[Federal Register: October 9, 2003 (Volume 68, Number 196)]
[Rules and Regulations]
[Page 58539-58549]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc03-15]
[[Page 58539]]
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Part III
Department of Labor
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Employment and Training Administration
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20 CFR Part 604
Unemployment Compensation--Trust Fund Integrity Rule; Birth and
Adoption Unemployment Compensation; Removal of Regulations; Final Rule
[[Page 58540]]
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DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Part 604
RIN 1205-AB33
Unemployment Compensation--Trust Fund Integrity Rule; Birth and
Adoption Unemployment Compensation; Removal of Regulations
AGENCY: Employment and Training Administration, Labor.
ACTION: Final rule.
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SUMMARY: The Department of Labor (Department) is issuing this final
rule to remove the Birth and Adoption Unemployment Compensation (BAA-
UC) regulations. Those regulations permitted an experimental
opportunity for states to provide, in the form of unemployment
compensation (UC), partial wage replacement for parents taking approved
leave or otherwise leaving employment while caring for their newborns
or newly-adopted children.
EFFECTIVE DATE: This final rule is effective November 10, 2003.
FOR FURTHER INFORMATION CONTACT: Gerard Hildebrand, Office of Workforce
Security, ETA, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Room C-4518, Washington, DC 20210. Telephone: (202) 693-3038 (voice)
(this is not a toll-free number); 1-800-326-2577 (TDD); facsimile: (202) 693-2874; e-mail: hildebrand.gerard@dol.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Overview
On June 13, 2000, the Department published the BAA-UC Final Rule in
the Federal Register at 65 FR 37210. The rule was codified at 20 CFR
Part 604. It implemented an experimental opportunity for state agencies
responsible for administering the Federal-State UC program to provide
partial wage replacement for parents taking approved leave, or
otherwise leaving employment, following the birth or placement for
adoption of a child. On December 4, 2002, the Department published a
Notice of Proposed Rulemaking (NPRM) proposing to remove the BAA-UC
regulations in the Federal Register. (67 FR 72122 (December 4, 2002).)
The NPRM invited the public to comment over a 60-day period, ending
February 3, 2003. Comments were accepted by mail and electronic media.
The preamble to the NPRM contained a detailed explanation of the
reasons for the removal of the BAA-UC regulations. In order to
adequately respond to comments, and to eliminate the need for readers
to refer to the NPRM for context, much of the material in the NPRM is
repeated in this document.
B. Background on BAA-UC
Under BAA-UC, states were permitted, as part of a voluntary
experiment, to amend their state UC laws to provide partial wage
replacement for parents taking approved leave, or otherwise leaving
employment, following the birth or placement for adoption of a child.
In qualifying for UC, the individual would not have to be able and
available (A&A) for work in the sense traditionally used by the
Department. Instead, parents of newborns and newly-adopted children
would be viewed as meeting the federal A&A requirements (as implemented
through state law) under the premise that the parents' long-term
attachment to the workforce would be strengthened and promoted by the
payment of UC, which would provide some financial support to accompany
the introduction of a new child into the family.
As the Department noted during the final rulemaking in 2000, the
BAA-UC experiment was ``a reversal of our position taken in 1997,''
when the Department advised a state that UC could not be used in this
manner. (65 FR 37212 (June 13, 2000).) The BAA-UC experiment was
described as ``part of an evolving interpretation of the federal A&A
requirements that recognizes practical and economic realities.'' (Id.)
Simply stated, the Department interpreted the A&A requirements in a new
and different way that emphasized the individual's potential long-term
attachment to the workforce. BAA-UC was intended to test whether
individuals would be more attached to the workforce, even if their
current separation from the workforce was a conscious decision on their
part due to personal and family reasons relating to the birth or
adoption of a child. Significantly, since the Department made the BAA-
UC experiment available in 2000, no state has elected to participate.
Following a review of the BAA-UC Final Rule as part of a
Department-wide review of all regulations, the Department announced, in
the NPRM, that it proposed to remove the BAA-UC regulations because it
had determined that ``the BAA-UC experiment is poor policy and a
misapplication of federal UC law relating to the A&A requirements.''
(67 FR 72122 (December 4, 2002).) After thoroughly analyzing the A&A
requirement, the Department concluded that ``A&A tests involuntary
unemployment due to a continuing lack of suitable work'' and that the
``BAA-UC rule not only failed to recognize this, but is in fact
contrary to the A&A requirement.'' (Id. at 72125.)
C. Effect of Repeal
To date no state has elected to participate in the BAA-UC
experiment. Therefore, terminating the experiment will not result in
any state withdrawing benefits it previously granted. The only effect
of the removal of the regulations is that it arguably reduces state
flexibility because a state could no longer elect to use its
unemployment fund to pay BAA-UC. The Department's position on federal
law requirements will revert to that in existence before publication of
the BAA-UC rule. Thus, a state must require that to be eligible for UC
an individual must, among other things, demonstrate current labor force
attachment by meeting the A&A requirements. Each state remains free to
create a paid family leave-type program using state moneys from sources
other than the state's unemployment taxes deposited into its
unemployment fund.
D. Policy Reasons for Repeal
The UC program is designed to provide temporary wage insurance for
individuals who are unemployed due to lack of suitable work. This would
generally not be the case for parents who would avail themselves of
BAA-UC. Such parents would be out of work because they both initiated
their separation from the workforce and are currently unavailable for
work; they would have effectively withdrawn from the labor market for a
period of time. To the extent that BAA-UC is based on labor force
attachment, it is based on an assumption of increased future attachment
to the labor force. Individuals who take approved leave when an
employer is holding a job open for them are not available for that work
or other suitable work. As a result, BAA-UC paid to these individuals
would be a payment for voluntarily taking time off work rather than
payment due to lack of suitable work. As such, it would be paid leave,
which was not envisioned in the design of the UC program.
We again note that no state has enacted BAA-UC legislation. The
limited flexibility provided under BAA-UC may be one factor. In 2002,
California passed legislation (enacted Senate Bill 1661; Chapter No.
901) that contains features of BAA-UC, as well as many features beyond
the scope of
[[Page 58541]]
BAA-UC. Notably, it authorizes payments beyond the scope of BAA-UC to
certain individuals who take time off from work to care for a sick or
injured child, spouse, parent or domestic partner as well as for foster
care placements of a new child. The California law does not use its
unemployment fund as a funding source, but instead uses employee
contributions to its Temporary Disability Insurance fund. Similarly,
the BAA-UC rule limits the types of eligibility conditions that may be
imposed on individuals. For example, the BAA-UC rule at 20 CFR 604.20
lists industry, employer size, or the unemployment status of a family
member as unacceptable eligibility factors.
