Workforce Investment Act

SUMMARY: The Department of Labor (DOL) is issuing an Interim Final Rule

implementing provisions of titles I, III and V of the Workforce

Investment Act. Through these regulations, the Department implements

the first major reform of the nation's job training system in more than

15 years. Key components of this reform include streamlining services

through a One-Stop service delivery, empowering individuals through

information and access to training resources through Individual

Training Accounts, providing universal access to core services,

increasing accountability for results, ensuring a strong role for Local

Boards and the private sector in the workforce investment system,

facilitating State and local flexibility, and improving youth programs.

DATES: This Interim Final Rule will become effective on May 17, 1999.

Comment Period: Comments must be submitted by July 14, 1999. The

Department cannot guarantee that comments received after this date will

be considered. Comments that are less than 10 pages in length may be

transmitted via a facsimile at (202) 219-0323 provided that submission

of written text follows. Commenters wishing acknowledgment of receipt

of their comments must submit them by certified mail, return receipt

requested. Also, comments may be sent electronically using the Internet

web page at http://usworkforce.org.

ADDRESSES: Submit written comments to the Employment and Training

Administration, Workforce Investment Act Implementation Taskforce, 200

Constitution Avenue, NW, Room S5513, Washington, DC 20210, Attention:

Eric Johnson.

All comments will be available for public inspection and copying

during normal business hours at the Employment and Training

Administration, Workforce Investment Act Implementation Taskforce, 200

Constitution Avenue, NW, Room S5513, Washington, DC 20210. Copies of

the Interim Final Rule are available in alternate formats of large

print and electronic file on computer disk, which may be obtained at

the above-stated address. The Interim Final Rule is also available on

the WIA website at http://usworkforce.org

In compliance with 28 U.S.C. 2112(a), the Employment and Training

Administration designates the Associate Solicitor for Employment and

Training Services, Office of the Solicitor, U.S. Department of Labor,

200 Constitution Avenue, NW, Room N-2101, Washington, DC 20210, as the

recipient of petitions to review this Interim Final Rule.

FOR FURTHER INFORMATION CONTACT: Mr. Eric Johnson, Workforce Investment

Act Implementation Taskforce Office, U.S. Department of Labor, 200

Constitution Avenue, NW, Room S5513, Washington, DC 20210, Telephone:

(202) 219-0316 (voice) (this is not a toll-free number) or 1-800-326-

2577 (TDD).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

Certain sections of this Interim Final Rule, such as Secs. 667.300,

667.900, 668.800, and 669.570 contain information collection

requirements. As required by the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)), the Department of Labor has submitted a copy of these

sections to the Office of Management and Budget for its review.

Comments must be submitted by May 17, 1999 to: Desk Officer for the

Department of Labor, Employment Training Administration, Office of

Management and Budget, 725 17th Street, NW (Rm 10235), Washington DC

20503. Affected parties do not have to comply with the information

collection requirements in this document until DOL publishes in the

Federal Register the control numbers assigned by the Office of

Management and Budget (OMB). Publication of the control numbers

notifies the public that OMB has approved this information collection

requirement under the Paperwork Reduction Act of 1995. An OMB control

number (1205-0398) was issued for the WIA state planning guidance

authorized under 20 CFR 661.220, and published at 64 FR 9402 (Feb. 25,

1999).

I. Background

A. WIA Principles

On August 7, 1998, President Clinton signed the Workforce

Investment Act of 1998 (WIA), comprehensive reform legislation that

supersedes the Job Training Partnership Act (JTPA) and amends the

Wagner-Peyser Act. The WIA also contains the Adult Education and Family

Literacy Act (title II) and the Rehabilitation Act Amendments of 1998

(title IV). Guidance or regulations implementing titles II and IV will

be issued by the Department of Education.

The WIA reforms Federal job training programs and creates a new,

comprehensive workforce investment system. The reformed system is

intended to be customer-focused, to help Americans access the tools

they need to manage their careers through information and high quality

services, and to help U.S. companies find skilled workers.

This new law embodies seven key principles. They are:

Streamlining services through better integration at the

street level in the One-Stop delivery system. Programs and providers

will co-locate, coordinate and integrate activities and information, so

that the system as a whole is coherent and accessible for individuals

and businesses alike.

Empowering individuals in several ways. First, eligible

adults are given financial power to use Individual Training Accounts

(ITA's) at qualified institutions. These ITA's supplement financial aid

already available through other sources, or, if no other financial aid

is available, they may pay for all the costs of training. Second,

individuals are empowered with greater levels of information and

guidance, through a system of consumer reports providing key

information on the performance outcomes of training and education

providers. Third, individuals are empowered through the advice,

guidance, and support available through the One-Stop system, and the

activities of One-Stop partners.

Universal access. Any individual will have access to the

One-Stop system and to core employment-related services. Information

about job vacancies, career options, student financial aid, relevant

employment trends, and instruction on how to conduct a job search,

write a resume, or interview with an employer is available to any job

seeker in the U.S., or anyone who wants to advance his or her career.

Increased accountability. The goal of the Act is to

increase employment, retention, and earnings of participants, and in

doing so, improve the quality of the workforce to sustain economic

growth, enhance productivity and competitiveness, and reduce welfare

dependency. Consistent with this goal, the Act identifies core

indicators of performance that State and local entities managing the

workforce investment system must meet--or suffer sanctions. However,

State and local entities

[[Page 18663]]

exceeding the performance levels can receive incentive funds. Training

providers and their programs also have to demonstrate successful

performance to remain eligible to receive funds under the Act. And

participants, with their ITA's, have the opportunity to make training

choices based on program outcomes. To survive in the market, training

providers must make accountability for performance and customer

satisfaction a top priority.

Strong role for local workforce investment boards and the

private sector, with local, business-led boards acting as ``boards of

directors,'' focusing on strategic planning, policy development and

oversight of the local workforce investment system. Business and labor

have an immediate and direct stake in the quality of the workforce

investment system. Their active involvement is critical to the

provision of essential data on what skills are in demand, what jobs are

available, what career fields are expanding, and the identification and

development of programs that best meet local employer needs. Highly

successful private industry councils under JTPA exhibit these

characteristics now. Under WIA, this will become the norm.

State and local flexibility. States and localities have

increased flexibility, with significant authority reserved for the

Governor and chief elected officials, to build on existing reforms in

order to implement innovative and comprehensive workforce investment

systems tailored to meet the particular needs of local and regional

labor markets.

Improved youth programs linked more closely to local labor

market needs and community youth programs and services, and with strong

connections between academic and occupational learning. Youth programs

include activities that promote youth development and citizenship, such

as leadership development through voluntary community service

opportunities; adult mentoring and followup; and targeted opportunities

for youth living in high poverty areas.

Many States and local areas have already taken great strides in

implementing these principles, supported by grants from the Department

of Labor to build One-Stop service delivery systems and school-to-work

transition systems. The Act builds on these reforms and ensures that

they will be available throughout the country.

The Department wishes to emphasize that it considers the reforms

embodied in the Workforce Investment Act to be pivotal, and not

``business as usual.'' This legislation provides unprecedented

opportunity for major reforms that can result in a reinvigorated,

integrated workforce investment system. States and local communities,

together with business, labor, community-based organizations,

educational institutions, and other partners, must seize this historic

opportunity by thinking expansively as they design a customer-focused,

comprehensive delivery system.

The success of the reformed workforce investment system is

dependent on the development of true partnerships and honest

collaboration at all levels and among all stakeholders. While the

Workforce Investment Act and these regulations assign specific roles

and responsibilities to specific entities, for the system to realize

its potential necessitates moving beyond current categorical

configurations and institutional interests. Also, it is imperative that

input is received from all stakeholders and the public at each stage of

the development of State and local workforce investment systems.

The cornerstone of the new workforce investment system is One-Stop

service delivery which unifies numerous training, education and

employment programs into a single, customer-friendly system in each

community. The underlying notion of One-Stop is the coordination of

programs, services and governance structures so that the customer has

access to a seamless system of workforce investment services. It is

envisioned that a variety of programs could use common intake, case

management and job development systems in order to take full advantage

of the One-Stops' potential for efficiency and effectiveness. A wide

range of services from a variety of training and employment programs

will be available to meet the needs of employers and job seekers. The

challenge in making One-Stop live up to its potential is to make sure

that the State and Local Boards can effectively coordinate and

collaborate with the network of other service agencies, including TANF

agencies, transportation agencies and providers, metropolitan planning

organizations, child care agencies, nonprofit and community partners,

and the broad range of partners who work with youth.

B. Early Implementation

Many States have expressed interest in which features of WIA may be

phased-in after approval of the State workforce investment plan, and

how long they will have before they must be in full compliance.

The planning guidance (which was published in the Federal

Register on February 25, 1999) and regulations specify that States may

submit a State workforce investment plan to the Department for approval

at any time between April 1, 1999 and April 1, 2000. For those States

that plan to transition to WIA prior to July 1, 2000, and do not have

all policies, procedures and systems fully developed, the State may

submit a Transition Plan that outlines when the State expects to have

each of the WIA components (for example, the One-Stop system, or the

Individual Training Account system) fully operational. All components

must be in place by July 1, 2000. Under this option, the Department

will conditionally approve the State workforce investment plan. The

State workforce investment plan will be fully approved once all of the

WIA components are in place. This option provides some flexibility for

early implementing States, while ensuring that full implementation is

completed for all States by July 1, 2000.

States and local areas may use the current waiver

authority and allowable activities under JTPA, to plan for and

implement WIA reforms. Activities that are allowable during this phase

include: (1) Strategic planning; (2) establishment of State and local

workforce investment boards; (3) consultation with One-Stop partners;

(4) establishment of ITA systems; and (5) establishment of consumer

report systems.

Because JTPA title II youth funds are available for

obligation on April 1, 1999, the Calendar Year 1999 Summer Youth

Employment and Training Program, and JTPA title II-C youth program

allocations have been made and are to be allocated by States to local

areas under the JTPA rules. The Department will issue transition

guidance which will provide further direction and specification.

A 90 percent hold harmless provision for within-State

allocations for the youth and adult funding streams, that is based on

allocations in the first two years of WIA operation, becomes effective

in the third year a State operates under WIA. Structured to facilitate

creation of new local areas by freeing States from allocation formulas

established under JTPA, there is no hold harmless provision effective

in the first two years of a state's WIA implementation that would cover

the transition period from JTPA. The lack of a hold harmless provision

during this period could result in some instability during the early

stages of WIA implementation. However, Governors do have options

available to promote stability. For program year 1999 only, the

Governor may elect to utilize the

[[Page 18664]]

JTPA hold harmless provision. However, in doing so, the two year hold

harmless is delayed for one year. Therefore, if a State elects to use

this option, the two year hold harmless would apply for PY 2000 and

2001 unless Congress decides to address this area with a technical

amendment. Also, Governors may use some of their 15 percent State

reserve funds to assist local areas that are negatively impacted by the

WIA funding formulas, or choose to adopt an adult or youth within-State

allocation formula that incorporates additional targeting factors,

provided for in sections 128 and 133 of WIA.

C. Rule Format

The format, as well as the substance, of the Interim Final Rule,

reflects the Administration's commitment to regulatory reform and to

writing regulations that are reader-friendly. The Department has

attempted to make these regulations clear and easy to understand, as

well as to anticipate issues that may arise and to provide appropriate

direction. To this end, the regulatory text is presented in a

``question and answer'' format. The Department has organized the

regulations in a way that will help those who must implement the new

system to recognize the various steps they must take as they develop

the organization and services that make up the workforce investment

system. In many cases, the provisions of WIA are not repeated in these

regulations. As requested by some interested parties, however, in a

number of instances, it was determined that the regulations would

provide context and be more reader-friendly if the Act's provisions

were included in an answer rather than merely cross-referencing the

statute.

Section 506(c)(1) of the Act requires the Secretary of Labor to

issue this Interim Final Rule implementing provisions of the WIA under

the Department's purview within 180 days of enactment. WIA also

requires that final regulations be published by December 31, 1999.

Under Secretary of Labor's Order No. 4-75, the Assistant Secretary for

Employment and Training has been delegated the responsibility to carry

out WIA policies, programs, and activities for the Secretary of Labor.

Given the short time frame imposed, the Department has employed a

variety of means to initiate extensive coordination with other Federal

agencies that have roles and responsibilities under the Workforce

Investment Act. In addition, the Department of Labor, the Department of

Education, the Department of Health and Human Services, the Department

of Transportation, and the Department of Housing and Urban Development

continue to meet on a regular basis to resolve issues surrounding the

development of the Interim Final Rule and WIA implementation.

The Department also requested and received input from a broad range

of sources regarding guidance on how to comply with a number of WIA

statutory provisions. The Department solicited broad input on WIA

implementation through a variety of mechanisms: establishing a website

to encourage input; publishing a Federal Register notice on September

15, 1998, conducting regional and national panel discussions in October

1998; publishing a White Paper announcing goals and principles

governing implementation; posting issues on the usworkforce.org

website; sharing a discussion draft of regulatory issues with

stakeholders; holding town hall meetings across the country in December

1998; conducting several workgroups in December 1998; and issuing draft

Planning Guidance in December 1998.

A number of the suggestions received are discussed in the Summary

and Explanation of the individual provisions of the Interim Final Rule.

However, because of the large volume of suggestions received and the

short time allowed for preparation of the regulations, as well as the

fact that suggestions continue to be received, it was not possible to

address each one. Where input has not been addressed, it will be

considered along with comments on the Interim Final Rule before

publication of the Final Rule. Also, the Department will ensure that

there are other opportunities for public input and dialogue on the

important issues surrounding implementation of the Workforce Investment

Act prior to the publication of the Final Rule.

The Department has determined that this Interim Final Rule, as

promulgated, complies with the WIA statutory mandate and provides

effective direction for the implementation of WIA programs. ETA will

review all comments received in the development of and response to the

Interim Final Rule, as well as the experience of early implementing

States, in considering what further action is necessary in promulgating

a Final Rule.

II. Summary and Explanation

This section describes and explains the specific provisions of the

Interim Final Rule. The explanatory text, in general, adheres closely

to the corresponding WIA statutory and regulatory language. A

supporting rationale is provided in those instances where the Rule

promulgates specific provisions to fulfill the requirements of the WIA

statute.

The Department has set regulations only where they are necessary to

clarify or to explain how the Department intends to interpret the WIA

statute, to provide context for interpretations or to provide a clear

statement of the Act's requirements. In several instances--for example,

the Indian and Native American Programs, and Migrant and Seasonal

Farmworker Programs--the regulations were developed in consultation

with advisory councils and are more comprehensive in order to assist

those grantees. Consistent with the Act, the Interim Final Rule

provides the States and local governments with the primary

responsibility to initiate and develop program implementation

procedures and policy guidance regarding WIA administration. The

Department has not defined what constitutes many of the activities

under the Act in order to provide policy-making flexibility to States

and local areas. Section 661.120 formalizes this flexibility in the

regulations.

