methods in the Unemployment Insurance (UI) Program

1. Purpose. To advise State Employment Security Agencies (SESAs) of

the Department of Labor's position regarding issues relating to

telephone or other electronic methods of processing in the UI program.

2. Background. Several SESAs are developing, exploring, or

implementing a variety of innovative approaches to UI tax and benefit

claimstaking and processing utilizing new and developing electronic

information/communication technologies. The technologies include, but

are not limited to, interactive voice response units (IVRs) for

continued claims (inquiry and filing), telephone initial claimstaking,

and electronic funds transfer for collecting UI taxes and paying

benefits. These approaches continue the movement of the UI program

toward a ``paperless'' system, thereby reducing office traffic and

making it more easy and convenient for claimants and employers to

transact UI business.

Insofar as SESAs have planned for or implemented new methods of

claimstaking, issues have arisen requiring a response from the

Department. Since there has not been an authoritative statement of the

Department's position on this matter, the Department's position is set

forth below.

Rescissions: None

Expiration Date: June 30, 1996

3. Position.

The Department's overall position is to promote methods of

administration which ensure that UI applicants are afforded prompt and

efficient service, and also ensures that pertinent Federal requirements

are met by the claimant and SESA. To this end, the Department believes

that SESAs should move toward fully implementing telephone claimstaking

or other electronic methods of filing (e.g., computer terminals at

kosks in one-stop centers etc.) for both initial and continued claims

filing processes. The UI Information Technology Support Center (ITSC)

will support the nationwide expansion of telephone claims technology.

Any system planned or implemented to provide ease and convenience

for filing claims must, however, provide safeguards to meet the

requirement of Section 303(a)(1) of the Social Security Act (SSA), that

the State have in place such methods of administration reasonably

calculated to insure the full payment of UI when due. In other words,

there must be methods in place to protect against improper payments and

fraud. Also, prior to filing an application (oral or IVR telephone

system or other electronic method (touchscreen or computer keyboard)),

claimants must be advised that the law provides penalties for false

statements including penalties for perjury in regard to citizenship/

immigration status. Since the State is required to establish a

[[Page 55608]]

record of the claim, the claimant should also be advised that his/her

answers will cause a record to be produced.

A. Initial Claimstaking.

(1) Verification of Claimant Identity/Signature.

There is no Federal requirement that a claimant provide a signature

on a claim form. Any such requirement would be pursuant to State law.

However, Section 303(a)(1) of the SSA, requires that a State have such

methods of administration to reasonably insure the full payment of

unemployment compensation when due. In addition, Section 1137(a)(1),

SSA, requires States to require the individual to furnish his/her

Social Security Number as a condition of eligibility for benefits.

These Federal provisions mean, among other things, that a State must

have a system to reasonably insure that the name and Social Security

Number used to establish eligibility for unemployment compensation

belongs to the individual filing the claim.

(2) Identification of Ethnic Background and Handicapped Status.

The Department's regulations at 29 CFR Parts 31 and 32 require

recipients of Department of Labor grant funds to collect, maintain and

make available data as may be necessary to ascertain compliance with

the requirements of the nondiscrimination statutes (Title VI of the

Civil Rights Act of 1964, as amended; Section 504 of the Rehabilitation

Act of 1973, and the Age Discrimination Act of 1975, as amended).

Unemployment Insurance Program Letter UIPL) Nos. 46-89 and 46-89,

Change 1, set forth the guidelines and requirements that State agencies

must follow in collecting the data (at the time an individual files a

new initial claim), and reporting the data relative to the unemployment

insurance program.

There is no Federal requirement regarding the method to be utilized

by the State to obtain the information (i.e., orally to a claimstaker,

IVR, self-entry at a computer keyboard or touchscreen, completing a

response on a hardcopy document or other method (e.g., recorded on

tape)). However, the information must be given voluntarily by the

individual and the State agency may not change the response of the

applicant. The applicant also has the right to refuse to provide the

information and such refusal will not subject such individual to any

adverse action or treatment. Therefore, any telephone or other

electronic claims filing system must be able to accommodate a ``no

response'' answer.

(3) Child Support and Other Obligations.