Other flexibility issues have also been identified. For example,
the Department expressed concern with a state bill that appeared to be
close to enactment because it appeared to be inconsistent with Section
3304(a)(6)(A) of the Federal Unemployment Tax Act (FUTA). This bill
would have made BAA-UC mandatory for all services performed in the
state, except for services performed for certain governmental and
nonprofit entities that could elect to participate. Because Section
3304(a)(6)(A), FUTA, requires that, with respect to these governmental
and nonprofit services, UC must be paid ``in the same amount, on the
same terms, and subject to the same conditions'' as UC payable on other
services performed under state law, the Department advised the state
that this legislation, if enacted, would be inconsistent with FUTA.
Finally, when the BAA-UC Final Rule was issued in 2000, state
unemployment funds were in sounder financial condition than today.
Since the publication of the rule, many states have seen a drastic
decline in their unemployment fund balances, and most states are below
our recommended 1.00 average high-cost multiple. (The average high-cost
multiple indicates how many years of benefits a state has available
under a recessionary scenario. A rating of 1.00 indicates the state has
one year's worth of benefits on hand. The Department recommends a 1.00
high-cost multiple as a reasonable margin of safety to ensure fund
solvency in periods of high unemployment.) Indeed, at the time BAA-UC
was created, one of the policy arguments made for using a state's
unemployment fund for BAA-UC was the claim that states had
``surpluses'' in their unemployment funds, which could be made
immediately available to implement a BAA-UC experiment. The sudden and
rapid decline in fund balances undercuts this argument and emphasizes
the need for states to preserve the integrity of their unemployment
funds for providing temporary income support to the involuntarily
unemployed.
E. Legal Reasons for Repeal
The Department and its predecessors (the Social Security Board and
the Federal Security Agency) have interpreted and enforced federal A&A
requirements since the inception of the federal-state UC program.
Although no A&A requirements are explicitly stated in federal law, the
Department and its predecessors interpreted four provisions of federal
UC law, contained in the Social Security Act (SSA) and FUTA, as
requiring that states condition the payment of UC upon a claimant being
able to and available for work. Two of these provisions, at Section
3304(a)(4), FUTA, and Section 303(a)(5), SSA, limit withdrawals, with
specific exceptions, from a state's unemployment fund to the payment of
``compensation.'' Section 3306(h), FUTA, defines ``compensation'' as
``cash benefits payable to individuals with respect to their
unemployment.'' The A&A requirements provide a federal test of an
individual's continuing ``unemployment.'' (The meaning of
``unemployment'' in this statutory framework is discussed below.) The
other two provisions, found in Section 3304(a)(1), FUTA, and Section
303(a)(2), SSA, require that compensation ``be paid through public
employment offices.'' The requirement that UC be paid through the
public employment system (the purpose of which is to find people jobs)
ties the payment of UC to both an individual's ability to work and
availability for work. These A&A requirements serve, in effect, to
limit UC eligibility.
The basis for the federal A&A requirements was summarized in a
March 11, 1939, letter from the Chair of the Social Security Board to
the Governor of California, concerning whether the state could make
payments with respect to temporary disability from its unemployment
fund:
The entire legislative history [of the UC titles of the original
SSA] including the Report to the President of the Committee on
Economic Security, the report of the House Committee on Ways and
Means, the report of the Senate Committee on Finance, and the
Congressional debates all indicate, either expressly or by
implication, the compensation contemplated under [these titles] is
compensation to individuals who are able to work but are unemployed
by reason of lack of work. Several provisions of those titles are
meaningful only if applied to State laws for the payment of such
compensation. For example, the requirement that compensation be paid
through public employment offices, or the requirement that States
make [certain information] available to agencies of the United
States charged with the administration of public works or assistance
through public employment, are obviously without reasonable basis if
applied to payments to disabled individuals. Many of the standards
contained [in the experience rating provisions] are similarly
without reasonable basis if applied to a State law for the payment
of disability compensation.
For these reasons, the Board is of the opinion that the [UC
titles of the SSA] are applicable solely to State laws for the
payment of compensation to individuals who are able to work and are
unemployed by reason of lack of work. [Emphasis added.]
That involuntary unemployment due to lack of suitable work was the
key test is supported by the Congressional Committee Reports:
The essential idea in unemployment compensation* * * is the
accumulation of reserves in time of employment from which partial
compensation may be paid to workers who become unemployed and are
unable to find work. * * * In normal times it will enable most
workers who lose their jobs to tide themselves over, until they get
back to their old work or find other employment without having to
resort to relief. * * * [H. Rep. 615, 74th Cong. 1st Sess. 1935 Page
5.]
The essential idea in unemployment compensation is the creation
of reserves during periods of employment from which compensation is
paid to workmen who lose their positions when employment slackens
and who cannot find other work. Unemployment compensation differs
from relief in that payments are made as a matter of right, not on a
needs basis, but only while the worker is involuntarily unemployed.
* * * Payment of compensation is conditioned upon continued
involuntary unemployment. Beneficiaries must accept suitable
employment offered them or they lose their right to compensation.
[S. Rep. 628, 74th Cong. 1st Sess. 1935 Page 11.]
For the great bulk of industrial workers unemployment
compensation will mean security during the period following
unemployment while they are seeking another job, or are waiting to
return to their old position. [Id. Page 12.]
As illustrated by this history, the UC program is designed to
provide temporary wage insurance for individuals who are unemployed due
to lack of suitable work. In order to be eligible for UC, an individual
must be able to accept suitable work if it is offered, must be
available to accept that work and must not refuse suitable work if
offered. In other words, an individual may not voluntarily make him/
herself unavailable for offered suitable work. Rather, a fundamental
premise of the UC program is that benefits are only available to
individuals who are involuntarily unemployed because there is no
suitable work available to them.
[[Page 58542]]
The federal A&A requirements implement this design by testing whether
the fact that an individual did not work for any week was involuntary
due to the unavailability of work. (Note that the A&A test looks only
to whether the unemployment is due to lack of work for each given week
of benefits claimed. That is, it looks to why the individual is
unemployed for a given week; it does not look to why the individual was
separated from employment, except to the extent that the individual may
have not been A&A for the week of the separation.) Since the BAA-UC
experiment did not examine the federal A&A requirements from this
perspective, it permits the payment of UC to individuals for whom
suitable work may exist, thus contradicting the basic purpose of the
A&A requirements.
The legislative history quoted above indicates that eligibility for
UC is not based on the individual's personal need, except to the extent
that his/her ``need'' is created by lack of suitable work. BAA-UC,
however, extended eligibility for UC to parents based on considerations
of compelling personal or family need regardless of whether there is a
lack of suitable work. While the idea of providing financial assistance
to parents or families experiencing birth or adoption may be admirable,
it is not in keeping with the fundamental limitation of paying UC only
to individuals who are unemployed due to lack of suitable work.