Description of Regulatory Provisions

The Rule adds 12 new parts to the Code of Federal Regulations, and

a new subpart to the existing Wagner-Peyser Act regulations. Parts 660-

672 are organized by subject matter; for example, 661 describes State

and local system design, 667 contains administrative requirements

applicable to WIA title I funds, and 669 describes requirements

particularly applicable to Migrant and Seasonal Farmworker programs.

This discussion section follows that organizational structure.

Part 660--Introduction to the Regulations for the Workforce

Investment Systems Under Title I of the Workforce Investment Act

Part 660 discusses the purpose of title I of the Workforce

Investment Act, explains the format of the regulations governing title

I, and provides definitions which are not found in the Act. Sections

101, 142, 166(b), 167(h) 301 and 502 of the Act contain additional

definitions. Among the regulatory definitions, the Department has

defined the term ``register'' in order to clarify that programs do not

need to register participants until they receive a core service beyond

those that are self-service or informational. This point in time also

corresponds to the point when the EEO data must be collected, when the

eligibility definition begins, and when the participants are counted

for performance measurement purposes.

[[Page 18665]]

Part 661--Statewide and Local Governance of the Workforce

Investment System Under Title I of the Workforce Investment Act

Introduction

This part covers the critical underpinnings of how the workforce

investment system is organized under WIA at the State and local levels.

Specifically, it consists of four subparts--General Governance, State

Governance, Local Governance Provisions and Waiver Provisions. The

General Governance subpart broadly describes the WIA system and sets

forth the roles of the governmental partners. The State and local

subparts cover the State and local workforce investment boards and the

designation process, including alternative entities, and the planning

requirements. The waiver subpart discusses the processes for obtaining

general and work-flex waivers.

Subpart A--General Governance Provisions

1. Subpart A describes the workforce investment system, and sets

forth the roles of the government partners in the system: the Federal

government, State governments and local governments. The workforce

investment system is the method of delivery of workforce investment

activities to individuals under title I of WIA, and is composed of

State and local workforce investment boards, local workforce investment

areas, and the One-Stop system. Through the One-Stop system, the

workforce investment system is a gateway to a wide variety of

employment, training, educational and other human resource programs. In

the Department's view, close cooperation and coordination among the

Federal, State and local government partners are essential to the

system's success in providing services to those who need them. Sections

661.110 and 661.120, describe, in general terms, the roles of the

government partners. The Department sees one of its roles as Federal

partner as providing leadership, guidance and support to the system, so

that State and local governmental partners can better respond to the

needs of customers. To that end, the WIA regulations are intended to

provide a framework in which States and local partners may design

systems and deliver services in ways that best achieve the goals of WIA

based on particular need. Thus, whenever possible, items such as design

options and categories of service are not narrowly defined in the

regulations. Section 660.120 provides authority to State and local

governments to establish their own policies, interpretations,

guidelines and definitions relating to program operations under title

I, as long as they are not inconsistent with WIA or the regulations,

and, in the case of local governments, not inconsistent with State

policies. To assist with such interpretations, the Department, with the

participation of other Federal agencies, as appropriate, will issue

technical assistance guidance to help States and localities interpret

WIA and the regulations. Such guidance is not intended to limit State

flexibility, but rather is intended to provide helpful models on which

States and local governments can rely to ensure that their own

interpretations are not inconsistent with the Act and regulations.

Subpart B--State Governance Provisions

1. State Workforce Investment Board: Sections 661.200--661.210

describe the membership requirements and responsibilities of the State

Workforce Investment Board (State Board) and procedures regarding

designation of an alternative entity to perform the functions of the

State Board. The role of the State Board is to assist the Governor in

the development of the State workforce investment plan (State Plan) and

to carry out the additional functions described in WIA section 111(d).

Section 661.200 describes the membership requirements of the State

Board. This section clarifies that State Boards must contain two or

more members from each of the representative categories described in

sections 111(b)(1)(C)(iii)-(v) of WIA. These categories are labor

organizations, individuals and organizations that have experience with

youth activities, and individuals and organizations that have

experience and expertise in the delivery of workforce investment

activities. The Rule requires that, in appointing representatives with

experience in workforce investment activities, special consideration be

given to chief executive officers of community colleges and community-

based organizations in the State. The Department acknowledges the

special expertise that the community college system brings to the

workforce investment system. The Department foresees a strong role for

community colleges across states and in local areas and encourages

states and local areas to appoint presidents and executive officers of

the state community college system and local community colleges to the

State and Local Workforce Investment Boards. The Department also

emphasizes the importance of including the director of the state agency

responsible for TANF on the State Board, in order to foster linkages

between WIA and TANF, and to facilitate participation of TANF in One-

Stop systems in the state.

The Department also received suggestions concerning the

representation of the State Vocational Rehabilitation Services program,

a required One-Stop partner, on the State Board. Individuals with

disabilities represent a large untapped potential workforce, and the

workforce needs of this group is of significant importance to the

Department and other Federal agencies. To signal the importance of this

issue, the Presidential Taskforce on Employment of Adults with

Disabilities was formed in 1998. In light of this emphasis on

increasing the employment rate for individuals with disabilities as

well as the complexity of the organizational requirements applicable to

this program, the director of the designated State unit under section

101(a)(2)(B)(ii)(II) of the Rehabilitation Act, if a State has such a

unit, should be considered the lead State agency official with

responsibility for the State's vocational rehabilitation program and,

therefore, should serve on the State Board. In addition, a program

operated by a State agency for the blind or by a designated State unit

for the blind should be considered a separate program for purposes of

appointing members to the State Board under WIA section 111. Among the

contributions the unit head(s) would make as a member of the State

Board is assisting in the development of the State performance

measures. The expertise of the unit head(s) would be particularly

useful since the Department, in coordination with the Department of

Education, will be working on the development of an additional

performance indicator focusing on individuals with disabilities that

may be used by States under title I of WIA. The Department of Labor and

the Department of Education will work with the States as they develop

and implement their State plans to ensure the effective delivery of

services under the WIA to individuals with disabilities. The Department

will also be conducting a study of WIA implementation that will include

a review of the manner and extent to which Vocational Rehabilitation

programs are integrated in the workforce investment system, and how

effectively the system serves individuals with disabilities.

As discussed below, regarding local workforce investment board

(Local Board) membership requirements, the

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Department received substantial input expressing concern that the

statutory membership requirements relating to the State and local

boards will lead to large, unmanageable State and Local Boards. In

contrast, others thought larger boards would be better in representing

a wider array of interests. The Department recognizes this concern,

and, although constrained by the statutory requirements that each

category of membership contain more than one representative and a

business majority, the Department has avoided adding additional

requirements relating to the number of members required. The Department

believes that problems associated with large board size can be

addressed in a number of ways, such as the use of committees. The

Department will be providing technical assistance on creative

approaches State and Local Boards may wish to consider in addressing

this issue.

2. Alternative Entities: The Department believes that changing from

existing JTPA boards and councils to State Boards meeting the

requirements of WIA section 111(b) is essential to the reforms of WIA.

The Department encourages all States to create new, fully functional

State Boards as early as possible, and is committed to providing

assistance to States to make such changes. In order to accommodate

States that have already begun to reform their boards prior to the

enactment of WIA, the statute provides an option to use an existing

entity to carry out the functions of the State Board. Section 661.210

describes the requirements relating to the appointment of this

alternative entity. Because of questions regarding the application of

these requirements, paragraph (b) of Sec. 661.210 makes clear that an

alternative entity must meet each of the three criteria set forth in

WIA section 111(e). The three criteria are that the entity: (1) Was in

existence on December 31, 1997; (2)(a) was established pursuant to

section 122 or title VII of the Job Training Partnership Act, as in

effect on December 31, 1997, or (b) is substantially similar to the

State Board as described in subsections (a), (b), and (c) of WIA

section 111; and (3) includes representatives of business in the state

and representatives of labor organizations in the state. An entity

which fails to meet any one of the criteria is not eligible to perform

the functions of the State Board. A key requirement for an alternative

entity that was not created under JTPA, is that it be substantially

similar to the Boards required under WIA. The Department considered

various ways to define the term ``substantially similar'' but, in the

end, decided to leave the term undefined. All groups required for

membership on Workforce Investment Boards are equally important and the

Department sees alternative entities as a transitional phase during

which states can operate until a new Board is appointed.

While an alternative entity need not contain the identical

membership structure required of State Boards, in the Department's view

it is important that each of the groups listed in WIA section 111(b)

have a role in the workforce investment system if the system is to be

successful. Therefore, the Rule requires that if the Governor

identifies an alternative entity, the State Plan must explain how the

State will ensure the ongoing participation of any omitted membership

groups in the functions of State workforce investment system. While

this Rule does not mean that omitted groups must be seated on an

alternative entity, it does require that the State Plan describe how

these groups will have an opportunity for meaningful input into

decisions made by the State Board.

Paragraph (d) of Sec. 661.210 amplifies the requirement that an

alternative entity must have been established by and in existence on

December 31, 1997. Because of this requirement, modifications to the

alternative entity are not allowed; a change to the membership

structure after December 31, 1997 will invalidate the entity's

eligibility as an alternative entity. The membership structure is not

considered to be changed when an existing member leaves the board and a

replacement member is appointed. However, the membership structure is

considered to be changed when a change is made to the organizational

structure of the State Board that requires a change (whether the change

is formally made or not) in the State Board's charter or to a similar

document that defines the organizational structure of the State Board,

such as appointing members of a category not previously represented. In

such a case, the entity would no longer be eligible to perform the

functions of the State Board and a new entity, meeting all the

requirements of section 111 of WIA must be created. This prevents

piecemeal modification of alternative entities that would add certain

section 111(b) membership categories but not others.

3. State Workforce Investment Plan Requirements: Sections 661.220

and 661.230, describe the requirements for submission, approval and

modification of the State workforce investment plan. The State Plan

must be submitted in accordance with planning guidelines to be issued

by the Secretary, and must be developed through an open public comment

process. The State Plan must document the timeline and the steps taken

to ensure the opportunity for meaningful public comment. The Department

intends that the information contained in the State Plan be subject to

the broadest possible stakeholder involvement in policy development and

the broadest possible range of public comment. The planning guidelines

set forth the information needed for the Secretary to make an informed

judgment as to whether a State Plan is consistent with WIA. The Rule

restates the statutory language regarding the process for State Plan

approval. All plans must be approved within 90 days unless the

Secretary determines in writing that the State Plan is inconsistent

with the provisions of title I of WIA and its implementing regulations

or it does not satisfy the State Plan approval requirements of the

Wagner-Peyser Act and its implementing regulations. This reflects

changes made by the technical corrections added in the Omnibus

Appropriations Act for FY 1999, which clarified that the State plan

will not be approved if it fails to meet the requirements of either WIA

or the Wagner-Peyser Act rather than only when it fails to meet both.

Failure to have completed negotiations with the Secretary of Labor on

performance measures means the plan is not consistent with title I of

WIA. A state's failure to have an effective strategy in place to ensure

the development of a fully operational One-Stop delivery system in the

state also means the state plan is not consistent with WIA title I. An

important part of this strategy is an impasse procedure designed to

facilitate collaboration and coordination between One-Stop partners at

the local level.

4. State Plan Modifications: Section 661.230 provides the approval

process for State Plan modifications. It clarifies that modifications

may be made at any time during the life of the State Plan, and must be

made upon certain conditions. Because the State Plan is a five year

strategic plan and designed to be a living document, it is likely that

assumptions based upon such things as State or Federal policy, economic

conditions, performance goals, State and local organizational

structures and/or State and local needs may change during the course of

the State Plan. The provision for a five year State Plan was intended

to reduce paperwork burdens on the States. Accordingly, only

significant changes require a modification. Examples are: changes in

performance indicators, changes in the

[[Page 18667]]

methodology used to determine local allocation of funds, or changes to

the membership structure of the State Board or alternative entity.

Modifications triggered by significant changes will be subject to the

same review process as the original State Plan. While it is impossible

to foresee all such changes that may occur during a five year period,

through timely modifications of the State Plan, State strategies can

continue to guide Local Board policy development. The Secretary must

approve all State Plan modifications unless the disapproval criteria in

Sec. 661.220 are met.

5. Local Workforce Investment Area Designation Requirements:

Sections 661.250 through 661.280 discuss the requirements applicable to

the designation of local workforce investment areas. The Rule tracks

the statutory language regarding the State Board recommendation and

Governor's approval process for designation. It refers to the statutory

provisions regarding automatic designation of areas with a population

of 500,000 or more (that request designation) at section 116(a)(2) of

WIA and temporary and subsequent designation of JTPA service delivery

areas meeting certain performance criteria (that request designation)

at section 116(a)(3) of WIA. The statute prohibits the Department from

further regulating on the standards and criteria for temporary and

subsequent designation and requires the Department to provide the

States with technical assistance to make the designations. The

regulations restate the statutory language regarding the rights of

areas to appeal the denial of a request for automatic or temporary and

subsequent designation as a local workforce investment area.

6. Regional Planning Activities: Section 661.290 describes the

circumstances in which the State may require Local Boards to take part

in regional planning activities. This provision permits States to

undertake methods to improve performance across area boundaries by

requiring local areas to engage in a regional planning process to share

employment-related information and to coordinate the provision of local

services pursuant to that regional planning. The regulation follows the

statutory language regarding the requirements for regional planning,

and permits regional planning to occur across State boundaries. Section

661.290 clarifies that Local Boards which are part of State-designated

regional planning areas must participate in regional planning

activities. However, to strike a balance, the regulation also provides

that regional planning and performance requirements may not substitute

for the local planning and performance requirements unless the affected

chief elected officials and the Governor agree to that substitution.

Subpart C--Local Governance Provisions

This Subpart covers the designation of local workforce investment

areas and the responsibilities and membership requirements of local

boards.

1. Role of the Local Workforce Investment Board: Under WIA, the

Local Board, in partnership with the chief elected official, is

responsible for setting policy and overseeing workforce investment

programs for a workforce investment area. Sections 661.300 and 661.305

reiterate the roles and responsibilities of Local Boards. There was

some concern expressed that the Local Board activities be carried out

in an open manner which encourages public comment and participation.

The Department responds to these concerns by restating the WIA section

117(e) ``sunshine provision'' in Sec. 661.305(d).