Section 303(e)(2)(A)(i) of the SSA requires each State agency to

``require each new applicant for unemployment compensation to disclose

whether or not such applicant owes child support obligations (as

defined in the last sentence of paragraph (1).'' UIPL Nos. 1-82 and 15-

82 set forth the basic requirements for States to follow in

implementing the statute. Essentially, the disclosure requires a

``yes'' or ``no'' response to a question on any child support owed when

individuals file a new initial claim.

Effective January 1, 1997, among other Federal law amendments,

Section 3304(a)(18) of the Federal Unemployment Tax Act (added by P.L.

103-465 enacted December 8, 1994) requires States to offer voluntary

withholding of Federal income tax for all unemployment compensation

(includes State UI, UCFE/UCX, TRA, DUA, etc.) payments made after

January 1, 1997. UIPL No. 17-95 advised State agencies of the

provisions and furnished guidelines on implementation. States will need

to include questions during the new initial claim filing process on

whether the individual elects or declines to have income tax withheld

(mandatory for Federal, and optional for State or local tax withholding

if authorized by State law).

Additionally, other Federal law provisions permit States, if the

States have provisions in their State laws, to withhold amounts from

unemployment compensation to pay health insurance premiums and food

stamp over-issuances. Such provisions would also require asking

claimants to provide responses to questions at the time of filing

initial claims.

For any of the above obligations, other than obtaining the needed

information at the time of filing an initial claim, there is no Federal

requirement for the method to be utilized by the State to obtain the

information. The State agency may obtain the information orally, by

IVR, keyboard or touchscreen entry, on a hardcopy document or other

method.

(4) Citizenship or National Status.

Section 1137(d)(1)(A) of the SSA requires that each State require,

as a condition of eligibility for unemployment compensation, ``a

declaration in writing by the individual, (or, in the case of an

individual who is a child, by another on the individual's behalf),

under penalty of perjury, stating whether or not the individual is a

citizen or national of the United States, that the individual is in a

satisfactory immigration status.'' State laws require that individuals

be able and available for work in order to be determined eligible for

benefits. If an alien is not in ``satisfactory immigration status,''

such individual cannot be considered eligible for unemployment

compensation. The Department issued guidance and instruction to States

for implementation of Section 1137(d) and determining eligibility for

aliens in UIPL Nos. 1-86; 12-87; 12-87, Change 1; and 6-89. The

instructions provide that all applicants for unemployment compensation

provide a ``yes'' or ``no'' response to a question on the new initial

claim form or other form, asking if the applicant is a ``U.S. citizen

or national.'' If the answer is ``no'', then an alien ID number is to

be provided from registration documentation issued by the Immigration

and Naturalization Service (INS) or such other documentation as the

State determines constitutes reasonable evidence (Section 1137(d)(2).

The above actions required of the applicant constitute ``in writing.''

In the case of telephone or other electronic method initial claims

filing, it is the Department's position, that if the claimant takes

action to produce a record indicating citizenship and immigration

status, such as entry of data through a touchtone phone (IVR system) or

through a computer keyboard or touchscreen response (at a kiosk) in

response to a question, such action is a ``declaration in writing by

the individual.'' However, a claimant's oral response to a

claimstaker's question, and then the claimstaker's entry onto a form or

into an electronic format, does not constitute such a declaration

because the individual claimant is not making the electronic record him

or herself, but such record is being made by a third party where an

error could be made unbeknown to the claimant. In other words, the

claimant must make the ``declaration in writing,'' not the claimstaker.

If the SESA utilizes the latter procedure to take initial claims, the

SESA must have an alternate means of obtaining an answer from the

claimant that will satisfy the Federal requirement. Examples of such

alternate means include recording the conversation on tape or obtaining

the claimant's ``declaration in writing'' on a continued claim or other

hard copy document.

In addition to the ``declaration in writing'' requirement of

Section 1137(d)(1)(A), the provision also states that the declaration

is made ``under penalty of perjury.'' However, it is the Department's

position that State law must be followed regarding whether a claimant's

statement (``declaration in writing'') is in a form that can uphold a

perjury conviction. Therefore, the two tests for what constitutes a

``declaration in writing'' and for what is needed

[[Page 55609]]

under State law to uphold a ``penalty for perjury,'' must be met in

order to comply with Section 1137(d)(1)(A) of the SSA. A SESA must

consider both factors when designing and implementing a telephone or

other electronic methods initial claims filing process.

(5) Not a Citizen or National--Presentation of Documentation.