The legislative history also establishes a link between the public
works programs in existence in 1935 and the UC program that bears on
the A&A requirements. As noted in the Social Security Board's
contemporaneous interpretation, an SSA provision (Section 303(a)(7))
requires that states make available to agencies of the United States
charged with the administration of public works or assistance through
public employment, the name, address, ordinary occupation, and
employment status of UC recipients. This requirement is predicated upon
the understanding that UC recipients must be out of work due to lack of
available work. It would make no sense to refer an individual, for whom
work was available, to a public works program, which should be the
employer of last resort. Senator Wagner, who introduced the SSA in the
Senate, described the relationship between the proposed UC program and
the government's public works programs (as well as public employment
offices) as follows in the floor debate on the SSA:
[Unemployment insurance] is not designed to supplant, but rather
to supplement the public-works projects which must absorb the bulk
of persons who may be disinherited for long periods of time by
private industry. * * * A provision in the present bill requires
that the Federal tax rebate shall be used to encourage a close
connection between State job-insurance laws and unemployment-
exchange offices. This provision emphasizes the fact that the
[monetary] relief of existent unemployment is but a subordinate
phase of the main task of providing work for all who are strong and
willing. [79 Cong. Rec. 9284 (June 14, 1934).]
Thus, Congress intended the UC system to be subordinate to the main
task of getting people back to work, which is, as noted above,
implemented through the A&A requirements. BAA-UC is not consistent with
this goal because it encourages parents to refuse available work.
Finally, as noted in the Social Security Board's letter, experience
rating standards are meaningless if the test of involuntary
unemployment due to lack of work is not used. Experience rating was
originally established to ensure an equitable distribution among
employers of the cost of the system, and to encourage employers to
stabilize their work forces. (``Credits'' will be provided ``in the
form of lower contribution rates * * * to employers who have stabilized
their employment.'' (S. Rep. 628, 74th Cong. 1st Sess. 1935 Page 14.))
BAA-UC contradicts the intent of experience rating because it allows
payments based on an individual's own actions without regard to an
employer's attempt to stabilize employment by offering suitable work to
its current and former employees. Although experience rating was
discussed in the BAA-UC final rulemaking, that discussion did not
recognize that stabilization of employment is one of the primary
purposes of experience rating.
II. Responses to Comments
A. Overview
About 6,200 pieces of correspondence commenting on the NPRM were
submitted by the close of the comment period on February 3, 2003.
Roughly 74 percent of the commenters favored removal of the BAA-UC rule
while the remainder opposed removal. Some commenters addressed areas
beyond the scope of the NPRM, which was the removal of the BAA-UC
regulation. These commenters addressed such matters as reforms to the
UC program, including the eligibility of part-time workers and other
expansions of eligibility. Because these areas are beyond the scope of
the proposed rulemaking, they are not discussed in this preamble. All
timely comments were considered and all correspondence is included in
the rulemaking record.
Most commenters were individuals, including many who identified
themselves as human resource professionals. Comments were also received
from employers; groups representing employer interests; groups
representing the human resource community; labor unions and groups
representing various other interests.
B. Reasons for Repeal
(1) Need for Paid Family Leave
Many commenters opposing removal of the rule argued that paid
family leave is needed because of financial barriers to taking family
leave. Some noted that the final rule creating BAA-UC cited research
supporting this need and that the NPRM proposing removal did not refute
this research. Some also noted that the NPRM did not refute research
that paid family leave might have positive effects on workforce
attachment. Others claimed the rulemaking would have a negative effect
on family life.
This rulemaking does not address whether paid family leave is
needed or desirable. Thus, there is no need to discuss the research
discussed in the BAA-UC Final Rule. The purpose of this rulemaking is
to address whether a state's unemployment fund is the appropriate
vehicle to fund family leave payments. As will be discussed in the next
section, the removal of the BAA-UC rule does not prohibit states from
establishing paid family leave programs nor does it prohibit
integrating administration of these programs into a state's UC
administrative infrastructure. Because no state will be required to
repeal an existing BAA-UC program, and because other avenues are
available to states for creating a paid leave program, the Department
does not believe the rule would preclude paid family leave or have a
negative effect on family life. Rather, by preserving the integrity of
state unemployment funds, this rule helps assure that adequate funds
will be available to benefit workers unemployed due to lack of suitable
work (and, as a result, the families of those workers) under the UC
program.
(2) Flexibility
Many commenters opposing removal of the rule cited preservation of
state flexibility as a reason for maintaining the rule. Commenters
opposing removal argued that there is state interest in flexible
approaches, including BAA-UC, as indicated by the number of
[[Page 58543]]
BAA-UC legislative proposals in the states. Several observed that ``in
2002, over 20 states had legislation introduced looking at this
issue.'' One commenter argued that repeal would have a ``chilling
effect'' on state legislatures' attempts to create paid family leave
while others asserted that the Department made the BAA-UC experiment
available only two years ago and many states have just begun the
process of deciding whether to adopt it. It was also observed that the
approach taken in California (discussed above) is not available in all
states, while the UC system offers a long-standing, stable
infrastructure available in all states.
The only lack of flexibility that will be caused by removal of the
BAA-UC rule, however, is that states will not be able to use their
unemployment fund moneys to pay workers who take approved leave, or
otherwise leave employment, following the birth or placement for
adoption of a child. States can use other means of funding paid leave
programs. Protecting the integrity of unemployment fund moneys against
use for non-UC purposes was a major area of concern for most commenters
supporting removal. Among other things, these commenters characterized
BAA-UC as a ``back door'' expansion of the Family and Medical Leave Act
(FMLA); as putting ``at risk the safety net for unemployed workers;''
as ``illegal;'' and a ``misuse'' of the UC program. We agree that, as
discussed elsewhere, BAA-UC fundamentally differs from UC.
While we acknowledge that California's approach is limited to those
states with temporary disability programs, nothing in federal law
prohibits a state from using the existing UC administrative
infrastructure for other programs, providing it properly allocates the
costs of administration between the UC and non-UC programs. We also
note that one commenter, citing state interest in paid leave, indicated
the innovation and flexibility that several states have already
demonstrated in fashioning an ``at-home infant care'' program where
``low-income working parents receive subsidies'' from non-UC funds for
caring for infants at home.
(3) Unemployment Fund Balances
Most of the commenters supporting removal of the BAA-UC rule
expressed concern with the solvency of state unemployment funds.
Several commenters opposing removal disagreed with our assessment of
the solvency of state funds, which is that most states have seen a
drastic decline in fund balances and most states are below the
Department's recommended level of solvency. For example, one commenter
indicated that even though reserves have dropped from pre-recession
levels, the UC ``funding situation is exceptionally well positioned to
handle the demand for benefits.'' We believe our characterization of
the fund balance situation is accurate. Indeed, arguments that the
funds are well positioned can be made only because Congress distributed
$8 billion to states to assist in the payment of UC and for other
purposes, in recognition that fund levels were dropping. (Section 209
of Public Law 107-147, March 9, 2002.) This infusion of funds on
average increased state balances by about 20 percent at the time of the
distribution and cannot be expected to recur in future downturns.