2. Local Boards as Service Providers: Section 117(f)(1) of WIA

places limitations on Local Boards' direct provision of core services,

intensive services, or training services. In response to requests for

clarification, Sec. 661.310(c) specifies that the prohibition related

to providing core, intensive and training services by the Local Board

also applies to the staff of the Local Board. This regulation also

cites the statutory provision allowing a Local Board to be designated

or certified as a One-Stop operator only with the agreement of the

chief elected official and the Governor.

3. Membership Requirements: Section 661.315 of the regulations

addresses the membership requirements for the Local Board that are

contained in section 117(b) of WIA. There were suggestions on several

issues related to the required membership of the Local Board,

particularly as to how the terms ``representatives'' and ``including''

would be defined.

Representatives: Some parties expressed the view that the term

``representatives,'' as used in section 117(b)(2)(A) (ii)-(v) of WIA,

requires that there be multiple representatives from each of the

specified entities. While others wanted a more restrictive definition,

the regulations specify that the Local Board must contain two or more

members representing the categories described in section 117(b)(2)(A)

(ii)-(v) of WIA. These categories cover different types of local

educational entities, labor organizations, community-based

organizations (including those representing individuals with

disabilities and veterans), and economic development agencies.

Including: There also were many questions on the meaning of the

term ``including'' as it is used in WIA section 117(b). Some expressed

the view that each of the entities following the word ``including'' in

section 117(b)(2)(A)(ii), (iv), and (v) of WIA must be a required

member of the Local Board, while others disagreed with this

interpretation. The regulations address this issue by requiring that

special consideration be given to including representatives of

community colleges in the selection of members representing local

educational entities; to including representatives of organizations

representing individuals with disabilities and veterans, in selection

of members representing community-based organizations; and

representatives of private sector economic development entities in

selecting representatives of economic development agencies. The

regulations do not mandate a membership seat for each such entity.

Board Size: The Department heard many concerns that the statutory

membership requirements relating to Local Boards will lead to large,

unwieldy, and unmanageable Local Boards. The Department recognizes this

concern, and while the Department is constrained by the statutory

requirements that each category of membership contain more than one

representative and that the board contain a business majority, the

Department has not added additional regulatory requirements on the

number of members required. The Department believes that problems

associated with large board size can be addressed in a number of ways,

such as through the use of committees. The Department will provide

technical assistance on creative approaches State and Local Boards may

wish to consider in addressing this issue.

4. Alternative Entity: The Department believes that changing from

existing JTPA Private Industry Councils to local workforce investment

boards is essential to the reforms of WIA. The Department strongly

encourages all eligible areas to create new, fully functional Local

Boards as early as possible, and is committed to providing assistance

to facilitate such changes. However, the Department recognizes that the

statute provides an option to use an existing entity to carry out the

functions of the Local Board. Section 661.330 describes the

requirements relating to the appointment of such an alternative entity.

Because of questions regarding

[[Page 18668]]

the application of these requirements, paragraph (a) of Sec. 661.330

makes clear that an alternative entity must meet each of the four

criteria set forth in WIA section 117(i), including the requirement

that the alternative entity must have been established by December 31,

1997. An entity which fails to meet any one of these criteria is not

eligible to perform the functions of the Local Board.

While an alternative entity need not contain the identical

membership structure as that required of Local Boards, section

117(i)(1)(c)(ii) does require the alternative entity to be

substantially similar to the Local Boards. In the Department's view it

is extremely important that each of the groups listed in section

117(b)(2) have an active role in the workforce investment system if the

system is to be successful. Therefore, the Rule requires that the

alternative entity be identified in the State Plan and the local

workforce investment plan, and that these workforce investment plans

explain the manner in which the Local Board will ensure the ongoing

participation of any omitted membership groups in the local workforce

investment area. While this Rule does not require that such groups be

seated on the Board, it does require the State and local workforce

investment plans to describe the means by which such groups will have

periodic regular meaningful opportunities for input into decisions made

by the Local Board.

Paragraph (c) of Sec. 661.330 amplifies the requirement that an

alternative entity must have been established by and in existence on

December 31, 1997. Because of this requirement, modifications of the

alternative entity are not allowed; any change to the membership

structure will invalidate the entity's eligibility as an alternative

entity. The membership structure is not considered to be changed when

an existing member leaves the Local Board and a replacement member is

appointed. However, it is considered to be changed when a change is

made to the organizational structure of the Local Board that requires a

change (whether the change is formally made or not) in the Local

Board's charter or to a similar document that defines the

organizational structure of the Local Board, such as appointing members

of a category not previously represented. In that case, the entity is

no longer eligible to perform the functions of the Local Board and a

new entity, meeting all the requirements of section 117 of WIA must be

created. This prevents piecemeal modification of alternative entities

that would add certain WIA section 117(b)(2) membership categories, but

not others.

5. Youth Council: Section 117(h) of WIA establishes youth councils

as a subgroup of the Local Boards. Youth councils are an innovative new

entity intended to broaden participation in the design and delivery of

youth services at the local level. Section 661.335 describes the

relationship of the youth council to the Local Board as well as the

membership requirements and Sec. 661.340 explains the responsibilities

of the youth council, as described in section 117(h) of WIA.

6. Local Workforce Investment Plan: Sections 661.345 and 661.350

describe the requirements for the submission of the local workforce

investment plan (Local Plan) and the contents of the Local Plan.

Section 661.350 enumerates the Local Plan components outlined in WIA

section 118(b). The Local Plan also must include information on the

process for directing the One-Stop operators to give priority to low-

income individuals and recipients of public assistance in the event

that adult funds are limited, as required by WIA section 134(d)(4)(E).

This priority is discussed in more detail under Sec. 663.600.

Section 118 of WIA indicates that Local Plans cover a five year

period. Some parties suggested that modifications to the local plan

will likely be needed within the five year span. The Department

concurs, and the regulations permit the Governor to require local plan

modifications and, at Sec. 661.355, offer a few examples of when such

modifications might be required by the Governor. Section 661.355 states

that the Governor must establish procedures for Local Plan

modifications.

Subpart D--Waivers and Workflex

Subpart D indicates the elements of WIA and the Wagner-Peyser Act

that may and may not be waived under either the General Waiver

Authority or the Work Flex provision. The purpose of the general

statutory and regulatory waiver authority provided by section 189(i)(4)

and workforce flexibility waiver authority provided at section 192 is

to give flexibility to States and local areas in the design and

implementation of consolidated workforce development programs under

WIA. The regulations specify that the Secretary does not intend to

waive any of the key elements of the reform principles embodied in the

Act (listed in the background section of this preamble and in

Sec. 661.400), except in extremely unusual circumstances. It also

specifies that the provisions that incorporate the reform principles

embodied in the Act may not be waived under the Work Flex authority.

Part 662--Description of the One-Stop System Under Title I of the

Workforce Investment Act

Introduction

The establishment of a One-Stop delivery system for workforce

development services is a cornerstone of the reforms contained in title

I of WIA. This delivery system streamlines access to numerous workforce

investment and educational and other human resource services,

activities and programs. The Act's requirements build on reform efforts

that are already underway in all States through the Department's One-

Stop grant initiative. Rather than requiring individuals and employers

to seek workforce development information and services at several

different locations, which is often costly, discouraging and confusing,

WIA requires States and communities to integrate multiple workforce

development programs and resources for individuals at the ``street

level'' through a user friendly One-Stop delivery system. This system

will simplify and expand access to services for job seekers and

employers.

The Act specifies nineteen required One-Stop partners and an

additional five optional partners to streamline access to a range of

employment and training services. WIA requires coordination among all

Department of Labor funded programs as well as other workforce

investment programs administered by the Departments of Education,

Health and Human Services, and Housing and Urban Development. WIA also

encourages participation in the One-Stop delivery system by other

relevant programs, such as those administered by the Departments of

Agriculture, Health and Human Services, and Transportation, as well as

the Corporation for National and Community Service. In addition, local

areas are authorized to add additional partners as local needs may

require. All of these Federal Agencies will continue to work together

to ensure effective communication and collaboration at the Federal

level in support of One-Stop service delivery.

Subpart A--One-Stop Delivery System

1. Structure: Subpart A describes the structure of a One-Stop

delivery system. The regulation, at Sec. 662.100, describes the One-

Stop system as a seamless system of service delivery that is created

through the collaboration of entities responsible for separate

workforce development funding streams. The One-Stop system is designed

to enhance access to services and improve outcomes for individuals

seeking

[[Page 18669]]

assistance. The regulation specifically defines the system as

consisting of one or more comprehensive, physical One-Stop centers in a

local area that provides the core services specified in WIA section

134(d)(2) and that provide access to the other activities and programs

provided under WIA and by each One-Stop partner. In locating each

comprehensive center, Local Boards should coordinate with the broader

community, including transportation agencies, to ensure that the

centers are accessible to their customers. In addition to the

comprehensive centers, the regulation notes that WIA allows for three

other arrangements to supplement the comprehensive center. These

supplemental arrangements include: (1) A network of affiliated sites

that provide one or more of the programs, services and activities of

the partners; (2) a network of One-Stop partners through which the

partners provide services linked to an affiliated site and through

which all individuals are provided information on the availability of

core services in the local area; and (3) specialized centers that

address specific needs. In essence, this structure may be described as

a ``one right door and no wrong door'' approach. One-Stop partners have

an obligation to ensure that core services that are appropriate for

their particular populations are made available at one comprehensive

center. If an individual enters the system through one of the network

sites rather than the comprehensive One-Stop center, the individual may

still obtain certain services at the network site and information about

how and where all the other services provided through the One-Stop

system may be obtained.

Subpart B--One Stop Partners

1. Responsibilities: Subpart B identifies the One-Stop partners and

their responsibilities in the One-Stop delivery system. The required

partners are entities that carry out the workforce development

programs. They are specifically identified in section 121(b)(1) of WIA

and Sec. 662.200. The regulation at Sec. 662.200(a)(1)(i through vii)

separately specifies the funding streams under title I that are

included as required partners. The regulations also identify the other

required programs, with some clarification of the particular sections

of certain Acts (for example, the Vocational Rehabilitation Act and the

Carl D. Perkins Act) that authorize the program that must participate.

Section 662.210 identifies additional partners that may be a part of

the One-Stop system at local option.

Entities--The regulation at Sec. 662.220 provides a general

definition of the ``entity'' that carries out the specified programs

and serves as the partner. In light of the responsibilities of the

partners, which are described below and include decisions regarding the

use and administration of program resources, the regulation defines the

entity as the grant recipient or other entity or organization

responsible for administering the program's funds in the local area.

The term ``entity'' does not include service providers that contract

with or are subrecipients of the local entity. The regulation notes

that for programs that do not have local administrative entities, the

responsible State agency may be the One-Stop partner. In addition, the

regulation specifies the appropriate entity to serve as partner for the

Adult Education and Vocational Rehabilitation programs. Entities that

serve as the partner under the Indian and Native American, Migrant and

Seasonal Farmworker, Job Corps, and Youth programs are identified in

the sections of the regulations applicable to those programs.

Partner Responsibilities--This subpart also describes and

elaborates on the statutory responsibilities of the partners. The

regulation at Sec. 662.230 identifies the five provisions of the Act

that describe these responsibilities. One of the key responsibilities

of each partner is to make available at the comprehensive center

through the One-Stop system appropriate core services that are

applicable to the partner's program. The regulation at Sec. 662.240

lists the core services that are described in section 134(d)(2) of WIA,

and defines ``applicable'' to mean the services from that list that are

authorized and provided under the partner programs. The extent to which

core services are applicable to a partner program, as well as the

manner in which services are provided, are determined by the program's

authorizing statute.

Availability of Services--The regulation at Sec. 662.250 describes

where and to what extent the One-Stop partners must make available the

applicable core services. Since section 134(c) of WIA requires that

core services be provided, at a minimum, at one comprehensive physical

center, the regulation requires that the applicable core services

attributable to the partner's program be made available by each partner

at that comprehensive center. To avoid duplication of services

traditionally provided under the Wagner-Peyser Act, this requirement is

limited to those applicable core services that are in addition to the

basic labor exchange services traditionally provided in the local area

under the Wagner-Peyser program. While a partner would not, for

example, be required to duplicate an assessment provided under the

Wagner-Peyser Act, the partner would be expected to be responsible for

any needed assessment that includes additional elements specifically

tailored to participants under the partner's program. However, the

adult and dislocated worker program partners are required to make all

of the core services available at the center.

Flexibility--The regulations also provide significant flexibility

regarding how the core services are to be made available at the One-

Stop center by allowing for services to be provided through appropriate

technology at the center, through co-location of personnel, cross-

training of staff, or through contractual or other arrangements between

the partner and the service providers at the center.

2. Proportional Responsibility: The regulation also provides that

the responsibility for the provision of and financing for applicable

core services is to be proportionate to the use of services at the

center by individuals attributable to the partners' programs. The

regulation further provides that the individuals attributable to a

partners' program may include individuals referred through the center

and enrolled in the partner's program after the receipt of core

services, individuals enrolled prior to the receipt of core services,

individuals who meet the eligibility criteria for the partner's program

and who receive an applicable core service, or individuals who meet an

alternative definition described in the Memorandum of Understanding

(MOU), described in subpart C. This ``proportionate responsibility''

provision is intended to provide an equitable principle for sharing

responsibility among the partners. The regulation provides that the

specific method for determining proportionate responsibility (for

example, surveys) must be described in the MOU.

Additional Sites--The regulation provides that core services may be

provided at sites in addition to the comprehensive center under the

MOU. Therefore, it is not required that partners provide applicable

core services exclusively at a One-Stop center. If an individual seeks

core services at the One-Stop center rather than at the partner's site,

they should be made available to him or her without referral to another

location, but a partner is not required to route all of its

participants through the comprehensive One-Stop center.

Access to Services--The regulation at Sec. 662.260 provides that,

in addition to the provision of core services, the One-

[[Page 18670]]

Stop partners must use the One-Stop system to provide access to the

partners' other activities and programs. This access must be described

in the MOU. This requirement is essential to ensuring a seamless,

comprehensive workforce development system that identifies the service

options available to individuals and takes the critical next step of

facilitating access to these services.

3. Cost Sharing: The regulation at Sec. 662.270 provides that the

particular arrangements for funding the services provided through the

One-Stop system and the operating costs of the One-Stop system must be

described in the MOU. Each partner must contribute a fair share of the

operating costs based on the use of the One-Stop delivery system by

individuals attributable to the partner's program. This is an equitable

principle and there are a number of methods that may be used for

allocating costs among partners that are consistent with this principle

and the OMB circulars. To promote efficiency and optimal performance,

partner contributions for the administrative costs of the system may be

re-evaluated annually through the memorandum of understanding process.