Section 1137 (d)(2) of the SSA provides that if--

An individual is not a citizen or national of the United States,

there must be presented either--

(A) alien registration documentation or other proof of

immigration registration from the Immigration and Naturalization

Service that contains the individual's alien admission number or

alien file number * * *, or

(B) Such other documents as the State determines constitutes

reasonable evidence indicating a satisfactory immigration status.

Therefore, neither Sections 1137(d)(2) (A) or (B) of the SSA may be

satisfied by information obtained by telephone (orally or IVR) or entry

via a computer keyboard or touchscreen.

In order to satisfy the Federal law requirements, if a SESA

utilizes a method of claimstaking other than in-person filing, and the

claimant indicates a noncitizenship status, the SESA (State) must

require that the claimant submit ``alien registration documentation or

other proof of immigration registration from the INS that contains the

individual's alien admission number or alien file number.''

(Requirement of Section 1137 (d)(2)(A).) Since an alien cannot allow

his/her original INS documentation to leave his/her person, it is the

Department's position that a photostatic copy of the document(s)

submitted by mail or facsimile (FAX) transmission would suffice to meet

the requirements of the Section in lieu of viewing the original

document(s), particularly when taken in conjunction with the provisions

of Section 1137 (d)(2)(B). That Section provides that the individual

can submit such other documents as the State determines constitutes

reasonable evidence indicating a satisfactory immigration status. This

will allow the SESA to proceed with verification with INS required by

Section 1137 (d)(3). The provisions of Section 1137(d)(2)(B) are also

utilized when an individual cannot produce documentation that provides

an alien admission or file number. Copies of such documents must then

be sent to the INS for verification of status in accordance with

Section 1137 (d)(4)(B)(i).

The Department is in the process of resolving with the INS the

differences between the Systematic Alien Verification for Entitlements

(commonly called SAVE) program manual distributed by the INS requiring

all entitlement agencies to have applicants present original documents

(which must be kept on the person of the alien at all times) and the

provision of Section 1137(d)(2)(B) that authorizes the State to accept

such other documents as the State determines constitutes reasonable

evidence indicating a satisfactory immigration status (which could be

copies). The SAVE manual does not appear to giver any consideration to

a method of filing other than in-person.

B. Other Program Areas.

(1) Unemployment Compensation for Ex-servicemembers (UCX) Claim--

Use of Form ETA-841 (Formerly ES 970).

Form ETA-841 is an optional form and is not needed to establish UCX

eligibility since all required information is on the DD Form 214 or

information received from the Louisiana Claims Control Center (LCCC)

based on a SESA's inquiry. Therefore, States implementing telephone or

other electronic methods of initial claim filing do not have to

complete and have the claimant sign Form ETA-841.

(2) UCX Claim--Eligibility in the Absence of DD Form 214.

Under a telephone or other electronic method of initial claim

filing, if the claimant does not present copy no. 4 of his/her DD Form

214 or SESA filing procedures do not require submittal of a copy,

eligibility for UCX may be established based on an inquiry to the LCCC

to verify the validity of data that was transmitted to the SESA in

response to the SESA's original notification to the LCCC that a claim

was filed. However, such eligibility may be established only if the

LCCC provides a copy of copy no. 5 of DD Form 214 to the SESA. While it

is not mandatory, the Department believes it is a preferable procedure

to have the claimant present, or submit by mail or FAX, a copy of copy

no. 4 of DD Form 214 to the SESA.

(3) Trade Readjustment Allowances (TRA) Claim--Employer Signature

on Form TRA-855A.

Neither Federal law nor regulations require an employer's signature

on the form. Therefore, the required information employers provide may

be obtained by telephone or computer interface.

(4) Extended Benefits (EB) and TRA--Tangible Evidence of Work

Search.

The Department's regulations at 20 CFR Part 615 implement the

provisions of the Federal-State Extended Unemployment Compensation Act

(EB Act). 20 CFR 615.8(g)(1) requires that an individual claiming EB

shall make a systematic and sustained effort (as defined in 20 CFR

615.2(0)(8)) to search for suitable work (as defined in 20 CFR

615.8(d)(4)) each week after notification of his/her job prospects, and

will furnish the State agency with each claim, tangible evidence of

such efforts. The Department's regulations at 20 CFR 617.17(a)

implementing the provisions of the Trade Act of 1974, as amended,

require that the EB work test be satisfied for each week of TRA

claimed. 20 CFR 615.2(o)(9) defines ``tangible evidence'' as a written

record that can be verified that includes the actions taken, methods of

applying for work, types of work sought, dates and places where work

was sought, and the name of the employer or person contacted and the

outcome.