Some commenters opposing removal of the BAA-UC rule objected to
including all states, even those with ``abundant reserves,'' in our
solvency arguments. One commenter noted that the Department could
establish a solvency standard as a condition of a state adopting or
implementing BAA-UC, and indicated that several commenters on the NPRM
proposing the BAA-UC experiment had suggested establishing such a
standard. Other commenters criticized the Department for not taking
action to stop state tax cuts which they claim precipitated solvency
problems. However, as the Department noted in the final rule creating
the BAA-UC experiment, it has ``never interpreted Federal law to
require ``solvency''' of state unemployment funds. (65 FR 37216 (June
13, 2000).) Even if the Department had authority to mandate a solvency
standard, we believe it would be poor public policy to create a federal
standard that would require states to deny specific types of benefits
based on fund balances.
(4) Whether Certain Situations Are Exceptions to A&A
Most commenters agreed with the Department's position that BAA-UC
is inconsistent with the federal A&A requirements. Some also argued
that there is an ``involuntariness'' requirement in federal UC law.
Others disagreed, stating that the Department has allowed exceptions to
A&A; that there are no specific A&A requirements in federal law; that
Congress expressly rejected A&A requirements; and that federal law
contains no ``involuntariness'' requirement (which is a basic
underpinning of the federal A&A requirements).
Commenters addressed four situations--illness, jury duty, approved
training, and temporary lay-offs `` as they relate to the A&A
requirements. Generally, those favoring removal of the rule supported
the Department's analysis that these situations are materially
different from the BAA-UC experiment and could not be used as a basis
for supporting BAA-UC. Opponents of removing the rule argued that these
situations are approved ``exceptions'' to the A&A requirement.
The preamble to the BAA-UC Final Rule noted that these four
situations affect individuals' ability ``to meet the stricter
interpretations of the A&A requirements.'' (65 FR 37213 (June 13,
2000).) Although that preamble also noted that none of these situations
``precisely parallels the payment of BAA-UC, they do operate on the
same premises: that situations exist in which it is important to allow
a flexible demonstration of availability and in which attachment to the
workforce can be demonstrated, and indeed strengthened, without
requiring a current demonstration of availability.'' (Id.) However, the
preamble also noted that ``paying BAA-UC is a departure from past
interpretations.'' (Id.) The preamble of the NPRM (67 FR 72124-72125
(December 4, 2002)) noted that, unlike BAA-UC, none of these situations
permit a voluntary withdrawal from the workforce. Instead, all of these
situations require that an individual initially be A&A for work. These
situations represent a practical response to situations in which it
does not seem sensible to apply a strict application of A&A to an
individual who is initially A&A for suitable work. In particular:
[sbull] Illness. The interpretation pertaining to illness applies
only to individuals who initially meet the A&A requirements, but who
then become ill and who do not refuse suitable work. Until work is
refused, the unemployment is due to lack of work, which is what the A&A
requirements are designed to test. The A&A requirements are preserved
because the individual must initially demonstrate availability before
the illness and must be held ineligible if s/he refuses suitable work
offered during the illness.
[sbull] Jury Duty. The interpretation pertaining to jury duty
applies only to individuals who initially meet the A&A requirements,
but who are then called for jury duty. The unemployment continues to be
due to a lack of work. The A&A requirements are preserved because the
individual must initially demonstrate availability before being called
for jury duty and because attendance at jury duty may be taken as
evidence that the individual would otherwise be available for work.
Even if
[[Page 58544]]
the individual has a job, the individual would have to report for jury
duty.
[sbull] Approved training. Approved training is limited to
situations where the state, not the individual, determines that short-
term training will improve an individual's job prospects and is
appropriate and necessary. In other words, the state has determined
that the training enhances the individual's availability for work by
making him/her qualified for a wider range of jobs. The Committee
Report explaining this provision noted that Congress considered
``training in occupational skills * * * so important to the
employability of the individual'' because ``training is frequently
necessary for obtaining new employment.'' S. Rep. 91-752 U.S.C.C.A.N.
3606, 3625 (1970). Attendance at such training is accepted as evidence
of availability for work. Indeed, if the individual refuses training,
or fails to attend training, the states must evaluate eligibility under
their A&A provisions.
[sbull] Temporary lay-offs. An individual on temporary lay-off must
be available to work for the employer who laid-off the individual as
soon as the employer again has work for the individual. While this
requires an individual's availability for work with only one employer,
it is nonetheless a test of whether the unemployment is due to lack of
suitable work.
As we noted above, unlike BAA-UC, none of these situations permit a
voluntary withdrawal from the workforce. Unlike BAA-UC, all of these
situations contain some link to involuntary unemployment caused by a
lack of suitable work.
Also, as the Department noted in the NPRM, none of these situations
apply to BAA-UC. Under BAA-UC, unlike the illness exception, an offer
of suitable work could be refused with no effect on eligibility. Unlike
the illness and jury duty exceptions, no initial establishment of A&A
was required to determine if the unemployment was linked to a lack of
suitable work despite the individual's availability for work. Unlike
approved training, BAA-UC did not address a situation where an
individual is attempting to remedy his or her continuing unemployment;
indeed, BAA-UC addressed a situation where a job is already available
to the parent. Also, for approved training, the state must approve the
training as increasing the individual's job prospects; no similar
requirement existed for BAA-UC, with the result that increased
attachment to the workforce for any one individual is highly
speculative. Finally, unlike temporary lay-offs, BAA-UC did not require
that the individual be available for at least one job; an offer of
suitable work could be refused with no effect on eligibility. (One
commenter noted a provision of a state's law that ``waived''
availability for individuals on temporary lay-off. In response, we note
that, even under this provision, individuals must remain available for
the job from which they were laid off.) These precedents differ from
BAA-UC in that they do not permit an individual to voluntarily remove
him/herself from being available for suitable work for a given week.
BAA-UC, on the other hand, allowed payment to parents who have
initiated their separation from the workforce and whose personal
situation, rather than the lack of available suitable work, makes them
unavailable for employment.
One commenter noted that individuals on temporary lay-off are ``not
``involuntarily [unemployed] due to lack of work'' since they
voluntarily work in an industry that ``only provides work part of the
year'' and that they are required to ``accept work from a single
employer, regardless of what opportunities may otherwise exist for them
in the job market.'' Similarly, the commenter noted work remains
available for those on jury duty.