The regulation identifies a number of methodologies, including cost

pooling, indirect cost allocation, and activity based cost allocation

plans, that may be used. The Department, in consultation with other

affected Federal agencies, intends to issue guidance or technical

assistance relating to cost allocation methods to assist in this area.

Allocation Process--The regulation at Sec. 662.280 clarifies that

the requirements of each partner's authorizing legislation continue to

apply under the One-Stop system. Therefore, while the overall effect of

linking One-Stop partners in the One-Stop system is to create universal

access to core services, the resources of each partner may only be used

to provide services that are authorized and provided under the

partner's program to individuals who are eligible under the program.

As noted above, consistent with this principle, there are a variety

of methods for allocating costs among programs. In sum, this regulation

is intended to clarify that participation in the One-Stop delivery

system is a requirement that is in addition to, rather than in lieu of,

the other requirements applicable to the partner program under each

authorizing law.

Subpart C--Memorandum of Understanding

Subpart C describes the operation of the local One-Stop system.

Section 662.300 addresses the Memorandum of Understanding (MOU) that

must be executed between the Local Board and the One-Stop partners.

Section 662.310 states that the local areas may develop a single

umbrella MOU covering all partners and the Local Board, or separate

MOU's between partners and the Local Board. In many areas, the umbrella

approach may be the preferred means to facilitate a comprehensive and

equitable resolution of the operational issues relating to the One-

Stop. The regulation also emphasizes that it is a legal obligation for

the partners and the Local Board to engage in good faith negotiation

and reach agreement on the MOU. The partners and the Local Boards may

seek the assistance of the appropriate State agencies, the Governor,

State Board or the appropriate parties in reaching agreement. The State

agencies, the State Board, and the Governor may also consult with the

appropriate Federal agencies to address impasse situations after

exhausting other alternatives. If an impasse has not been resolved,

parties that fail to execute an MOU may not be permitted to serve on

the Local Board. In addition, if a Local Board has not executed an MOU

with all required parties, the local area is not eligible for State

incentive grants awarded for local coordination.

Subpart D--One-Stop Operator

This subpart addresses the role and selection of One-Stop

operators. The operators are responsible for administering the One-Stop

centers and their role may range from simply coordinating service

providers in the center to being the primary provider of services at

the center. The role is determined by the Local Board. In areas where

there is more than one comprehensive One-Stop center, there may be

separate operators for each center or one operator for multiple

centers. The operator may be selected by the Local Board through a

competitive process, or the Local Board may designate a consortium that

includes three or more required One-Stop partners as an operator. The

Local Board itself may serve as a One-Stop operator only with the

consent of the chief elected official and the Governor. This subpart

also addresses the ``grandfathering'' of existing One-Stop operators.

The regulations provide some continuity for areas that have already

established One-Stop systems while ensuring that fundamental features

of the new One-Stop system are incorporated. A local area does not have

to comply with the One-Stop operator selection procedures if the One-

Stop delivery system, of which the operator is a part, existed before

August 7, 1998 (the date of the WIA's enactment); if the One-Stop

system includes all of the required One-Stop partners; and if an MOU is

executed consistent with the requirements of the Act.

Part 663--Adult and Dislocated Worker Activities Under Title I of

the Workforce Investment Act

Introduction

This part of the regulations describes requirements relating to the

services that are available for adults and dislocated workers. Along

with Wagner-Peyser labor exchange services, the required adult and

dislocated worker services, described as core, intensive, and training

services, form the backbone of the One-Stop delivery system. The WIA

goal of universal access to core services is achieved through close

integration of services provided by the Wagner-Peyser, WIA adult and

dislocated worker partners and other partners in the One-Stop center

and system. Intensive and training services are available to

individuals who meet the eligibility requirements for the funding

streams and who are determined to need these services to achieve

employment, or in the case of employed individuals, to obtain or retain

self-sufficient employment. Supportive services, to enable individuals

to participate in these other activities, including needs-related

payments for individuals in training, may also be provided.

These regulations also introduce the Individual Training Account

(ITA), which is a key reform element of the Workforce Investment Act.

Individuals are expected to take a proactive role in choosing the

training services which meet their needs. They will be provided with

quality information on providers of training and, armed with effective

case management and an ITA as the payment mechanism, they will have the

opportunity to choose the training provider that best meets their

needs.

Subpart A--One-Stop System

1. Role of the Adult and Dislocated Worker Program in the One-Stop

System: The regulation at Sec. 663.100 provides that the One-Stop

system is the basic delivery system for services to adults and

dislocated workers. The concept of a single system that provides

universal access to certain services to all individuals age 18 or older

is a key tenet of the Workforce Investment Act. The regulation reflects

the emphasis in WIA to consolidate and coordinate services. The grant

recipient(s) for the adult and dislocated worker program is a required

partner and is subject to Sec. 662.210

[[Page 18671]]

regarding required partner responsibilities. Access to services through

the One-Stop system ensures that individual needs are identified and,

to the extent possible, met. The consolidation of and access to

services will result in improved services for both adults and

dislocated workers.

2. Registration and Eligibility: Sections 663.105 through 663.120

address registration and basic eligibility requirements. In response to

concerns regarding the timing of eligibility determination for services

in a One-Stop system, the Department has provided general guidance in

the regulation at Sec. 663.105 on when adults and dislocated workers

must be registered. Sections 663.110 and 663.120 contain the basic

eligibility criteria for adults and dislocated workers, respectively.

Individuals who are primarily seeking information and do not seek

direct, one-on-one staff assistance, do not need to be registered.

However, when an individual seeks more than minimal assistance from

staff in taking the next steps toward self-sufficient employment, then

eligibility must be determined. Registration is the point at which

information that is used in performance measurement begins to be

collected. In addition, equal employment opportunity data must be

collected on individuals when any assessment or discretionary decision

regarding a specific individual is made. Such assessments or decisions

include: Decisions regarding service or program eligibility, either

positive or negative; and decisions made on the part of any workforce

investment system employee which lead to a targeting of services for

the individual. The Department will issue further guidance regarding

this data collection. Additional information needed to determine

eligibility for other assistance available at the One-Stop site may

also be determined at the same time. Program operators should determine

the information that they need for cost allocation purposes and when

they can most efficiently collect it. Electronic records systems allow

information to be collected incrementally as higher levels of

assistance are provided.

3. Displaced Homemaker Eligibility: In response to inquiries

regarding assistance to displaced homemakers, the regulation at

Sec. 663.120 clarifies that a displaced homemaker who has been

dependent on the income of another family member but is no longer

supported by that income, is unemployed or underemployed and is

experiencing difficulty in obtaining or upgrading employment, may

receive assistance with funds available to Local Boards for services to

dislocated workers.

4. Title I Funds: Section 663.145 clarifies how title I adult and

dislocated worker funds are used to contribute to the provision of core

services, and to provide intensive and training services through the

One-Stop delivery system. All three types of services must be provided,

but the Local Boards determine the mix of the three services.

5. Sequence of Services: WIA provides for three levels of services:

Core, intensive, and training, with service at one level being a

prerequisite to moving to the next level. There was a great deal of

concern expressed about how this tiered approach would be implemented.

Many were particularly concerned that the Department might require a

``failed'' job search or a minimum time period in one level of service

before moving on to the next level. The regulations establish the

concept of a tiered approach but allow significant flexibility at the

local level. The Department, in response to the comments received, did

not establish a minimum number of ``failed'' job applications or a

minimum time period but, instead, allows localities to establish

gateway activities that lead from participation in core to intensive

and training services. Any core service, such as an initial assessment

or job search and placement assistance, could be the gateway activity.

In intensive services, the gateway activity could be the development of

an individual employment plan, individual counseling and career

planning or another intensive service. Key to these gateway activities

is the determination, made at the local level, that intensive or

training services are required for the participant to achieve the goal

of obtaining or retaining self-sufficient employment. The three levels

of services are discussed separately in the regulations.

6. Core Services: The regulations at Secs. 663.150 to 663.165

discuss the core services. All of the core services that are listed in

the Act must be made available in each local area through the One-Stop

system. Followup services must be available for a minimum of 12 months

after employment begins, to registered participants who are placed in

unsubsidized employment. Among the core services available is

information on targeted assistance available through the One-Stop

system for specific groups of workers, such as Migrant and Seasonal

Farm Workers, and veterans.

Core services also include assistance in establishing eligibility

for the Welfare-to-Work program and programs of financial aid for

training and education programs. The specific form of this assistance

is determined at the local level based on the participant's needs and

in coordination with the other partner programs. This assistance may

include: referrals to specific agencies; information relating to, or

provision of, required applications or other forms; or specific on-site

assistance.

Another core service is the provision of information relating to

the availability of supportive services, including child care and

transportation, available in the local area, and referral to such

services as appropriate. The Department encourages Local Boards to

establish strong linkages with a variety of supportive service

programs, including Food Stamps, Medicaid programs, and CHIP. Such

programs provide key supports for low-income working families and

families making the transition from welfare to self-sufficiency.

The Department also encourages Local Boards to establish strong

linkages to child support agencies and organizations serving fathers.

WIA services can help raise the employment and earnings of non-

custodial fathers and fathers living with their children so that they

can better support their children. Child support payments help low

income single parents stabilize and raise their income. At the same

time, it is important for One-Stop programs to be aware of the child

support requirements on non-custodial parents who may receive services.

Subpart B--Intensive Services

1. Intensive Services for Adults and Dislocated Workers: The

regulation at Sec. 663.200 discusses intensive services. The regulation

provides that intensive services beyond those listed in the Act may

also be provided. Out-of-area job search expenses, relocation expenses,

internships, and work experience are specifically mentioned to clarify

that they are among the additional intensive services that may be

provided. Intensive services are intended to identify obstacles to

employment through a comprehensive assessment or individual employment

plan in order to determine specific services needed, such as counseling

and career planning, referrals to community services, and, if

appropriate, referrals to training.

2. Participation in Intensive Services: Section 663.220 explains

that intensive services are provided to unemployed adults and

dislocated workers who are unable to obtain employment through core

services and require these services to obtain or retain employment, and

employed workers who need services to obtain or retain employment that

leads

[[Page 18672]]

to self-sufficiency. The regulations at Secs. 663.240 through 663.250

specify that an individual must receive at least one intensive service,

such as the development of an individual employment plan with a case

manager or individual counseling and career planning, before the

individual may receive training services and that there is no Federally

required minimum time for participation in intensive services. Each

person in intensive services should have a case management file, either

hard copy, electronic or both. Section 663.240 explains that the case

file must contain a determination of need for training services, as

identified through the intensive service received.

3. Self-sufficiency: This regulation, at Sec. 663.230, discusses

how ``self-sufficiency'' should be determined. WIA requires a

determination that employed adults and dislocated workers need

intensive or training services to obtain or retain employment that

allows for self-sufficiency as a condition for providing those

services. Recognizing that there are different local conditions that

should be considered in this determination, the regulation provides

maximum flexibility, requiring only that self-sufficiency mean

employment that pays at least the lower living standard income level.

State Boards or Local Boards must set the criteria for determining

whether employment leads to self-sufficiency. Such factors as family

size and local economic conditions may be included in the criteria. It

may often occur that dislocated workers require a wage higher than the

lower living standard income level to maintain self-sufficiency.

Therefore, the Rule allows self-sufficiency for a dislocated worker to

be defined in relation to a percentage of the lay-off wage.

Subpart C--Training Services

1. Training Services: Training services are discussed at

Secs. 663.300 and 663.320. Training services are designed to equip

individuals to enter the workforce and retain employment. Under JTPA, a

dislocated worker participating in training under title III of JTPA is

deemed to be in training with the approval of the State Unemployment

Compensation Agency. With such approval, unemployment compensation

cannot be denied to the individual solely on the basis that the

individual is not available for work because he or she is in training.

Although there is no comparable provision in WIA, this JTPA provision

will remain in effect during the transition period under the

Secretary's authority to guide that transition from JTPA to WIA. The

Department will seek an amendment adding similar language to WIA which

would deem all adults participating in training under title I of WIA to

be in approved training for the purposes of unemployment compensation

qualification.

2. Determining the Need for Training: The regulations at

Sec. 663.310 provide that the One-Stop operator or partner determines

the need for training based on an individual (1) meeting the

eligibility requirements for intensive services; (2) being unable to

obtain or retain employment through such services; and (3) being

determined after an interview, evaluation or assessment to be in need

of training. Section 663.310 requires that, to receive training, an

individual must select a program of services directly linked to

occupations in demand in the area, based on information provided by the

One-Stop operator or partner. If individuals are willing to relocate,

they may receive training in occupations in demand in another area.

3. Requirements When Other Grant Assistance is Available to

Participants. Section 663.320 implements the requirements of WIA

section 134(d)(4)(B), which limits the use of WIA funds for training

services to instances when there is no or inadequate grant assistance

from other sources available to pay for those costs. The statute

specifically requires that funds not be used to pay for the costs of

training when Pell Grant funds or grant assistance from other sources

are available to pay the costs. This section is intended to give effect

to this WIA requirement and still give effect to title IV of the Higher

Education Act (HEA) as amended (20 U.S.C. 1087uu), which prohibits

taking into account either a Pell Grant or other Federal student

financial assistance when determining an individual's eligibility for,

or the amount of, any other Federal funding assistance program.

Section 134(d)(4)(B) of WIA requires the coordination of training

costs with funds available under other Federal programs. To avoid

duplicate payment of costs when an individual is eligible for both WIA

and other assistance, including a Pell Grant, Sec. 663.320(b) requires

that program operators and training providers coordinate by entering

into arrangements with the entities administering the alternate sources

of funds, including eligible providers administering Pell Grants. These

entities should consider all available sources of funds, excluding

loans, in determining an individual's overall need for WIA funds. The

exact mix of funds should be determined based on the availability of

funding for either training costs or supportive services, with the goal

of ensuring that the costs of the training program the participant

selects are fully paid and that necessary supportive services are

available so that the training can be completed successfully. This

determination should focus on the needs of the participant; simply

reducing the amount of WIA funds by the amount of Pell Grant funds is

not permitted. Participation in a training program funded under WIA may

not be conditioned on applying for or using a loan to help finance

training costs.

With such coordination and arrangements, the WIA counselor is

likely to know the amount of WIA funds available to the WIA participant

when calculating the amount of financial assistance needed for the

participant to complete the training program successfully. The WIA

counselor needs to work with the WIA participant to calculate the total

funding resources available as well as to assess the full ``education

and education related costs'' (training and supportive services costs)

incurred if the participant is to complete the chosen program. This

also ensures both that duplicate payments of training costs are not

made and that the amount of WIA funded training is not reduced by the

amount of Federal student financial assistance in violation of 20

U.S.C. 1087uu.