Most States' telephone or other electronic methods of claim filing

systems will not suffice for the EB or TRA programs. Therefore, States

utilizing a telephone or other electronic method of claims filing must

have an alternative system in place to obtain the detailed information

of a systematic and sustained search for work required as tangible

evidence on weekly claims for EB and TRA to comply with the EB

regulatory requirements. As examples, a State could set up a telephone

tape system, which would enable claimants to describe their detailed

work search over the phone, or, a State could require hard copy

documents to be submitted for each week claimed that provide the

required information.

4. Action. SESA Administrators should inform appropriate staff of

the Department's position set forth in this program letter. The

position set forth should be followed by SESAs in the design or

implementation of any telephone or other electronic claims filing

method.

5. Contact. Questions concerning this issuance should be directed

to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, D.C. 20210

Classification: UI

Correspondence Symbol: TEURL

Dated: October 5,1995

Directive: Unemployment Insurance Program Letter No. 1-96

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: The Legal Authority of Unemployment Insurance Program Letters

and Similar Directives

[[Page 55610]]

1. Purpose. To advise States of the position of the Department of

Labor (Department) regarding the legal authority for Unemployment

Insurance Program Letters (UIPLs) and other Departmental directives

which affect the Federal-State Unemployment Insurance (UI) Program.

2. References. The Administrative Procedure Act (APA), 5 U.S.C.

551-559; the Social Security Act (SSA); and the Federal Unemployment

Tax Act (FUTA).

3. Background. Departmental directives for the UI program include

UIPLs, General Administration letters (GALs), Handbooks, the Employment

Security Manual (ESM) and various transmittals of model legislation for

implementing Federal law requirements. These directives are issued to

the States under authority delegated by the Secretary of Labor.

The Department issues directives to set forth official agency

policy. These directives state or clarify the Department's position,

particularly with respect to the Department's interpretation of the

minimum Federal requirements for conformity or compliance, thereby

assuring greater uniformity of application of such requirements by the

States. Oftentimes these directives provide information in the public

interest which is vital to guiding the States' courses of operations.

States have raised questions regarding what weight these directives

carry as interpretations of Federal law. These inquiries have come from

State legislators, State Attorney General offices, other State

officials and attorneys in Legal Services. It has sometimes been argued

that, since the interpretations in these directives are not found in

the Code of Federal Regulations, they have no legal effect. This UIPL

is issued to advise States that these directives do, in fact, have

legal effect.

Rescissions: None

Expiration Date: October 31, 1996

4. Discussion. The APA contains requirements to determine which

rules are subject to its notice and comment procedures (ultimately

leading to publication in the Code of Federal Regulations) to have

force and effect as well as provisions for those rules which are not

subject to those procedures. The APA, originally enacted on June 11,

1946, and later revised by P.L. 89-554 (5 U.S.C. 551-559) was passed in

part to assist the various Federal Government agencies in their

administration of statutes under their jurisdiction. The APA recognizes

that some functions and some operations of Federal agencies do not lend

themselves to a formal procedure. For this reason, the APA provides for

different types of rules including ``substantive'' or ``legislative''

rules and ``interpretative'' rules. Section 553(b) of the APA, which

requires that a general notice of proposed rule making must be

published in the Federal Register, makes two exceptions to this

requirement, one of which is relevant here as follows:

Except when notice or hearing is required by statute, this

subsection does not apply--

(A) to interpretative rules, general statements of policy, or

rules of agency organization, procedure, or practice; * * *.

The test for determining if a rule is interpretative, and thus not

subject to the requirement of a published notice of proposed rule

making, is found in Gibson Wine Co., Inc. v. Snyder et al., 194 F.2d

329 (D.C. Cir. 1952). In Gibson, the court addressed an interpretative

ruling transmitted by the Deputy Commissioner of the Internal Revenue

Service. The court stated on page 331:

Administrative officials frequently announce their views as to

the meaning of statutes or regulations. Generally speaking, it seems

to be established that ``regulations,'' ``substantive rules'' or

``legislative rules'' are those which create law, usually

implementary to an existing law; whereas interpretative rules are

statements as to what the administrative officer thinks the statute

or regulation means. [Emphasis supplied.]