In response, we note that, as these situations indicate, the
Department has been liberal and flexible in construing A&A. Concerning
temporary lay-offs, it is sufficient that the individual be available
for a single job opportunity. (Indeed, payment of UC to individuals on
temporary lay-off allows employers to preserve their skilled
workforces, which has been cited as one of the purposes of the UC
program.) For jury duty, the Department believes it is unreasonable to
deny UC to an individual, who has initially met the A&A requirement,
because of a governmental compulsion to serve on a jury. If suitable
work was available prior to the individual being called to serve on a
jury, the individual would have been required to accept such work to
meet the A&A requirement. Indeed, serving on a jury indicates an
individual was otherwise available for work; even individuals who are
employed must by law serve on juries and employers must permit them to
serve.
We also note that, as a practical matter, it makes little sense to
require individuals on temporary lay-off who intend to return to work
with their former employers to be available for work that they will
leave when their old job again becomes available. This creates
unreasonable expectations for both the individual and the firms looking
for new workers; indeed, most employers will not hire individuals on
temporary lay-offs.
It does not follow that these situations support an argument that
BAA-UC-eligible individuals are A&A. In all of the above situations an
individual could be denied for failing to be A&A. Failure to attend
jury duty or approved training will result in a denial for failure to
be A&A; failure by an ill individual to accept suitable employment or
failure to accept recall from a temporary lay-off will, at a minimum,
result in a denial due to failure to be A&A. (We note that states also
impose a disqualification for failure to accept suitable employment.)
Conversely, under BAA-UC, an individual could refuse work without
any effect on current eligibility. As one commenter supporting removal
noted, the BAA-UC rule was ``premised on the extraordinary assertion
that ``able and available'' somehow can be interpreted to mean
`unavailable now but perhaps available in 3 months or later. * * * This
interpretation * * * contradicts the plain meaning of the word
`available' by covering employed workers who take leave from employment
when the employer has work available but the worker cannot, or does not
wish to work.'' (Emphasis in original.)
(5) Voluntary Leaving and Other Situations
(a) Voluntary Leaving
Some commenters opposing removal of the rule argued that the
Department had approved other exceptions to the A&A requirement. These
commenters noted provisions of state UC laws that address voluntarily
leaving a job to escape domestic violence, to escape sexual harassment,
to follow a spouse, due to loss of child care, due to pregnancy or
pregnancy-related disability, and due to the individual's illness.
Others used these provisions as proof that there is no
``involuntariness'' requirement in federal law. Conversely, some
commenters favoring removal of the rule argued that there is a specific
``involuntariness'' requirement.
The examples addressing voluntary leaving are distinct from the A&A
requirement. The A&A requirement, a test of whether an individual is
unemployed due to lack of suitable work, ``looks only to whether the
unemployment is due to lack of work for each given week of benefits
claimed. That is, it does not require that states hold an individual
ineligible based on the reason for separation from employment, except
to the extent that the individual may have not been A&A
[[Page 58545]]
for the particular week of the separation.'' ( 67 FR 72124 (December 4,
2002).) There is, simply put, no federal requirement that the initial
separation be involuntary for an individual to be eligible for UC;
however, the individual must be A&A for suitable employment. Indeed, in
the early days of the UC program, many state laws did not contain any
provision addressing voluntary separations from employment, but they
all had provisions requiring an individual to be A&A for suitable work.
An example may help explain how voluntary leaving provisions are
distinct from the A&A requirements. If an individual left work to care
for an ill child, certain states will not disqualify that individual
for voluntarily leaving employment. However, the individual must still
be A&A to be eligible for UC. If caring for the ill child prevents the
individual from being available for a new job, the individual will be
held ineligible for not meeting the state's A&A requirements because
the individual is not involuntarily unemployed due to lack of suitable
work. However, after the child no longer needs care and the individual
becomes available for work, the individual may immediately commence
collecting UC. Thus, this voluntary leaving provision does not affect
the requirement that the individual must be A&A.
(b) Other Situations
One commenter noted a state law provision relating to short-time
compensation (more commonly known as ``worksharing'') under which an
individual would not be denied UC ``by reason of application of
provisions relating to availability for work'' as evidence that
exceptions to the A&A requirement exist. (Under ``worksharing,'' an
employer and its employees agree that the employees will work a reduced
work week in lieu of having some employees totally laid-off.) In
response, we note that worksharing is expressly permitted by federal
law as an exception to the A&A requirements, and that, like temporary
lay-offs, the individual must still be available to work for his/her
employer. Section 401(d)(1)(C) of Public Law 102-318 provides that,
under worksharing, individuals ``are not required to meet the
availability for work or work search test requirements * * *, but are
required to be available for their normal workweek.''
The same commenter noted a state law that permits individuals with
a history of part-time work to limit their availability to part-time
work under certain conditions. This is consistent with federal law
because those individuals are available for work. They are
involuntarily unemployed due to lack of suitable work, which, in their
case, is limited to part-time work.
(6) Test Requires Changes in State Law
Some commenters expressed concern that our basis for A&A--to test
whether an individual's unemployment was involuntary due to lack of
suitable work--could result in states having to repeal several current
provisions of state law. For example, one commenter noted that the
Department ``indicates its approval of exceptions [to the A&A
requirement] such as temporary lay-offs, jury duty, and other
situations that do not comply with the narrow rule the Department''
articulated in the NPRM. These provisions of state law were discussed
in sections (2) and (3) above as being consistent with the Department's
position on A&A. Therefore, the Department's basis for A&A will not
require any states to repeal such provisions.
(7) Legislative History
Several commenters favoring removal agreed with the Department's
analysis that the legislative history supports the A&A requirements.
Some commenters opposing removal noted that no specific A&A
requirements exist in federal law. One such commenter disagreed with
our analysis of legislative history, noting that the ``lack of a
federal availability requirement is confirmed not only by the plain
language of FUTA and SSA, but by their legislative histories, which
show that [Congress] expressly declined to impose specific federal
requirements for availability'' and, further, that Congress could
clearly display its intention to create eligibility requirements as it
did when it required individuals claiming ``extended and emergency
benefits to apply for and accept suitable work and to actively engage
in such work.'' This commenter further noted that even if ``widespread
involuntary unemployment'' was the original impetus for UC provisions
of the 1935 SSA, ``nothing in federal [UC] law limits states's ability
to provide more expansive coverage.'' In support of this, the commenter
also cited a 1936 Social Security Board statement that ``It is
desirable that a State law should be at least as broad in its coverage
as the Federal act. * * * The State may, of course, go further and
adopt a wider coverage.''