It is important to note that the Pell Grant is not school-based;

rather, it is a portable grant for which preliminary eligibility can,

and should, be determined before the participant enrolls in a

particular school or training program. The application for determining

eligibility and ultimately the amount of the grant, should be readily

available at all One-Stop centers for assistance in the completion of

these ``gateway'' financial aid applications.

Section 663.320(c) implements the requirements of WIA section

134(d)(4)(B)(ii). This section permits a WIA participant to enroll in a

training program with WIA funds while an application for Pell Grant

funds is pending, but requires that the local workforce investment area

be reimbursed for the amount of the Pell Grant used for training if the

application is approved. Since Pell Grants are intended to provide for

both tuition and other education-related costs, the Rule also clarifies

that only the portion provided for tuition is subject to reimbursement.

In the limited cases where contracts are used rather than ITA's,

the contracts negotiated by the One-Stop center must prohibit training

institutions or

[[Page 18673]]

organizations from holding the student liable for outstanding charges.

Otherwise, the performance agreements would be undercut because the

incentive for the institution or organization to perform would be

removed. Also, the practice of withholding Pell Grants from students is

prohibited by the U.S. Department of Education.

Subpart D--Individual Training Accounts

1. Definition of an Individual Training Account: Information

regarding Individual Training Accounts (ITA) is contained in

Secs. 663.400 through 663.430. A key reform tenet of the Workforce

Investment Act is that adults and dislocated workers who have been

determined to need training, may access training with an Individual

Training Account. The regulation at Sec. 663.410 provides a definition

for an ITA that seeks to provide maximum flexibility to State and local

program operators in managing ITA's. These regulations do not establish

the procedures for making payments, restrictions on the duration or

amounts of the ITA, or policies regarding exceptions to the limits, but

provide that authority to the State or Local Boards. However, this

authority to restrict the duration of ITA's or restrict funding amounts

should not be used to establish limits that arbitrarily exclude

eligible providers.

2. Exceptions to ITA's: The Act at section 134(d)(4)(G)(ii) and

Sec. 663.430 of the regulations provide that, under certain limited

circumstances, contracts for training rather than ITA's may be used.

Specifically, on-the-job training contracts with employers and

customized training contracts are authorized. Contracts may also be

used when there is an insufficient number of eligible providers in a

local area. This exception applies primarily to rural areas. The

exceptions to ITA's are to be used infrequently. The Act reforms the

local service delivery system by eliminating the current practice of

assigning participants to contracted training services and instead

establishing a system that maximizes customer choice in the selection

of training providers. When the Local Board determines there are an

insufficient number of eligible providers in the local area to

accomplish the purposes of a system of ITA's, and intends to use

contracts for services, there must be at least a 30 day public comment

period for interested providers.

Contracts for Special Populations--Contracts for training are also

authorized when the Local Board determines that there are special

populations that face multiple barriers to employment, as identified in

Sec. 663.430(b), and that there is a training services program of

demonstrated effectiveness offered by an eligible provider. Section

663.430(a)(3) explains that an eligible provider in this case is a

community based organization (CBO) or other private organization. The

Department has received many suggestions about this exception and the

extent to which it may be used. This exception is intended to meet

special needs and should be used infrequently. Those training providers

operating under the ITA exceptions still must qualify as eligible

providers, as required at Sec. 663.505. The Department believes that

effective eligible training providers, including CBO's and other

training providers, can and will compete for individual training

accounts and, that providers should view the use of ITA's as an

opportunity to expand their customer base.

Criteria for ``Demonstrated Effectiveness''--The regulation at

Sec. 663.430(a)(3) provides that when the exception for special

populations is used, the Local Board must apply criteria it develops to

determine ``demonstrated effectiveness,'' particularly as it applies to

the special participant population it proposes to serve. This

determination is in addition to meeting the requirements for qualifying

as an eligible training provider. The provisions in the regulation are

illustrative and Local Boards should develop specific criteria

applicable to their local areas.

Subpart E--Eligible Training Providers

1. Subpart E describes the methods by which organizations qualify

as eligible providers of training services under WIA. It also describes

the roles and responsibilities of Local Boards and the State in

managing this process. Although no single entity has full

responsibility for the entire process, the State must play a leadership

role in ensuring the success of the eligible provider system. The

Governor establishes minimum performance levels for initial

determination of non-Higher Education Act/registered apprenticeship

providers and for all subsequent eligibility determinations. The Local

Board may establish additional local performance levels for subsequent

eligibility determinations. The eligible provider process requires a

collaborative effort among the State, Local Boards, and other partners.

The regulations attempt to amplify and clarify the intent of the Act,

by linking statutory language on eligible providers in WIA section 122

with section 134 provisions covering Individual Training Accounts. In

Sec. 663.505, the regulations clarify that all training providers,

including those operating under the ITA exceptions, must qualify as

eligible providers, except for those engaged in on-the-job and

customized training (for which the Governor should establish qualifying

procedures as discussed in Sec. 663.595). Finally, in order to ensure

the strong relationship between the eligible provider process and

program performance, the regulation at Sec. 663.530 establishes a

maximum eighteen month period for an organization's initial

determination as an eligible provider.

The Department heard concern that some traditional providers of

training under previous workforce programs, such as community-based

organizations, would face difficulties in participating in this system.

The regulations clarify that such organizations have the opportunity to

deliver training funded under WIA, provided they deliver services that

customers value and meet training performance requirements. It is

important that States provide access to these organizations in order to

maximize customer choice. States should provide access to a broad and

diverse set of providers, including CBO's, while maintaining the

quality and integrity of training services.

Subpart F--Priority and Special Populations

1. Priority Under Limited Adult Funding: This subpart contains

requirements related to the statutorily-required priority for the use

of adult funds when funds are limited. WIA section 134(d)(4)(E) states

that in the event that funds allocated to a local area for adult

employment and training activities are limited, priority shall be given

to recipients of public assistance and other low-income individuals for

intensive services and training services. The appropriate Local Board

and the Governor must direct the One-Stop operators in the local area

with regard to making determinations related to such priority. The

Department assumes that adult funding is generally limited because

there are not enough adult funds available to provide services to all

of the adults who could benefit from such services. However, the

Department also recognizes that conditions are different from one area

to another and funds might not be limited in all areas. Because of

this, the regulation requires that all Local Boards must consider the

availability of funds in their area. In making this determination, the

availability of other Federal funding, such as TANF and Welfare-to-Work

[[Page 18674]]

funds, should be taken into consideration. Unless the Local Board

determines that funds are not limited in the local area, the priority

requirement will be in effect. States and Local Boards must work

together to establish the criteria that must be used in making this

determination. States and Local Boards also may administer their

priority for adult recipients of public assistance and other low income

adults so as not to preclude providing intensive and training services

to other individuals.

A substantial number of parties expressed views on the priority

issue. Many believed that the Department should not write any

regulations that would, in effect, establish a nationwide priority.

Some believed that the Department should not write any regulations at

all on this section of the statute. However, the Department believes

that the interpretation of this requirement is of such importance that

there must be regulations. This section reiterates the statutory

language that provides States and Local Boards with the authority to

determine the criteria to be applied when making the determination that

there are sufficient funds available so that the priority is not in

effect. Section 663.610 clarifies that the statutory priority only

applies to adult funds for intensive and training services, and not to

dislocated worker funds.

2. Welfare-to-Work and Temporary Assistance to Needy Families as

Part of One-Stop: At Sec. 663.620, the regulation discusses the

relationship of the Welfare-to-Work program and the Temporary

Assistance to Needy Families (TANF) program to the One-Stop delivery

system. Welfare-to-Work is a required partner to which the One-Stop

partner regulations apply. The TANF agency is specifically suggested as

an additional partner. Both programs can benefit from close cooperation

with the One-Stop delivery system because their respective participants

will have access to a much broader range of services to promote

employment retention and self-sufficiency.

Subpart G--On-the-Job Training and Customized Training

1. Sections 663.700 through 663.720 are the regulatory provisions

for conducting on-the-job (OJT) and customized training activities.

They include specific information regarding general, contract, and

employer payment requirements. The Department received input advocating

OJT regulations which do not restrict the duration of OJT and which

permit eligible employed workers to also receive this training. Unlike

JTPA, OJT is not limited to six months. However, as specified in WIA

section 101(31)(C), it is limited in duration as appropriate for the

occupation being trained for. Section 663.705 establishes requirements

that permit OJT contracts for employed workers.

Some parties called for minimal regulations in this area; however,

there were a few who suggested the need for information regarding

documentation requirements to avoid audit exceptions. Section 663.710

provides that employers are not required to document the extraordinary

costs associated with providing OJT, and no further documentation

requirements are established. Instead, program operators should put

emphasis on the development and/or selection of OJT assignments that

meet the identified needs of the participants.

Subpart H--Supportive Services

1. Flexibility in the Provision of Supportive Services: The

regulations in subpart H define the scope and purpose of supportive

services and the requirements governing their disbursement. A

fundamental principle of WIA is to provide local areas with the

authority to make policy and administrative decisions as well as the

flexibility to tailor the workforce investment system to meet the needs

of the local community. To ensure this flexibility, the regulations

afford local areas the discretion to provide supportive services as

they deem appropriate with limitations only in the areas defined in the

Act. Local Boards are required to develop policies and procedures

addressing coordination with other entities to ensure non-duplication

of resources and services, as well as any limits on the amount and

duration of such services. Attention should be given to developing

policies and procedures that ensure that the supportive services

provided are not available through other agencies and that they are

necessary for the individual to participate in title I activities.

2. Needs-Related Payments: There were a number of issues regarding

the eligibility requirements for dislocated workers to receive needs-

related payments that came to our attention, including the concern that

training enrollment requirements restrict the numbers of individuals

eligible to receive this income support which they need to participate

in training. Studies show that early entry into training for dislocated

workers who require it is a key factor in reducing the period of

unemployment during the adjustment process. Early intervention

strategies and policies are best implemented through quality rapid

response assistance which includes comprehensive core services, and the

provision of other reemployment assistance, including intensive and

training services, as soon as the need can be identified, preferably

before layoff. The statute authorizes all levels of assistance under

title I of WIA to many workers six months (180 days) before layoff, or

at least as soon as a layoff notice is received. Providing these

workers with access to quality information regarding all adjustment

assistance available in the community, including any deadlines that

must be met, is critical for workers to make intelligent reemployment

choices. Thus, many of the concerns raised can be resolved through the

use of early intervention strategies. The Department has decided to

issue only limited regulations on needs-related payments eligibility at

Sec. 663.815 through Sec. 663.840.

Part 664--Youth Activities Under Title I

Introduction

The youth regulations attempt to reflect the intent of the

legislation by moving away from one-time, short-term interventions and

moving to a systematic approach that offers youth a broad range of

coordinated services. Such offerings include opportunities for

assistance in both academic and occupational learning; developing

leadership skills; and preparing for further education, additional

training, and eventual employment. Rather than supporting separate,

categorical programs, the youth regulations are written to facilitate

the provision of a menu of varied services that may be provided in

combination or alone at different times during a youth's development.

Legislation creating the youth council, the local entity

responsible for recommending and coordinating youth policies and

programs, intends that the youth council be a catalyst for such broad

change. The regulations support that legislative intent.

Flexibility for local program operators in conducting youth

programs is key to the legislation and these regulations. The

Department encourages local decision making in terms of policy, youth

program design within the statutory framework, and determining

appropriate program offerings for each individual youth. It is the

Department's expectation that these offerings will provide needed

guidance for youth that is balanced with appropriate

[[Page 18675]]

consideration of each youth's involvement in his or her training and

educational plan. Further, the regulations support strong connections

between youth program activities and the One-Stop service delivery

system, so that youth learn early in their development how to access

the services of the One-Stop system and continue to use those services

throughout their working lives.

Subpart A--Youth Councils

1. This subpart explains the purpose of youth councils. The youth

council is a new feature of the workforce investment system that helps

develop youth employment and training policy, brings a youth

development perspective to the establishment of such policy,

establishes linkages with other local youth services organizations, and

takes into account a range of issues that can have an impact on the

success of youth in the labor market. Working with the youth council,

the Local Board has responsibility for oversight of youth programs. It

may be advantageous for Local Boards to delegate responsibility for

oversight of youth programs to youth councils which have expertise in

youth issues, as is permitted by Sec. 664.110.

Subpart B--Eligibility for Youth Services

1. Definition of Sixth Eligibility Barrier: Under section

101(13)(C)(vi) of the Act, a low income youth is eligible for services

if he or she ``requires additional assistance to complete an

educational program, or to secure and hold employment.'' The regulation

at Sec. 664.210 envisions that Local Boards will define this term,

however, if State policy is set regarding this provision, the policy

must be described in the State Plan.

2. Registering Youth Participants: Section 664.215 provides that

all youth participants be registered by collecting information for

supporting eligibility determinations, as well as EEO data. The EEO

data must be collected on individuals when any assessment or

discretionary decision regarding an individual is made. Such

assessments include decisions regarding service or program eligibility,

either positive or negative, and decisions made on the part of any

workforce investment system employee which lead to a targeting of

services for the individual. The Department will issue further guidance

regarding this data collection requirement.

3. Non-Income Eligible Youth: Section 129(c)(5) of the Act provides

that up to five percent of youth participants served in a local area

may be individuals who do not meet income criteria for eligible youth,

provided that they meet one or more of the criteria specified in

section 129(c)(5) of the Act and the regulations at Sec. 664.220. Local

Boards may define the term ``serious barriers to employment'' and

describe it in the Local Plan.

4. Eligibility under the National School Lunch Program: Eligibility

for free school lunches is not a substitute for income eligibility

under the Act. The Department received suggestions that program

operators be allowed to use eligibility for free lunch as a substitute

for determining eligibility under the Act, and encouraging the

Department to seek a technical amendment that would include such a

provision in the legislation. The Department recognizes the importance

of this issue, yet lacks statutory authority to change the Act's income

eligibility requirements.

5. Eligibility of Youth with Disabilities: Section 664.250 provides

that a disabled individual whose family income exceeds maximum income

levels under the Act may qualify for services if the individual's own

income meets the income criteria established in WIA section 101(25)(F),

or the eligibility criteria for cash payments under any Federal, State

or Local public assistance program. (WIA section 101(25)(B).)