Under Gibson, an interpretative rule is one which explains or

defines particular terms in a statute or is an opinion of an official,

having authority on a particular subject, as to the meaning of a

statute or regulation. Id. at 331-332.

British Caledonian Airways, Ltd. v. C.A.B., 584 F.2d 982 (D.C. Cir.

1978), is a leading case concerning the use of interpretative rules.

The court stated that the agency was ``construing the language and

intent of the existing statute and regulations in order to * * * remove

uncertainty'' which is ``a function peculiarly within the ability and

expertise of the agency.'' Id. at 991. The agency's actions were

entirely appropriate ``to illuminate the meaning'' of its regulations.

Id. at 993. Another court has stated that, when interpretative rules

reiterate or explain an explicit statutory obligation, they can even

help ``make sense'' of inconsistent statutory direction created by acts

of Congress as long as they do not impose a new procedure or obligation

which is not derived from the language of the statute or regulation.

American Hospital Association v. Bowen, 640 F. Supp. 453, 460 (D.D.C.

1986).

In Cabais v. Egger, 690 F.2d 234 (D.C. Cir. 1982), the court held

that a UIPL was not subject to the APA notice and comment procedures

when it construed the language and intent of a statute and reminded

States of existing duties, and where the UIPL did not grant or deny

rights nor impose obligations which did not already exist in

statute.\1\

\1\The Cabais court did, however, conclude that, in one area, a

UIPL did create a substantive rule since, contrary to the broad

latitude granted to the states in the statute, the UIPL imposed ``an

obligation on the States not found in the statute itself.'' Id. at

239.

---------------------------------------------------------------------------

Even if an interpretative rule has a wide ranging effect or a

``substantial impact'' on individuals, this does not mean it is subject

to notice and comment procedures. Following the U.S. Supreme Court

decision in Vermont Yankee Nuclear Power Corp. v. Natural Resources

Defense Council Inc., 435 U.S. 519, 524 (1978) that courts are

generally not free to impose on agencies requirements that exceed those

required by the APA, courts have rejected the ``substantial impact''

test. See Cabais, 690 F.2d at 237-238); Rivera v. Becerra, 714 F.2d 887

(9th Cir. 1983). The Rivera court, which specifically addressed UIPLs,

stated that agencies are not required to comply with a notice and

comment procedure for interpretative rules which have a substantial

effect because Congress considered the matter and explicitly excepted

interpretative rules and general statements of policy from this

procedure. Id. at 890-891. The court observed that agencies now freely

issue interpretative rules as guidance and that unnecessarily

restrictive procedures should not be imposed beyond that contemplated

by the APA. Id.

5. Action Required. State Administrators are requested to provide

the above information to the appropriate staff.

6. Inquiries. Direct questions to the appropriate Regional Office.

Department of Labor

Employment and Training Administration, Washington, DC 20210

Classification: UI

Correspondence Symbol: TEURL

Dated: October 5, 1995.

Directive: Unemployment Insurance Program Letter 2-96

To: All State Employment Security Agencies

From: Mary Ann Wyrsch, Director, Unemployment Insurance Service

Subject: Approval of Training for Individuals who Reside in or File

from Another State

[[Page 55611]]

1. Purpose. To inform States of the Department of Labor's position

relating to the approval of training for individuals who reside in or

file an unemployment compensation (UC) claim from another State.

2. References. Sections 3304(a)(8) and 3304(a)(9)(A) of the Federal

Unemployment Tax Act (FUTA); Draft Legislation to Implement the

Employment Security Amendments of 1970 * * * H.R. 14705 (1970 Draft

Legislation), Unemployment Insurance Program Letter (UIPL) 1276, dated

July 22, 1974; and 20 C.F.R. Part 616.

3. Background. The Department has discovered that some States

restrict the approval of training to that which is provided within the

State. Since 1974, it has been the express position of the Department

that such restrictions are contrary to the requirements of Sections

3304(a)(8) and (9)(A), FUTA. This UIPL is issued to restate this

position.

4. Applicable Provisions of Federal Law. Section 3304(a)(8), FUTA,

requires that a State law, as a condition of certification for credit

against the Federal unemployment tax, provide that:

Rescissions: None

Expiration Date: October 31, 1996

Compensation shall not be denied to an individual for any week

because he is in training with the approval of the State agency (or

because of the application, to any such week in training, of State

law provisions relating to availability for work, active search for

work, or refusal to accept work).