Although several members of Congress wrote in opposition to
removing the BAA-UC rule, the Department's extensive review of the
legislative history and the provisions of the original 1935 SSA and
subsequent enactments indicate a Congressional expectation that
individuals must be A&A for suitable work as a condition of benefit
eligibility. While the Department agrees that FUTA and SSA do not
explicitly set forth an A&A requirement, the Department must, in its
supervisory role in the administration of these laws, make reasonable
interpretations of the requirements set forth therein. Not all of the
statutory requirements are unambiguous. Thus, although a requirement
may not be explicit, it may be implicit, especially when viewed in the
light of the legislative history. Further, although the states are free
``to provide more expansive coverage'' than that contemplated in these
federal laws, they are nevertheless constrained by the requirements of
this legislation as interpreted by the Department. The Department's
construction of an implicit federal A&A requirement is reasonable based
on the statutory language, the Social Security Board's contemporaneous
interpretation of this language, the purpose of the UC program as set
forth in the legislative history, and subsequent acts of Congress,
discussed below.
In subsequent enactments, Congress has acted several times to
reaffirm that UC is payable only to individuals who are able and
available for work. When Congress first enacted a provision requiring
the reduction of UC due to receipt of retirement pay, it explained that
it was establishing a ``uniform rule'' to address the fact that some
recipients of these retirement payments ``have actually withdrawn from
the labor force,'' that is, are not A&A. (S. Rep No. 1265, 94th Cong.
2d Sess. 22 (1976).) In 1993, Congress required that states refer
individuals likely to exhaust UC to reemployment services and deny UC
to individuals who failed to participate in these services. (Sections
303(a)(10) and (j), SSA.) This reflected Congress's interest in helping
UC claimants get back to work, especially those expected to have the
hardest time returning to work quickly, and its willingness to deny UC
to those individuals unwilling to take positive steps toward
reemployment. Providing reemployment services to individuals who are
not able or willing to accept employment (that is, who are not A&A)
would waste resources on some while denying reemployment services to
others who could benefit.
Congress has also created several extensions of UC to address
``widespread involuntary unemployment'' during economic downturns. In
Public Law 91-373, it created the permanent federal-state
[[Page 58546]]
extended benefit program (EB) to pay benefits ``during periods of high
unemployment.'' (H. Rep. No. 752, 91st Cong. 2d Sess. Page 6 (1970).)
Indeed, one of the ``triggers'' for determining if a high unemployment
period exists is the total unemployment rate, which includes only
workers who have recently demonstrated their availability by looking
for work. Several temporary extensions have also been enacted during
periods of high unemployment, including the current Temporary Extended
Unemployment Compensation program. When Congress extended the Emergency
Unemployment Compensation program in the early 1990's, it noted that
``[m]any people who have lost their jobs are spending months, and
months and months, sometimes a year or more seeking the next job.'' (H.
Rep. 268 103rd Cong. 1st Sess. Page 2 (1993).) The purpose behind these
programs was clearly to pay individuals unable to find employment
because of economic downturns.
As noted above, one commenter stated that special eligibility
requirements exist for the EB program. Specifically, an individual
claiming EB must conduct a sustained and systematic search for suitable
work and must submit tangible proof of this work search. Although many
commenters appeared to believe that an active work search is a federal
requirement for regular UC and/or is necessary component of
availability, this is not the case. Though an active work search is one
way for the individual to indicate availability, it is not the only
way. An individual's active registration with the state's employment
service or the individual's use of union hiring halls or private
recruiting firms are all acceptable indications of availability absent
an active work search by the individual. Aside from the EB provisions,
federal law does not require an active search for work and, as a
result, one state (Pennsylvania) does not require any work search for
the regular UC program. Thus, the fact that Congress required an active
search for work for the long-term unemployed is unrelated to whether an
A&A requirement exists for the regular program.
We note that the work search requirement was not part of the
original 1970 enactment of the EB program, having been added in 1980.
Also, Congress completely suspended the EB work search requirement in
the early 1990's when it extended the Emergency Unemployment
Compensation program. This EB requirement also is not applicable to the
Temporary Extended Unemployment Compensation Program. The effect of
these suspensions was that state law eligibility requirements,
including the state A&A requirements, were used for determining
eligibility for programs that were designed to ameliorate widespread
involuntary unemployment. In sum, the EB work search provisions do not
support the argument that there is no federal A&A requirement.
We note that even Congressional prohibitions on the denial of UC
assume that individuals must be available for work. When it passed a
federal prohibition on denying UC solely due to pregnancy, Congress
noted that an individual must be ``able to work * * * and be available
for employment'' (H. Rep. No. 752, 91st Cong. 2d Sess. Page 19 (1970))
and that pregnant workers must continue to meet the ``availability for
work and ability to work'' requirements. (Id. at 21.)
Finally, we note that Congress indicated its expectation that an
``able'' requirement existed for UC when it permitted states to
withdraw certain employee contributions from their unemployment funds
for the payment of ``cash benefits with respect to their disability.''
(Current Sections 3304(a)(4)(A), FUTA, and 303(a)(5), SSA.) Individuals
who lose their jobs because of a disability, and who are unable to
perform any work because of such disability, are not unemployed due to
a lack of suitable work. They are unemployed due to the disability.
Thus, explicit statutory authority was necessary to permit payment to
disabled individuals from state unemployment funds.
(8) Supreme Court Decisions
Two commenters cited New York Tel. Co. v. New York State Dep't of
Labor, 440 U.S. 519, 537 (1979). One commenter noted that ``[i]t is
unclear whether states have authority to use UI [that is, UC] funds to
provide family leave absent a Department of Labor regulation'' and then
cited New York Tel. Co. for the proposition that ``states have broad
discretion to legislate in the area of UI.'' The other commenter citing
New York Tel. Co. noted that the U.S. Supreme Court has treated the
absence of ``explicit prerequisites'' for UC eligibility ``as a strong
indication that Congress did not intend to restrict the States' freedom
to legislate in this area'' and that ``as the Supreme Court has noted,
`when Congress wished to impose or forbid a condition for compensation,
it did so explicitly.' '' Therefore, this commenter argues, the
omission of a specific availability requirement in FUTA or SSA
``reflects the absence of any congressional intent to condition
eligibility for regular UI benefits on claimants' availability for
work, as a matter of federal law.''
As a general rule, we agree that where Congress has not imposed
specific requirements related to FUTA or SSA, states are free to
operate and determine whether to impose their own requirements.
However, the principle that Congress intended to grant states freedom
to design their UC systems in areas in which it did not impose explicit
requirements does not mean that the Department is precluded from making
reasonable interpretations of the specific requirements of FUTA and
SSA. We note that (1) the interpretation of an ``able and available''
requirement was made contemporaneously with the passage of SSA by the
first agency with responsibility for interpreting SSA; (2) the
Department has consistently interpreted FUTA and SSA to include a
federal A&A requirement; and (3) New York Tel. Co. does not discuss
either a specific federal A&A requirement or its absence. Therefore,
the conclusion that the second commenter draws that the general
language of New York Tel. Co. means that there is no federal A&A
requirement or that it is beyond the authority of the Department to
construe such a requirement is not a persuasive position.