Subpart C--Out of School Youth

1. Defining Out-of-School Youth: Sections 664.300, 664.310, and

664.320 address issues related to out-of-school youth. Section 101(33)

of the Act defines ``out-of-school youth'' as: eligible youth who are

school dropouts or who have received a secondary school diploma or its

equivalent, but are basic skills deficient, unemployed, or

underemployed. Youth enrolled in alternative schools are not school

dropouts. The Department received a number of requests that it seek a

technical amendment that would allow youth attending alternative

schools to be included in the definition of ``dropout,'' noting that

this would permit Local Boards to provide services to more youth in

alternative educational environments and to design programs that take

advantage of local resources and best meet the needs of local youth.

While recognizing the importance of local flexibility and of serving

youth in alternative school settings, the Department lacks statutory

authority to change definitions established under the Act. Section

664.310 of the regulations clarifies this issue.

2. Funds for Summer Activities for Out-of-School Youth: The

Department received a number of inquiries asking if summer activities

are exempt from the requirement that 30 percent of youth funds be spent

on services for out-of-school youth. Transition guidance will address

how the 30% requirement applies to the Program Year 1999 JTPA summer

funds. Section 664.320 clarifies that there is no exemption from this

requirement for summer activities. There is no separate summer program

under the Act. A single allocation of youth funds is available to local

areas for year-round and summer activities. Thirty percent of the total

youth allocation must be spent on services for out-of-school youth.

This 30 percent, like the remaining 70 percent, may or may not be

proportional between summer and year-round activities, as determined by

the Local Board in consultation with the chief elected official.

Subpart D--Youth Program Design, Elements, and Parameters

1. Program Design: Features of the youth program design are

outlined in section 129(c) of the Act. While there are three program

design categories and ten program elements are required, there is

individual program design flexibility and flexibility in determining

the definition, scope, and characteristics of the elements.

Program Design Categories--Under section 129(c)(1), three

categories provide the framework for youth program design. They are:

(1) An objective assessment of each participant; (2) individual service

strategies; and (3) services that prepare youth for postsecondary

educational opportunities, link academic and occupational learning,

prepare youth for employment, and provide connections to intermediary

organizations linked to the job market and employers.

Linkages to Entities--Youth councils and programs are required to

establish linkages to entities that will foster the participation of

eligible youth. Suggested linkages are included in Sec. 664.400(c).

Information and Referrals--Section 129(c)(3) of the Act requires

that Local Boards ensure that eligible youth receive information and

referrals, including information on the full array of appropriate

services available to them and referrals to appropriate training and

educational programs. Youth program providers must ensure that eligible

applicants who do not meet the enrollment requirements of their program

or who cannot be served by their program are referred for additional

assessment and program placement. This language was included in

Sec. 664.400(d) of the regulations to emphasize the importance of

referrals as

[[Page 18676]]

a part of overall youth program design. To further promote the concept

of seamless One-Stop service delivery, One-Stop operators are

encouraged to send those youth assessments that are completed at the

One-Stop center to other training and educational programs to which the

youth is referred.

2. Program elements: Section 129(c)(2) of the Act lists 10 program

elements that must be generally available to youth through local

programs. The Department received requests for clarification that not

all of the 10 youth program elements must be provided to every youth

participant, and this interpretation is included in Sec. 664.410(b).

Local program operators must determine what program elements will be

provided to each youth participant based on the participant's objective

assessment and service strategy; however, it is envisioned that each

youth will participate in more than one of the ten program elements

required as part of any local youth program, and all youth must receive

follow-up services. For example, even if it is determined appropriate

that a youth participate in only summer employment activities, he or

she would still receive at least 12 months of followup services.

Followup service requirements are fully described in Sec. 664.450.

Sections 664.420 through 664.470 further define and discuss five

program elements: leadership development, positive social behaviors,

supportive services, followup services, and work experiences.

Leadership Development--The Act states that youth programs must

provide leadership development opportunities, and gives the following

examples of such activities: community service and peer-centered

activities encouraging responsibility and other positive social

behaviors during non-school hours. Some additional examples of

leadership development activities are outlined in Sec. 664.420 which

elaborates on the definition of leadership development opportunities.

The development of leadership abilities might address team work,

decision making, personal responsibility, and citizenship training, as

well positive social behavior training in areas such as positive

attitudinal development, self esteem building, issues of cultural

diversity, and other skills and attributes that would help youth to

lead effectively, responsibly, and by example.

Supportive Services--The Act states that youth programs must

provide supportive services. Section 101(46) of the Act defines

supportive services to include services such as transportation, child

care, dependent care, housing, and needs-related payments, that are

necessary to participate in activities authorized under the Act.

Section 664.440 elaborates on the definition of supportive services as

it applies to youth. Such services may include: linkages to community

services; referrals to medical services; and assistance with work

attire and work-related tool costs, including such items as eye glasses

and protective eye gear.

Followup Services--The Act states that followup services will be

provided for not less than 12 months after the completion of

participation, as appropriate. Section 664.450(b) clarifies that all

youth participants must receive some form of followup services. Such

services must be for a minimum of 12 months. Followup services for

youth who participate in only summer employment activities may,

however, be less intensive than for those youth who participate in

other types of activities. Program operators are encouraged to consider

the intensity of the services provided and the needs of the individual

youth in determining the appropriate level of followup services. This

section also provides that followup may include leadership development

or supportive service activities, as well as other allowable

activities, and provides additional examples of permissible followup

services.

Evaluation studies such as Abt Associates' Final Report on the

National JTPA Study, have shown disappointing results for short-term

job training programs for youth. Meanwhile, programs such as STRIVE and

the Children's Village have shown much success with longer-term

followup strategies. A 1993 study by MDRC showed that the Center for

Employment Training, which features close ties to the private sector

and a strong job placement component with followup with employers,

increased the earnings of enrollees by $3,000 a year over a control

group during the last two years of a four-year evaluation.

Work Experiences--Sections 664.460 and 664.470 address work

experiences for youth. Work experiences are planned, structured

learning experiences that take place in a workplace for a limited

period of time. No specific time period is specified. As provided in

section 129(c)(2)(D) of the Act, work experiences may be paid or

unpaid, as appropriate. Section 664.460 states that work experiences

may be in the private for-profit sector, the nonprofit sector, or the

public sector, and gives examples of the types of activities that work

experiences may include, such as On-the-Job Training (OJT). While OJT

is likely not an appropriate activity for most youth under age 18, it

may be used as a service strategy for such youth based on the needs

identified in an objective assessment of an individual youth

participant. Section 664.470 provides that youth funds may be used to

pay the wages of youth in work experience. Youth funds may be used to

pay the wages of youth in work experiences, including in the private,

for-profit sector, under conditions designed to protect youth and

incumbent workers when the purpose of the work experiences is to

provide youth with opportunities for career exploration and skill

development and not to benefit the employer. If an unpaid work

experience creates an employer/employee relationship, federal wage

standards may apply. This relationship is determined under the Fair

Labor Standards Act.

Subpart E--Concurrent Enrollment

1. Concurrent Enrollment in Youth and Adult Programs: Under the

Act, an eligible youth is an individual 14 through 21 years of age.

Adults are defined in the Act as individuals age 18 and older. The

Department received suggestions that local program operators be allowed

to decide whether youth or adult services are appropriate for

individuals aged 18 through 21 based on individual participant

assessments and service strategies. The Department encourages local

flexibility in serving both youth and adult participants, and thus

included this clarification in the regulations. Section 664.500(b)

clarifies that eligible youth who are 18 through 21 years old may

participate in youth and adult programs concurrently, as appropriate

for the individual. Such individuals must meet the eligibility

requirements under the applicable youth or adult criteria for the

services received. Local program operators must identify and track the

funding streams for services provided to individuals who participate in

youth and adult programs concurrently, ensuring non-duplication of

services.

2. Individual Training Accounts for Youth: Section 664.510 states

that ITA's are not an authorized use of youth funds. The ITA is the

currency of a market-based system that enables adults to select the

service providers most suited to their needs based on information about

the past performance of such providers. Under the Act, ITA's are not

authorized for youth below age 18. Providers of youth services are

competitively selected based on predetermined criteria, the judgment of

Local Boards, and recommendations of youth councils about the

providers' ability to meet the needs of youth

[[Page 18677]]

participants. Youth aged 18 through 21 can access ITA's under the adult

or dislocated worker program, if appropriate.

Subpart F--Summer Employment Opportunities

1. Summer Employment Activities: This subpart provides

clarification about summer youth employment. Although all Local Boards

must offer summer employment opportunities for eligible youth as one of

the ten required program elements listed in WIA section 129(c)(2) and

Sec. 664.410, the proportion of youth funds used for summer employment

is determined by the Local Board in consultation with the chief elected

official. Section 664.600 elaborates on the activities that must be

included in all summer employment opportunities, including direct

linkages to academic and occupational learning, as well as followup

services for at least 12 months. Numerous inquiries were received about

whether the Act would allow cities and counties to continue to operate

their summer activities. Section 664.610 provides that this practice is

still allowed, and clarifies that if summer employment opportunities

are provided by entities other than the grant recipient/fiscal agent,

the providers must be selected by awarding a grant or contract on a

competitive basis based on recommendations of the youth council and on

criteria contained in the State plan.

2. Application of Performance Indicators: In terms of performance

measurement, the Department received requests for clarification on

whether all of the core indicators listed in the Act apply to the

summer program element as well as to youth activities that are longer

in duration. It is important to note that the core indicators specified

in section 136 of the Act apply to all youth program activities. This

is consistent with the intent of the Act to move from a focus on

separate, categorical programs to a more systematic approach to

workforce investment and serving the needs of youth. Summer employment

opportunities then, are to be viewed as one element among many

available to youth as a part of a menu of activities offered by the

Local Board. Section 664.620 indicates that summer activities, as part

of the overall youth program, are required to meet the same core

indicators of performance as the other youth activities.

Subpart G--One-Stop Career Center Services to Youth

1. The Connection between the Title I Youth Program and the One-

Stop Delivery System: This subpart explains that the chief elected

official (as the local grant recipient for the youth program), as a

required One-Stop partner, is subject to the One-Stop provisions

related to such partners described in part 662 of the regulations and

is responsible for connecting the youth program and its activities to

the One-Stop system. In addition to the provisions of part 662,

connections between the youth program and the One-Stop system may

include those that facilitate:

The coordination of youth activities;

Connections to the job market and employers;

Access for eligible youth to information and services; and

Other activities designed to achieve the purposes of the

youth program.

The Department received requests for clarification on connecting

youth program activities to the One-Stop delivery system; however, some

parties felt that the youth program, as a One-Stop partner, should not

be made to conform to the same One-Stop partner requirements as other

partners. The Rule attempts to clarify the role of the youth program in

the One-Stop center through a cross-reference to the One-Stop

regulations found in 20 CFR, part 662.

2. Universal Access to One-Stop Centers for Youth under 18: Under

section 134(d)(2) of the Act, adults have access to core services in

One-Stop centers without regard to eligibility. Adults are defined

under the Act as persons aged 18 and above. Section 664.710 of the

regulations clarifies that local area youth, including youth under age

18 who are not eligible under the title I youth program, may receive

services through the One-Stop centers; however, services for such youth

must be funded from sources that do not restrict eligibility for

services, such as Wagner-Peyser. The Department believes that the

intent of the Act is to introduce youth, particularly out-of-school

youth, to the services of the One-Stop system early in their

development and to encourage the use of the One-Stop system as an entry

point to obtaining education, training, and job search services.

Subpart H--Youth Opportunity Grant Programs

This subpart explains that competitive procedures for awarding

Youth Opportunity Grants will be established by the Secretary. It also

restates statutory language regarding the eligibility of Local Boards

and other entities in high poverty areas to apply for Youth Opportunity

Grants. Provisions of the Act regarding eligibility for services under

Youth Opportunity Grants and the process for establishing performance

measures are clarified at Secs. 664.800 to 664.830. The Department

views these grants as a distinct opportunity to provide a variety of

needed services to youth in high poverty areas, building on the current

successful activities and innovations already at work in many

communities.

Part 665--Statewide Activities Under Title I of the Workforce

Investment Act

Introduction

This part addresses the funds reserved at the State level for

workforce investment activities under sections 128(a) and 133(2) of

WIA.

Subpart A--General Description

This subpart provides a general description of Statewide activities

conducted with up to 15 percent reserved from youth, adult and

dislocated worker funding streams (``15 percent funds''), and up to an

additional 25 percent of dislocated worker funds reserved for Statewide

activities from annual allotments to the State.

1. Section 665.110(b) explains that the 15 percent reserved funds

may be pooled and expended on workforce investment activities without

regard to the source of the funding. For example, funds reserved from

the adult funding stream may be used to carry out Statewide youth

activities and vice versa. The Department believes that the use of

these funds can provide critical leadership in the development and

continuous improvement of a comprehensive workforce investment system

for each State and, as a result, create a national system to which job

seekers and workers can look for expert assistance, and employers can

look for a qualified workforce.

Subpart B--Required and Allowable Statewide Workforce Investment

Activities

This subpart discusses required and optional activities conducted

with funds reserved from the three title I funding streams (youth,

adults, and dislocated workers).

1. Required Activities: Section 665.200 identifies the eight

activities which each State is required to carry out with its reserved

funds from the three funding streams. The Governor must reserve funding

for these activities, but has discretion to determine the amount

reserved, up to the maximum 15 percent of each funding stream. One use

of these funds is administration, subject to the five percent

administrative cost

[[Page 18678]]

limitation at 20 CFR 667.210(a)(1). This section clarifies that while

there is no specific amount for each of the seven of the eight required

activities to be carried out with the 15 percent funds, it is expected

that the State will expend a sufficient amount to ensure effective

implementation of those activities. The eighth required activity, rapid

response, is discussed in subpart C.

2. Optional Activities: Section 665.210 also identifies activities

which each State is allowed to carry out with the 15 percent funds. For

the first time, States have the discretion to conduct research and

demonstration projects, and incumbent worker projects, including the

establishment and implementation of an employer loan program. Section

665.220 makes clear that employed (incumbent) workers served under

projects funded with these reserve funds are not required to meet the

requirements that training is needed to lead to a self-sufficient wage

applicable to employed adult or dislocated workers served with local

formula funds.

Subpart C--Rapid Response Activities

This subpart addresses the use of funds that must be reserved (up

to 25 percent of dislocated worker funds allotted to States under

section 132(b)(2)(B) of WIA) to provide rapid response assistance.