The expressed intent of Congress in enacting this section was ``to

act to remove the impediments to training which remains in our

unemployment insurance system.'' (H.R. Rep. No. 612, 91st Congress, 1st

Session 17).

Section 3304(a)(9)(A), FUTA, further requires a State law to

provide that:

Compensation shall not be denied or reduced to an individual

solely because he files a claim in another State (or a contiguous

country with which the United States has an agreement with respect

to unemployment compensation) or because he resides in another State

(or such a contiguous country) at the time he files a claim for

unemployment compensation.

The expressed intent of Congress in enacting this section was to

remove provisions of law ``which reduce the benefits, or otherwise

penalize workers who reside elsewhere than in the State in which they

worked and earned their right to benefits,'' because such provisions

``are not only inequitable to the individual claimant and injurious to

the proper function of the unemployment system but inhibit among

workers a very desirable mobility which is important to our economy.''

(H.R. Rep. No. 612, 91st Congress, 1st Session 17).

5. Department of Labor Position. Section 3304(a)(8), FUTA,

prohibits the denial of UC to an individual undertaking training ``with

the approval of the State agency.'' In the 1970 Draft Legislation, the

Department stated that ``each State is free to determine what training

is appropriate'' and ``what criteria are established for approval of

training.'' As a result, the 1970 Draft Legislation provided only

suggested criteria. Since then, the Department has, however, required

that States apply ``reasonable'' criteria for the approval of training,

and taken the position that the refusal of approval of training solely

because the training is conducted in another State would be

inconsistent with Sections 3304 (a)(8) and (a)(9)(a), FUTA. (See UIPL

1276, Section (A)(4)).

Limiting approval of training to that within a State would create

an unreasonable burden on an individual residing in or filing a UC

claim from another State, with the result that the individual would be

discouraged from participating in training. In cases where such

individuals cannot reasonably be expected to commute to training in a

State in which they do not reside, individuals would have no choice but

to choose between attending training or receiving UC. This result would

be inconsistent with the expressed intent of Congress in enacting the

approved training provision.

Further, Section 3304(a)(9)(A), FUTA, precludes denial of UC to an

individual who files a claim or resides in another State (or a

contiguous country with which the United States has an agreement with

respect to UC) at the time he or she files a claim for UC. A State's

refusal to approve training solely because it is conducted in another

State is plainly inconsistent with this requirement. This result is

also plainly inconsistent with the expressed intent of Congress since

it inhibits the individual's mobility.

Limiting approval of training to institutions certified by the

State Board of Education, or a similar State entity, also limits the

approval of training to that undertaken within the State. This creates

the same problems with Federal law as discussed in the two preceding

paragraphs. States wishing to limit training to certified institutions

must, therefore, provide for the approval of training taken at an

institution certified by the State Board of Education or similar entity

in the State in which the institution is located.

If the individual is attending training in another State,

sufficient information must be collected to determine if the individual

is attending training which is approvable under the appropriate State

law. For interstate claims, the authority to approve training rests

with the liable State. However, the liable State may adopt a

determination by the agent State approving training for a particular

individual or delegate such authority to the agent State. In fact,

liable States should place as much reliance as possible on the

recommendation of the agent State since the agent State is usually in

the best position to know the individual's personal situation and its

own labor market. Similarly, in a combined-wage claim, the paying State

has the authority to approve training. The paying State may also adopt

a determination by another State or delegate the authority for approval

of training to the other State. Further, a transferring State must

transfer wages and reimburse the paying State as provided in 20 CFR

Part 616, without regard to approval of training by the paying State.

The paying State may not refuse to approve training solely because the

individual has no (or insufficient) covered wages or employment to

qualify for benefits in the paying State.

6. Action Required. States are to examine their current law,

regulations, and procedures relating to the approval of training for

individuals who reside in another State or who have filed either

interstate or combined-wage claims and determine whether the current

law, regulations, and procedures conform to the requirements of Federal

law. If they do not, the State must notify the appropriate Regional

Office of the Department of Labor as to how and when the law will be

amended or the regulations and procedures changed.

7. Inquiries. Inquiries should be directed to your Regional Office.

[FR Doc. 95-27101 Filed 10-31-95; 8:45 am]

BILLING CODE 4510-30-M