The language in New York Tel. Co., cited by the second commenter,
was used by the Court to discuss its prior holding in Ohio Bureau of
Employment Services v. Hodory, 431 U.S. 471, 482-483 (1977). In Hodory,
the Court affirmed Ohio's denial of benefits to workers unemployed by
labor disputes even if the unemployed workers were not strikers
themselves. (Hodory, 431 U.S. at 482-83.) Hodory held that benefits
could thus be denied under certain circumstances even when a worker is
involuntarily unemployed. (Id.) New York Tel. Co. also involved the
issue of workers involved in labor disputes. Unlike Ohio, New York
permitted strikers to obtain UC after a certain period of time had
elapsed. 440 U.S. at 523. The Court recognized that New York's law
required all individuals seeking UC to be A&A, including strikers, as
demonstrated by the Court's quote of that law, which required an
individual's ``capability and readiness, but inability to gain work.''
(Id. at 523, n.2, emphasis added.) Thus, although the striking
individual's initial separation may be voluntary, his/her continued
unemployment is involuntary, unlike BAA-UC where the individual is not
available for any work.
In the course of its discussion of Hodory, the Court in New York
Tel. Co.
[[Page 58547]]
emphasized that ``the issue of public benefits for strikers became a
matter of express congressional concern in 1935 during the hearings and
debates on the Social Security Act'' and that Congress left that matter
specifically to the states. (Id. at 542.) The Court remarked that
``[t]he drafters of the Act apparently concluded that such proposals
[to prohibit States from providing benefits to strikers] should be
addressed to the individual state legislatures without dictation from
Washington.'' (Id. at 542-43.)
However, the Court also noted that not all matters concerning UC
were left to the States. The Court recognized that ``[f]rom the
beginning * * * the Act has required a few specific requirements for
federal approval.'' (Id. at 542.) The Court explained that these
requirements included those found in Section 3304(a)(5), FUTA, which
provide, among other things, that a ``State may not deny compensation
to an otherwise qualified applicant because he had refused to accept
work as a strikebreaker, or had refused to resign from a union as a
condition of employment.'' (Id.) The Court also noted that Section
3304(a)(5), FUTA, ``from the start had provided'' that ``compensation
shall not be denied in such State to any otherwise eligible individual
for refusing to accept new work under any of the following conditions''
and then listed the specific conditions under which an otherwise
eligible individual could refuse to accept new work.
The Court's recognition of certain universal UC requirements is
further supported by its quotation from the Senate Report: ``Except for
a few standards which are necessary to render certain that the State
unemployment compensation laws are genuine unemployment compensation
acts and not merely relief measures, the States are free to set up any
unemployment compensation system they wish * * *.'' (Id. at 543, n.
42.) Allowing payment of BAA-UC from unemployment funds would transform
a ``genuine unemployment compensation'' program into relief measures
for those who have a job available and choose not to work and, thus,
New York Tel. Co. does not in any way support allowing a state to do
so.
In a later case, the Court recognized that there are limits on its
broad statement about state discretion in New York Tel. Co. In Baker v.
General Motors Corp., 478 U.S. 621, 633 (1986), the Court, citing
Hodory and the Report of the Committee on Economic Security, recognized
that involuntary unemployment, although nowhere specifically mentioned
in FUTA or the SSA, ``is thus generally a necessary condition to
eligibility for compensation.'' Athough Baker did not specifically
refer to the A&A requirement, that requirement is the test of
``involuntary'' unemployment under the FUTA and the SSA.
In sum, while we agree with the commenter's statement and the
Court's observation that states are free to design their UC systems as
they choose as long as those systems meet federal requirements, we
disagree with the commenter's conclusion that this principle voids the
A&A requirement. As we have shown, the federal A&A requirement is part
of the foundation that makes a UC system a true UC system, not a relief
system. The Department has the authority to interpret what the test of
continued ``involuntary'' unemployment requires, so long as its
interpretation is based on a reasonable construction of FUTA and SSA.
As discussed above, the Department and its predecessors have
consistently interpreted federal law to require that individuals must
be A&A as a condition of receiving UC.
(9) Whether BAA-UC Is Paid Leave
In the BAA-UC Final Rule, the Department addressed what were termed
``misconceptions'' regarding BAA-UC. The Department noted that ``[m]any
respondents referred to BAA-UC as `paid FMLA' leave or `paid family
leave.' '' The Department responded that ``[a]lthough there may be many
cases where parents of newborns and newly-adopted children will be
simultaneously eligible for BAA-UC and leave under the FMLA, the two
are legally unrelated to each other.'' (65 FR 37212 (June 13, 2000).)
The Department also said that BAA-UC is ``not a new program.'' (Id.)
Although the Department did not ask commenters to address this
distinction, the overwhelming majority did comment about FMLA and/or
paid leave. As previously noted, many of those supporting removal of
the rule described BAA-UC as a ``back door'' expansion of the FMLA,
while many of those opposing removal cited the need for ``paid family
leave'' and discussed BAA-UC as though it were paid family leave. In
other words, despite the Department's explanation of differences
between UC and paid leave, these commenters viewed BAA-UC as paid
family leave.
As one commenter supporting removal noted, the purpose of UC ``is
to compensate a worker who becomes temporarily unemployed when the
employer no longer has suitable work available * * *'' Family leave,
the commenter noted, citing Section 2(b)(1) of FMLA, is ``to balance
the demands of the workplace with the needs of families, to promote the
stability and economic security of families, and to promote national
interests in preserving family integrity.'' This commenter concluded,
``Clearly, these are two entirely separate systems.'' Concerning the
Department's rationale that BAA-UC might strengthen long-term
attachment to the workforce, another commenter also noted that one
``could argue that paid leave programs for any purpose permitted by the
FMLA might strengthen long-term attachment to the workforce,'' as might
``any leave policy'' and raised the concern that ``UC funds might be
used not just for leave programs, but for other social benefits such as
health or pension benefits.''
Thus, most commenters did not view the Department's attempts in the
original BAA-UC rulemaking to distinguish between ``paid leave'' and
BAA-UC as being sound. We agree. As we noted above, for individuals who
were taking approved leave when an employer is holding a job open for
them, BAA-UC would be a payment for voluntarily taking time off work
rather than payment due to lack of suitable work. This makes the
payment more in the nature of paid leave than UC. The payment is not
made due to involuntary unemployment due to lack of suitable work, but
due to the individual's decision to take time off from an existing job
that is still available to the worker.
(10) Justification for Changes in Position
Commenters also addressed the soundness of the Department's
justification for changing its position, both in the BAA-UC final rule
and the NPRM. One commenter opposing removal argued, among other
things, that repealing BAA-UC represents a ``radical shift in the
agency's position [that] undermines [its] credibility. * * *'' Some
commenters supporting removal took the opposite approach. One, for
example, argued that the rulemaking creating BAA-UC ``failed to justify
the Department's radical departure from over 60 years of precedent.''