1. Section 665.300 describes what are rapid response activities and

who is responsible for providing them. Rapid response assistance

commences at the site of dislocation as soon as a State has received a

WARN notice, a public announcement or other information that a mass

dislocation or plant closure is scheduled to take place. The Department

believes that this early intervention feature for dislocated workers,

if provided in a comprehensive and systematic manner through

collaboration between the State and Local Boards, One-Stop partners and

other applicable entities, is critical to enabling workers to minimize

the duration of unemployment following layoff. The Department strongly

urges States and Local Boards to implement processes that allow for

core services to be an integral part of rapid response assistance,

preferably on-site, if the size of the dislocation or other factors

warrant it. Further, WIA defines a dislocated worker at section 101(9)

in a way that permits formula funds to be used for intensive and

training services for workers: (1) As soon as they have layoff notices;

or (2) six months (180 days) prior to layoff if employed at a facility

that has made a general announcement that it will close within 180

days.

The Department believes that this is a critical period for workers,

States, Local Boards, One-Stop operators and partners to begin to make

important decisions. One important decision is whether there are

sufficient formula funds in the State (at the State or local levels) to

adequately serve the workers being dislocated, or whether national

emergency grant funds must be requested in a timely manner so that all

services are available to the workers when they need them.

2. In response to numerous concerns regarding whether rapid

response funds may be used beyond those types of required rapid

response assistance described in the Act and Sec. 665.310, the

Department has elaborated on the authorized rapid response activities

in the regulation at Sec. 665.320. These additional activities were

recommended by experts consulted on this topic.

3. Section 665.330 addresses the linkage of rapid response

assistance and WIA title I assistance to NAFTA-Transitional Adjustment

Assistance (NAFTA-TAA). This linkage is an important feature of the

One-Stop delivery system, and a requirement under NAFTA-TAA.

Part 666--Performance Accountability Under Title I of the Workforce

Investment Act

Introduction

This part presents the performance accountability requirements

under title I of the Act. This part of the regulations primarily

summarizes the statutory language in the Act and clarifies a few key

areas based on input the Department has received. WIA's purpose is to

provide workforce investment activities that improve the quality of the

workforce. The Department is strongly committed to a systemwide

continuous improvement approach, grounded upon proven quality

principles and practices. The regulations identify some of the major

issues where further guidance will be provided.

Subpart A--State Measures of Performance

1. Indicators: Section 666.100 identifies the 15 core indicators of

performance and the two customer satisfaction indicators that States

are required to address in title I grant applications. The 15 core

indicators represent the four core indicators that will be applied

separately for the three population categories (adult, dislocated

workers and eligible youth age 19 through 21) for a total of 12

indicators and the three youth indicators. There is one customer

satisfaction indicator for participants and one for employers. Section

666.110 clarifies that Governors may develop additional performance

indicators to be negotiated with Local Boards and that these additional

indicators must be included in the State Plan.

2. Definitions: Section 666.100(b) also explains that the

Departments of Labor and Education will issue more detailed definitions

for the title I and title II indicators after further consultation with

representatives identified in section 502(b) of WIA. The Departments

will consult further on the indicator definitions, including taking

into account factors such as the degree of difficulty and expense of

collecting data and reporting on the measures.

3. Negotiations: As noted at Sec. 666.120(a), the Department will

provide further guidance on each of these areas after additional

consultation. Section 666.120(b) addresses the requirement that States

must submit expected or proposed levels of performance for the core

indicators and customer satisfaction indicators for years one through

three of the State Plan. The Department may require States to express

levels of improvement as a percentage improvement over the previous

year's actual performance. The Department recognizes that continuous

improvement is more than incremental increases in performance and will

develop a comprehensive and rigorous approach to integrate continuous

improvement at all levels of the workforce investment system. The

Department received input that underscored this need to view continuous

improvement as a system building activity, not a compliance activity.

4. Participants Included in Measures: The Department was requested

to clarify when a customer becomes a participant for the purpose of

applying the core indicators of performance. Section 666.140 explains

that all individuals, except for those adults and dislocated workers

who receive services that are self-service or primarily informational,

must be registered and included in the core indicators of performance.

The Department will issue guidance to further specify which activities

and services require registration and which ones do not. In addition,

Sec. 666.140(b) implements the requirement that a standardized record

must be completed for registered participants.

5. Wage Record Data. Section 136(f)(2) of the Act requires States

to use quarterly wage records, consistent with State law, to measure

progress on the core indicators of performance. Section

[[Page 18679]]

666.150 clarifies that each State must describe its strategy for using

quarterly wage record data for performance measurement in the State

Plan. The State Plan must also identify the entities that may have

access to the wage record data for this purpose. In addition,

Sec. 666.150(c) defines ``quarterly wage record information'' (1) as

wages paid to an individual, (2) the individual's social security

number (or numbers if more than one), (3) the employer's name, address,

State where located, and (4) the Federal employer identification number

(when known). As requested, the Department will continue to explore the

implications and provide guidance for complying with the

confidentiality requirements at section 444 of the General Education

Act (20 U.S.C. 1232g (as added by the Family Educational Rights and

Privacy Act of 1974). Furthermore, the Department will continue to take

into account concerns about possible violations of State unemployment

compensation laws, confidentiality and privacy statutes and wage record

collection systems. The Department will issue further guidance about

the use of quarterly wage records.

Subpart B--Incentives and Sanctions for State Performance

1. Criteria: Section 666.200 restates the eligibility criteria for

States to apply for an incentive grant. Section 666.210 addresses the

use of incentive funds for one or more innovative programs consistent

with requirements of title I of WIA, title II of WIA and the Carl D.

Perkins Vocational and Applied Technology Education Act.

2. Timing: There were suggestions that the Department postpone the

incentive program until a State's second year progress report is

received. Additional time has also been requested to enable the

workforce investment system to have a year of performance information

to assist in establishing baseline levels and to learn more about using

the unemployment compensation wage records for performance measurement

and about the data and reporting systems for title II Adult Education

and Literacy programs and Carl D. Perkins programs. The Department

recognizes these concerns and is considering available options. The

regulations do not address the timing issue.

3. Awards: Section 666.230 explains that the Secretary of Labor

will consult with the Secretary of Education and issue annual

instructions listing the amounts of incentive funds available to each

eligible State and giving application instructions. The list will be

developed after annual performance reports are received and will be

based on the reported performance. It also describes the factors that

will be taken into account in determining the amount of Incentive Grant

awards.

4. Sanctions: Section 666.240 explains that States failing to meet

for any program adjusted levels of performance for core indicators and

the customer satisfaction indicators for any program, in any year, will

receive technical assistance, if requested. If a State fails to meet

the required indicators for the same program for a second consecutive

year, the State may receive a reduction of as much as five percent of

the succeeding year's grant allocation.

Subpart C--Local Measures of Performance

Section 666.300 explains that each local workforce investment area

will be subject to the same 15 core performance indicators and two

customer satisfaction indicators that States are required to address.

Governors may elect to apply additional performance indicators to local

areas. Section 666.310 states that local performance levels will be

based on the State adjusted levels of performance and negotiated by the

Local Board and chief elected official and the Governor to account for

variations in local conditions.

Subpart D--Incentives and Sanctions for Local Performance

Section 666.400(a) restates local area eligibility for State

incentive grants. Section 666.400(b) states that the amount of funds

available for incentive grants and specific criteria to be used are

determined by the Governor. Section 666.420 also explains that local

areas failing to meet agreed upon levels of performance will receive

technical assistance for any program year. Governors must take

corrective actions for local areas failing to meet the required

indicators for two consecutive years.

Part 667 Administration Provisions

Introduction

This part establishes administrative provisions which apply to WIA

programs conducted at the Federal, State and local levels. These

regulations are written to clarify what was written in the Act and to

assemble all of the administrative requirements from the various parts

of the Act and other applicable sources in order to facilitate the

administrative management of WIA programs.

Subpart A--Funding

This subpart addresses fund availability. Questions have been

raised about to reallotment and reallocation focused on procedures and

amounts. The regulation clarifies that the amount reserved for the

costs of administration is excluded from the calculation of unobligated

balances upon which reallotment/reallocation are to be based. The

regulation also emphasizes that any amount to be recaptured and the

reallotment/reallocation are to be separately determined for each of

the three funding streams. Thus, for example, it is possible that a

State may be subject to recapture of youth funds while receiving a

reallotment of adult funds. The Department will provide additional

guidance on these processes.

Subpart B--Administrative Rules, Costs and Limitations

1. Fiscal and Administrative Rules: This subpart specifies the

Rules applicable to WIA grants in the areas of fiscal and

administrative requirements, audit requirements, allowable cost/cost

principles, debarment and suspension, a drug-free workplace,

restrictions on lobbying, and nondiscrimination. This subpart also

addresses State and Local Board conflict of interest and program income

requirements, procurement contracts and fee-for-service use by

employers, nepotism, responsibility review for grant applicants, and

the Governor's prior approval authority in subtitle B programs. Section

667.170 sets forth the Department's authority to perform a

responsibility review of potential grant applicants. The Department may

review any information that has come to its attention as part of an

assessment of applicant's responsibility to administer Federal funds.

The responsibility tests include the items set forth in paragraphs

(a)(1) through (a)(14). In this section, the term ``include'' is used

as it is throughout the Interim Final Rule, to indicate an

illustrative, but not exhaustive list of examples.

2. Administrative Costs: Administrative Cost Limits: Section

667.210 restates the provision of the Act which set a State level

administrative cost limit of five percent of total funds allotted to

the State by the Department and a local administrative cost limit of

10% of funds allocated by the State to the local area. It also provides

that the cost limitation applicable to awards under subtitle D will be

specified in the grant agreement. In addition, this regulation includes

a provision which excludes from the administrative cost limitation

calculation the acquisition

[[Page 18680]]

costs of hardware and software used for tracking and monitoring

participants, and for collecting, storing and disseminating information

required as a core service under the Act.

Definition of Administrative Costs: Section 667.220 provides the

Department's definition of Administrative Costs. To comply with the

statutory requirement for consultation with the Governors in developing

this definition, the Department consulted with representatives of the

Governors and included both State and local stakeholders in the

discussion. In addition to the input received through the consultation,

the Department received suggestions related to the definition of

administrative costs in various forums and by direct communications

from a number of different sources. The key theme which emerged is that

the function and intended purpose of an activity should be used to

determine whether the costs associated with it should be charged to the

program or administrative cost category.

The Department received input regarding what to include and what to

exclude from the definition of administrative costs. There were

specific recommendations that costs of information technology and costs

associated with continuous improvement activities be excluded from the

administrative cost category. These suggestions helped the Department

as it framed the regulation which defines administrative costs.

The Department valued this consultation and carefully considered

all input and crafted its definition to incorporate this function-based

approach. The regulation enumerates those functions of State Boards,

Local Boards and boards of chief elected officials which are classified

as administrative and indicates that those costs and the costs of like

activities/functions performed by One-Stop operators are classified as

administrative costs. The regulation also includes additional cost

classification guidance to clarify areas where questions have arisen

concerning the allocation of costs between the program and

administrative categories. The regulation provides the system with the

flexibility needed to allocate costs to the program or administrative

cost category based on the purpose or nature of the activity or

function. As a result, the locus of responsibility and intended purpose

of the function, whether direct or indirect, determines the appropriate

cost category.

3. Prohibited Activities: Sections 667.260 through 270 address a

number of prohibited activities that are located in various sections of

the Act. The regulation clarifies the Department's interpretation that

the Act's prohibition on employment generating activities, economic

development and other similar activities does not apply when they are

directly related to training of eligible participants. It is not

intended that such activities must benefit individually identified

participants to be allowable, rather, such approaches as first source

hiring agreements that promise to benefit participants as a group would

suffice. The Rule includes a list of activities that may be provided as

allowable economic development or similar activities. This list is not

meant to be exclusive. There may be other activities of a similar

nature that are directly related to training for eligible individuals

that are permissible under WIA. In this section, the term include is

used, as it is throughout the Interim Final Rule, to indicate an

illustrative, but not exhaustive, list of examples. With respect to the

prohibition of WIA support of inducing relocation of a business, the

regulation provides a process for a preaward review to ensure that

funds are not spent in violation of the provision. Section 667.269

specifies where the procedures for resolution of violations of these

prohibitions, as well as the related sanctions and remedies, can be

found.

Sectarian Facilities: Section 667.266 restates the Act's

prohibition on the employment of participants in the construction,

operation, or maintenance of a facility that is used for sectarian

instruction or as a place of religious worship, and describes the Act's

limited exception to this prohibition.

4. Impairment of Collective Bargaining Agreements: Section 667.270

lists the safeguards that ensure that participants in WIA activities do

not displace other employees. These include the prohibition on

impairment of existing contracts for services or collective bargaining

agreements that is contained in WIA section 181(b)(2). When an

employment and training activity described in WIA section 134 would be

inconsistent with a collective bargaining agreement, the Rule requires

that the appropriate labor organization and employer provide written

concurrence before the activity begins.

5. Labor Protections: Section 667.272 requires that individuals

engaged in on-the-job training or employed in activities under Title I

of WIA must be paid at the same rate, including the same periodic wage

increases, as other workers who are similarly situated in similar

occupations by the same employer and who have similar training,

experience and skills. Wage rates must be in accordance with applicable

law, and must be at least equal to the rate specified in section

6(a)(1) of the Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C.

206(a)(1)) or the applicable State or local minimum wage law, whichever

is higher. The determination of whether an individual is ``employed''

in a WIA activity for purposes of this provision, including

participation in paid or unpaid work experience, must be made in

accordance with the requirements of the FLSA. Questions regarding the

application of FLSA to participants in WIA activities should be

directed to the DOL, Employment Standards Administration, Wage and Hour

Division.

Section 677.274 mandates that all Federal and state health and

safety standards and state workers' compensation laws applicable to the

working conditions of similarly situated workers are equally applicable

to the working conditions of participants in programs and activities

under Title I of WIA. Paragraph (b)(2) clarifies the application state

workers' compensation laws to individuals engaged in work experience.

If a State workers' compensation law does not apply to a participant in

work experience, insurance coverage must be secured for injuries

suffered by the participant in the course of such work experience.

6. Nondiscrimination: Section 188 of the Act prohibits

discrimination on the basis of race, color, national origin, sex, age,

disability, religion, political affiliation or belief, participant

status, and against certain noncitizens. It also requires the Secretary

to issue regulations ``necessary to implement this section not later

than one year after the date on enactment'' of the Act. The Department

anticipates the publication of an Interim Final Rule to implement the

nondiscrimination and equal opportunity provisions of the Act prior to

July 1, 1999 (63 FR 62003, November 9, 1998). The Rule will be located

at 29 CFR part 37.

The provisions of WIA sec.188 are substantially similar to sec. 167

of JTPA, as amended. As a consequence, the Department anticipates

little difference between 29 CFR part 37 and the regulation

implementing sec. 167.