We agree that the original BAA-UC rulemaking did not adequately
justify a reversal of the Department's longstanding position. As
previously noted, the BAA-UC rule failed to discuss why an A&A test
exists, which is to test involuntary unemployment due to a continuing
lack of suitable work. Due to this failure, the BAA-UC rulemaking
resulted in a misapplication of federal law.
[[Page 58548]]
Executive Order 12866
The removal of 20 CFR part 604 is a ``significant regulatory
action'' within the meaning of Section 3(f)(4) of Executive Order 12866
because it raises novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order. Accordingly, this final rule was submitted to, and
reviewed by, the Office of Management and Budget.
Before publication of the BAA-UC final rule (65 FR 37210 (June 13,
2000)), the Department prepared a Regulatory Impact Analysis which
estimated that the rule would result in annual costs ranging from zero
to $196 million, depending upon the number of states choosing to enact
this voluntary program. (To establish the upper end of the cost range,
the Regulatory Impact Analysis grouped the states into size groups--
large, medium and small--and used the extent of state enactment of five
representative types of UC benefit expansions (alternative base period,
unrestricted good cause for voluntary quits, short-time compensation,
dependents' allowances, and supplemental (or ``additional'') benefits)
as an indicator of the likelihood of state enactment.) Since
publication of the BAA-UC final rule, no state enacted BAA-UC, which
means that no benefits have been paid, nor administrative costs
expended. Removing the BAA-UC rule ends the possibility that BAA-UC and
its associated administrative costs will be paid out of state
unemployment funds with the result that the estimated costs would not
be incurred. Therefore, the removal of the rule results in no costs or
cost savings and potentially prevents costs from being incurred in the
future. Because the Department expects the immediate economic impact of
removing the rule to involve no costs, this regulatory action is
unlikely to have an annual effect on the economy of $100 million or
more and, consequently, is not ``economically significant'' within the
meaning of Section 3(f)(1) of that Executive Order. No commenter
claimed that there were any costs associated with removing the BAA-UC
rule.
Finally, we have evaluated this regulatory action and find it
consistent with the regulatory philosophy and principles set forth in
Executive Order 12866. Though this action removes authority for states
to fund a form of family leave from their unemployment funds, states
continue to have flexibility to provide paid family leave from other
funding sources. Further, because no state has enacted BAA-UC, no state
is adversely affected in a material way by having to dismantle such an
experiment. Finally, this action removes a regulation and imposes no
alternative regulatory requirements.
Paperwork Reduction Act
This regulatory action contains no information collection
requirements.
Executive Order 13132
We have reviewed this regulatory action in accordance with
Executive Order 13132 regarding federalism. This Executive Order
requires agencies, when formulating and implementing policies that have
federalism implications, to the extent possible, to refrain from
limiting state policy options, to consult with states before taking any
action which would restrict states' policy options, and to take such
action only where there is clear statutory and constitutional authority
and the presence of a problem of national scope. The UC program is a
matter of national scope, as evidenced by existing federal legislation,
which limits state flexibility in certain areas. As discussed above,
the Department has the authority to interpret what the test of
continued ``involuntary'' unemployment requires, so long as its
interpretation is based on a reasonable construction of FUTA and SSA.
Policies with federalism implications are those with substantial direct
effects on the states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government.
Because this regulatory action would limit state policy options, by
eliminating authority to pay for family leave out of unemployment
funds, we consulted with organizations representing state elected
officials, who did not object to removal of the BAA-UC rule.
Executive Order 13175
This regulatory action does not have ``substantial direct effects
on one or more Indian tribes, or the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.'' It
affects primarily states and state agencies.
Executive Order 12988
This regulatory action has been drafted and reviewed in accordance
with Executive Order 12988, Civil Justice Reform, and will not unduly
burden the federal court system. The proposal, a mere one sentence,
removes 20 CFR part 604. Given its brevity, it is not likely to lead to
litigation resulting from drafting errors or ambiguities.
Unfunded Mandates Reform Act of 1995
This regulatory action has been reviewed in accordance with the
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501 et seq.) and
does not include any unfunded federal mandate.
Regulatory Flexibility Act
This regulatory action will not have a significant economic impact
on a substantial number of small entities. This action affects states
and state agencies, which are not within the definition of ``small
entity'' under 5 U.S.C. 601(6). Under 5 U.S.C. 605(b), the Secretary
has certified to the Chief Counsel for Advocacy of the Small Business
Administration to this effect. Accordingly, no regulatory flexibility
analysis is required.
Effect on Family Life
We certify that this regulatory action has been assessed in
accordance with Section 654 of Public Law 105-277, 112 Stat. 2681, for
its effect on family well-being. As discussed earlier in this preamble,
we conclude that this action would not adversely affect the well-being
of the nation's families. No state has enacted BAA-UC; consequently no
families would experience a termination of BAA-UC benefits. Though the
rule withdraws authorization for states to amend their UC laws to pay
for such benefits from the state's unemployment fund, paid family leave
could be provided from other funding sources. This rule preserves the
availability of state unemployment funds for times when workers, who
may support families, are unemployed due to lack of work.
Congressional Review Act
Consistent with the Congressional Review Act, 5 U.S.C. 801, et
seq., we will submit to Congress and the Comptroller General of the
United States, a report regarding the issuance of this Final Rule prior
to the effective date set forth at the outset of this document.
OMB has determined that this rule is not a ``major rule'' as
defined by the Congressional Review Act (Section 804 of the Small
Business Regulatory Enforcement Fairness Act of 1996). It is not likely
to result in an annual effect on the economy of $100 million or more; a
major increase in costs or prices; or significant adverse effects on
competition, employment, investment, productivity, innovation, or the
ability
[[Page 58549]]
of United States-based companies to compete with foreign-based
companies in domestic and export markets.
Catalogue of Federal Domestic Assistance Number
20 CFR Part 604 is listed in the Catalogue of Federal Domestic
Assistance at No. 17.225, Unemployment Insurance.
List of Subjects in 20 CFR Part 604
Unemployment compensation.
Signed at Washington, DC on October 3, 2003.
Emily Stover DeRocco,
Assistant Secretary of Labor.
Words of Issuance
0
For the reasons set forth in this preamble, and under the authority of
42 U.S.C. 503(a)(2) and (5) and 1302(a); 26 U.S.C. 3304(a)(1) and (4)
and 3306(h); Secretary's Order No. 4-75 (40 FR 18515); and Secretary's
Order No. 14-75 (November 12, 1975), Chapter V, Title 20, Code of
Federal Regulations, is amended by removing part 604.
[FR Doc. 03-25507 Filed 10-8-03; 8:45 am]
BILLING CODE 4510-30-P