Section 667.275(a) provides that recipients must comply with the

nondiscrimination and equal opportunity provisions of the Act and its

implementing regulations. This provision is substantially similar to

that found in Sec. 627.210, the companion section of the regulations

implementing

[[Page 18681]]

the JTPA. A slight modification has been made to the language to

eliminate any possible confusion about who is covered by sec. 188. The

term recipient, as used in Sec. 671.275, has the same broad meaning as

that found in other civil rights regulations (for example, in 29 CFR

parts 31, 32, and 34), and that meaning will be carried over to 29 CFR

part 37. In the context of Sec. 667.275, a recipient is any entity that

receives funds under title I of the Act (except for the ultimate

beneficiary) whether the assistance comes directly from the Department,

through the Governor, or through another recipient. Some entities may

be identified as vendors or subrecipients, or some other term. However,

for the purpose of Sec. 667.275, these entities are considered

recipients and subject to section 188 and its implementing regulations.

Section 667.275 generally follows the language in Sec. 667.210, but

provides for the exception found in sec. 188(a)(3). This exception

allows for using funds under title I of WIA to employ participants in

maintenance of a part of a religious facility that is not primarily or

inherently devoted to sectarian instruction or religious worship, in a

case in which the organization operating the facility is part of a

program or activity providing services to participants.

Subpart C--Reporting Requirements

There were suggestions and questions related to the mechanics of

reporting. In response, Sec. 667.300 indicates that the Department will

issue instructions and formats for financial, participant and

performance reporting. We anticipate that reporting will be done

electronically. Section 667.300 also provides that a grantee may impose

different reporting requirements on its subrecipients including

different forms, shorter due dates, etc. When a State is the grantee

and plans to impose different reporting requirements, it must describe

them in its State Plan. Section 667.300(e), concerning the Annual

Performance Progress Report specifies the situations under which a

sanction, including a possible reduction in the subsequent year's grant

amount, may be imposed.

Subpart D--Oversight and Monitoring

This subpart includes regulations which provide for both Federal

and State oversight responsibilities. For formula grants, the

Department's monitoring of the States will be conducted primarily at

the State level and may include a sample of subrecipients. The

regulation emphasizes the requirement that States funded under this

program develop a Statewide monitoring system. States must be able to

demonstrate that the monitoring system meets certain regulatory

requirements. One way to so demonstrate is to make a monitoring plan

available for Federal review. The regulation which specifies the

oversight roles and responsibilities of WIA grant recipients and

subrecipients reflects the statutory language of sections 183 and 184

of the Act.

Subpart E--Resolution of Findings from Monitoring and Oversight

Reviews

1. Resolution of Findings and Grant Officer Resolution Process:

This subpart addresses the resolution of findings that arise from

audits, investigations, monitoring reviews, and the Grant Officer

resolution process. The processes are essentially the same as they were

under JTPA.

2. Nondiscrimination: To avoid confusion about which procedures

apply to nondiscrimination findings, the regulation specifies that

findings arising from investigations or reviews conducted under

nondiscrimination laws are to be resolved in accordance with section

188 of the Act and the applicable Department of Labor nondiscrimination

regulations. While 29 CFR part 34 is currently in effect, the

Department will issue a new 29 CFR part 37 to specifically implement

the provisions of section 188 of WIA. Therefore, States which do not

fully or partially implement WIA before July 1, 2000 will be subject to

the rules of 29 CFR, part 34 during PY 99. All States that implement

early, including those which implement under a transition plan, will be

subject to the new rules at 29 CFR, part 37, during PY 99.

Subpart F--Grievance Procedures, Complaints, and State Appeals

Processes

There were recommendations for and against the application of

grievance procedures to One-Stop partners not funded by the Department.

In response, the regulations allow such partners to file a grievance or

complaint when they are affected by the WIA system, but do not attempt

to address any grievance or complaint that might arise about their own

programs. Grievance procedures available in partners' programs are

those available under the law authorizing that program. A person who

believes that a partner may have violated WIA may use the grievance

procedure available under WIA.

1. Grievance Procedures: Section 667.600 describes those elements

required for local area, State and other direct recipient grievance

procedures. It also specifies that complaints of discrimination follow

the resolution process at sec. 188 and Department of Labor

nondiscrimination regulations. The regulation specifies the two

situations in which the Department will investigate and/or review

allegations that arise through local, State and other direct recipient

grievance procedures. In particular, as part of the State's

responsibilities, it must provide an opportunity for a timely review of

local level grievance adjudications.

2. Complaints and Appeals: Sections 667.630-650 address complaints

and reports of criminal activity, and the additional appeal processes

which a State must have for its WIA programs for nondesignation of

local areas, termination of eligibility or denial of training

providers, and testing and sanctions for use of controlled substances.

Subpart G--Sanctions, Corrective Actions, and Waiver of Liability

This subpart addresses sanctions and corrective actions, waiver of

liability, advance approval of contemplated corrective actions, as well

as the offset and State deduction provision.

Subpart H--Administrative Adjudication and Judicial Review

This subpart specifies those actions which may be appealed to the

Department's Office of Administrative Law Judge (OALJ), and the rules

of procedure and timing of decisions for OALJ hearings. Section 667.825

sets forth special requirements that apply to reviews of MSFW and INA

grant selections. These rules are similar to those currently in effect

under JTPA. Section 667.840 also provides for an alternate dispute

resolution process. In addition, Sec. 667.850 describes the authority

for judicial review of a final order of the Secretary.

Subpart I--Transition

Section 667.900 indicates that a Governor may reserve up to two

percent of Program Years 1998 and 1999 JTPA formula funds, of which not

less than 50% must be made available to local entities, for expenditure

on WIA transition planning activities. It specifies that the source of

funds may be any one or more of JTPA's titles or subtitles. It includes

a provision that expressly states the Department's position to exclude

funds so reserved from any calculation of compliance with JTPA cost

limitations. The Governor must decide to make the funds available to

one or more local entities. These might include a local JTPA entity, a

local entity established for the purpose

[[Page 18682]]

of operating WIA programs, or any other local entity. Additional

information and guidance on the process of transition will be

forthcoming.

Part 668--Indian and Native American Programs

Introduction

This part establishes the operation of employment and training

programs for Indians and Native Americans under the authority of

section 166 of the Act. This part is broken into subparts dealing with:

Purposes and policies; service delivery systems; customer services;

youth services; services to communities; grantee accountability;

planning and funding; administration; and miscellaneous provisions such

as waivers. In crafting the section 166 regulations, the Department

attempted to represent the program from the grantees' perspectives, and

to provide an organization which is relatively easy to follow and as

comprehensive as possible without repeating major sections of the

general WIA administrative regulations contained in part 667. Cross-

references to that part are provided in the body of these regulations,

when appropriate.

Need for Regulations

There are several reasons why these regulations exist separately,

and why they contain the areas regulated. The primary reason separate

regulations are drafted for the section 166 program is that it is

clearly the intent of Congress and the Administration that there be a

supplemental employment and training program under WIA solely for

Indians and Native Americans, with requirements, policies, and

procedures unique to that customer group. The current grantee community

stated a desire to have regulations which are as self-contained as

possible. Therefore, some material covered under the regulations

implementing the State workforce investment system is repeated in these

regulations, but usually not in the depth contained in part 667. Cross-

references direct the grantee to sections where greater detail is

provided.

Subject Areas Covered

The specific subject areas covered by these regulations, and cited

above, are being regulated because the language of section 166 does not

cover the detailed operation of the program. Statements of policy are

made to clearly delineate the Department's position with respect to the

section 166 program and the nature of the relationship between the

Department and its section 166 grantees. Areas such as those concerning

the designation of section 166 grantees must be regulated in order to

clarify the statutory provisions, and it is desirable to clearly define

these procedures and requirements for ease of compliance by those who

are or wish to be part of the system. The subparts in this Interim

Final Rule represent a logical sequence, from policies and purposes

through miscellaneous provisions, generally representing the reality of

program implementation as experienced by the typical grantee. This

sequence reflects grantee comments. The primary vehicle for soliciting

input on these regulations is the Native American Employment and

Training Council. Drafts of areas under consideration for regulation

were circulated to the grantee community by the Council, in their

statutorily-mandated advisory role. Input received from grantees came

either through the Council or directly to ETA's Division of Indian and

Native American Programs (DINAP), either in writing (including faxes),

orally (over the telephone), or via E-Mail. There were also discussion

sessions held at the three multi-regional meetings in Washington, DC,

Albuquerque, and Maui, as well as at the Advisory Council meeting in

November in Washington, DC. Each of these meetings generated

suggestions which were considered in crafting the present regulations.

Input was also received through individual members of the Work Group,

which is a body composed of Council members and other select grantee

program directors, and is an official Council subcommittee. All in all,

well over 50 parties submitted views on various aspects of the draft

regulations. The most significant input is synopsized below.

Areas Not Covered

Because a Final Rule will be effective for PY 2000, this Rule was

designed to address issues that affect grantees who implement in PY

1999. The Department will issue program direction and administrative

guidance to assist implementing grantees. These areas are as follows:

1. Transition to WIA: Although several sections allude to the

transition, no detailed instructions are included in this Rule. Because

this event will occur only once for each grantee, the Department

decided that the conversion from JTPA to WIA would be more

appropriately covered in administrative guidance to be completed and

distributed to grantees at a later date. This includes the closeout of

JTPA grants.

2. Public Law 102-477: A separate subpart was suggested to address

the various aspects of the demonstration under Pub. L. 102-477, The

Indian Employment, Training and Related Services Demonstration Act of

1992, including procedures for transitioning from a JTPA/WIA grantee to

a ``477 tribe.'' Because no separate regulations are authorized for the

demonstration, and participation is limited by law to Federally-

recognized tribes and Alaska Native entities, it was decided that such

a subpart would be inappropriate. However, Sec. 668.930 clearly states

that grantees who qualify may participate under Pub. L. 102-477. The

Department considers this to be an adequate reference for these

regulations.

3. Supplemental Youth Services: The Department believes that

establishing a separate subpart for youth services adequately covers

the provision of youth services for these regulations, but it

recognizes that further instruction in the creation and submission of

these youth plans will be necessary. In order to provide the

flexibility needed to adapt to these changes as they occur, the

Department believes it is appropriate at this time to provide policies

and procedures for the youth program in program guidance and policy

documents.

4. Performance Measures and Standards: While performance measures

and standards are referenced in Sec. 668.460 and Sec. 668.620, these

regulations do not specify which measures may or must be used, or how

accompanying performance standards will be derived. The development of

revised performance measures and levels for Native American employment

and training grantees has been on-going for several years under JTPA,

and will continue under WIA. This effort is considered to be on a

``separate track'' from the development of regulations, whether under

JTPA or WIA. When section 166 performance measures and standards are

finalized, they will be transmitted to the grantees in a separate

administrative issuance, and will not appear in regulations.

Subpart A--Purposes and Policies.

1. Self-determination: In Sec. 668.120, the Department clearly

commits to the principles of self-determination and sovereignty, and

names DINAP as the ``single organizational unit'' required in the Act

to administer section 166 programs. In addition to the language in the

Act, which the Department thought it appropriate to repeat by

paraphrasing, the Department has added a statement on helping customers

achieve personal and economic self-sufficiency. The Department

considers this statement to be one of the prime purposes of all

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Federal employment and training efforts, and especially appropriate to

the Native American population.

2. Consultation: The operating principle of ``partnership'' is

embodied in these regulations at Sec. 668.130, which paraphrases

section 166 (h)(2) of the Act.

3. Definitions: These regulations do not repeat definitions covered

in the Act or in the main definitions section at Sec. 660.300. The term

``underemployed'' is defined in this section of the regulation because

it is not defined elsewhere, and the definition of ``family income'' is

specific to Indian and/or Alaska Native circumstances. The Department

has made clarifications to the definition of ``family income'' for

section 166 purposes. The regulations include a section from the Alaska

Native Claims Settlement Act (ANCSA) (43 U.S.C. 1626(c)) concerning the

treatment of income for Alaska Natives which is applicable by law to

all Federally-funded programs.

4. Applicable Regulations: To create a more ``user friendly''

document, the Department added Sec. 668.140 to the Rule, which

describes what other regulations affect upon section 166 program

operation.

Subpart B--Service Delivery Systems

1. Designation: The current JTPA designation procedures,

eligibility requirements, competition hierarchies, etc., are retained

in this Interim Final Rule for PY 1999. WIA section 166 requires that

grantees be selected on a competitive basis except where a waiver of

competition is granted due to successful performance. The requirements

for the selection of grantees through the designation process are set

forth in Sec. 668.200--Sec. 668.280. In order to be selected as an INA

grantee, an entity must have legal status as a government or agency of

a government, a private non-profit corporation or a consortium

containing one of these groups; it must have the ability to administer

federal funds as determined under Sec. 668.220; and it must meet

certain eligible population requirements. To be consistent with the

goal of the Indian Self-Determination and Education Assistance Act and

to provide Indians with the opportunity to achieve ``self-determination

essential to their social and economic well-being,'' the rule, at

Sec. 668.210, gives priority in the competitive designation process to

federally-recognized Indian tribes, Alaskan Native entities and

consortia of these entities. However, as part of the competitive

selection process, no entity may be designated as an INA grantee unless

it demonstrates that it has the ability to administer federal funds, as

defined in Sec. 668.220. The Department believes that this process is

consistent with the mandates of the Indian Self-Determination and

Education Assistance Act and with the requirement that grants,

contracts, and cooperative agreements be made on a competitive basis.

The Department is establishing a new designation threshold for PY

2000 and beyond in Sec. 668.200(b)(3), with allowances made for smaller

grantees wishing to participate in the demonstration under Pub. L. 102-

477. Also for PY 2000, the dates for submission of the Notice of Intent

and any additional required supporting documentation, contained in

Secs. 668.240 and 668 .250, are different from those for PY 1999,

primarily to allow both applicants and the Department more time to

implement the designation process, especially in the event of more than

one applicant competing for a given service area. An area of frequent

comment involved the current JTPA criteria for designation as a Native

American grantee, specifically the issues of size and the competition

hierarchy. Most of the suggestions received were from smaller

Federally-recognized tribes, either without the currently required

1,000 Indian or Native American population in their service area or

without a significant reservation land base from which to claim a

Hierarchy 1 preference. There were suggestions that the Department

abandon the numbers altogether, and instead assign a dollar threshold

which would be a better indication of grantee viability. For the PY

2000 designation and beyond, the Department has chosen $100,000 as the

minimum funding threshold. This includes any supplemental youth

services funds awarded to the grantee. In response to requests from

some smaller grantees, the Department has included in

Sec. 668.200(b)(3) a statement ``grandfathering in'' those current

grantees which do not meet the $100,000 threshold for PY 2000 and

beyond. Also in response to suggestions received fro

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