[Federal Register: October 23, 2008 (Volume 73, Number 206)]
[Rules and Regulations]
[Page 63068-63072]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23oc08-5]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Part 616
RIN 1205-AB51
Federal-State Unemployment Compensation (UC) Program; Interstate
Arrangement for Combining Employment and Wages; Final Rule
AGENCY: Employment and Training Administration, Labor.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Labor (Department) is issuing this
final rule to amend its regulations governing combined-wage claims
filed under the Federal-State Unemployment Compensation (UC) program.
Most significantly, this final rule amends the definition of ``paying
State.''
[[Page 63069]]
DATES: Effective Date: This final rule is effective January 6, 2009.
FOR FURTHER INFORMATION, CONTACT: Stephanie Garcia, Team Leader, State
and Federal Programs Team, Division of UI Operations, Employment and
Training Administration, U.S. Department of Labor, 200 Constitution
Avenue, NW., Room S-4231, Washington, DC 20210; (202) 693-3207 (this is
not a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
On November 2, 2007, the Department published a notice of proposed
rulemaking (NPRM) to amend the definition of ``paying State'' for
purposes of combined-wage claims (CWCs) filed under the Federal-State
UC program. (72 FR 62145, Nov. 2, 2007) The Department invited comments
through January 2, 2008.
II. General Discussion of the Rulemaking
Section 3304(a)(9)(B) of the Federal Unemployment Tax Act (FUTA)
(26 U.S.C. 3304(a)(9)(B)) requires each State, as a condition of
participation in the Federal-State UC program, to participate in any
arrangement specified by the Secretary of Labor (Secretary) for payment
of UC on the basis of combining an individual's employment and wages in
two or more States. A claim filed under this arrangement is a CWC.
Rules implementing this arrangement are found at 20 CFR part 616.
As explained in Sec. 616.1, the purpose of the arrangement is to
permit an unemployed worker with covered employment or wages in more
than one State to combine all such employment and wages in one State,
in order to qualify for benefits or to receive more benefits. Section
616.2 explains that, in accordance with section 3304(a)(9)(B), the
arrangement was developed in consultation with the representative of
the State UC agencies, currently known as the National Association of
State Workforce Agencies (NASWA).
The arrangement provides, at Sec. 616.7(a), that any unemployed
individual who had employment covered under the UC law of two or more
States, whether or not he or she has earned sufficient wages to qualify
for UC under one or more of them, may elect to file a CWC. Under the
current regulations, Sec. 616.6(e)(1), the ``paying State'' is the
State in which the claimant files the CWC, if he or she qualifies for
benefits under the UC law of that State on the basis of combined
employment and wages. Section 616.6(e)(2) identifies the ``paying
State'' when either the CWC claimant does not qualify for unemployment
benefits under the UC law of the State in which he or she files the CWC
or when the claimant files a CWC in Canada.
The NPRM proposed amending the definition in Sec. 616.6(e) to
provide that any ``single State'' in which the claimant had base period
wages and employment, and in which the claimant qualifies for
unemployment benefits, may be a ``paying State.'' For example, if a
claimant had wages and employment in the base period(s) of State A and
the base period(s) of State B, the claimant may elect either State A or
State B (assuming the claimant qualifies in both States), because the
``paying State'' must be a ``single'' State. Further, no State other
than State A or State B could serve as the ``paying State'' because the
claimant did not have wages in the base period(s) of any other State.
The amendment's purpose was to prevent ``forum shopping,'' under which
an individual may file a claim in a State with a higher weekly benefit
amount (WBA) than that which exists in any of the States in which the
claimant had covered employment. The amendment limits the ``paying
States'' to those States in which CWC claimants had base period wages
and employment.
The Department believes that ``forum shopping'' is undesirable for
several reasons. First, it may unfairly advantage claimants who worked
in multiple States over those who worked in just one State by affording
CWC claimants the choice of filing a UC claim in a State with a higher
WBA. Second, ``forum shopping'' results in higher costs for the
claimant's employers, because the claimant files a CWC in a State
paying higher benefits, which are ultimately funded by those employers.
Moreover, ``forum shopping'' undermines the insurance principles of
the Federal-State UC program. Under an insurance program, benefits are
payable based on a specific plan. In the case of UC, benefits are
payable under a State's plan for compensating unemployment. This plan
balances premiums (in the form of employer contributions) with benefit
outlays (in the form of payments to individuals), requiring that
benefit rights and contribution rates be coordinated. CWCs are unique
in that insured wages are necessarily combined under a single State's
plan. Requiring that benefit eligibility be determined under the law of
one State in which the claimant had insured base period wages conforms
more closely to the insurance principles of the program.
The NPRM proposed amending Sec. 616.7 by adding a new paragraph
(f) to require a State that denies a CWC to notify the claimant of the
option of filing in another State, and proposed a conforming amendment
to Sec. 616.8(a) addressing the responsibilities of the ``paying
State.'' The NPRM also proposed removing and reserving Sec. 616.5,
which makes December 31, 1971 the effective date of the arrangement,
because it is no longer necessary.
III. Comments on the Proposed Amendments
The Department received 19 pieces of correspondence commenting on
the NPRM by the close of the comment period. All were from State UC
agencies. The Department considered all comments, although those that
were not germane to this rulemaking are not addressed here.
Discussion of Comments
In General. Eleven commenters generally supported the proposed
amendments while four opposed the proposed amendments. Four other
commenters limited their comments to matters related to implementation
of the new definition of ``paying State'' and did not express support
or opposition to the proposed amendments.
Commenters favoring the proposed amendments noted the problem of
``forum shopping.'' In describing the extent of forum shopping, one
commenter related that payments attributable to CWCs without employment
in that State totaled $41 million for the 12 months ending June 2006.
Another commenter stated that the proposed amendment was an ``equitable
solution'' to the problems created by the current rule. Commenters
favoring the proposed amendment also stated that it ``would simplify
combined-wage claim filing'' or that ``the revised definition should
result in a more expedited and efficient processing of CWCs.''
Conversely, commenters opposing the proposed amendment expressed
concerns about an increased administrative burden and workload shifts
between States. Three commenters proposed alternative amendments to the
existing rule. These alternative approaches and concerns about
administrative burdens are discussed below.
Alternative Approaches. One commenter proposed that the current
definition of ``paying State,'' under which the paying State is the
State in which the claimant files the claim (as long as the claimant
qualifies for benefits in that State), be retained, but require also
that the claimant must have
[[Page 63070]]
wages in that State. If the claimant did not have wages in that State,
the ``paying State'' would be the State where the claimant was last
employed in covered employment (among those States in which the
claimant qualifies for UC on the basis of combining employment and
wages).
This alternative approach thus has two parts: The first part makes
the ``paying State'' a State in which the CWC claimant files the claim
as long as the claimant qualifies for benefits in that State. This is
similar to the NPRM's approach, in that it requires the claimant to
have wages in, as well as qualify for benefits in, the ``paying
State.'' This first part, therefore, serves the same purpose of the
NPRM to prevent forum shopping.
However, the second part of the alternative approach would require,
in instances where the claimant did not have wages in the first State
in which the CWC was filed, that the ``paying State'' be the State
where the claimant was last employed. This approach, however, would
unnecessarily restrict a claimant's choice as to the ``paying State.''
Under the first part of the alternative approach, a claimant would be
free to file a claim in, and therefore select among, any of the States
in which he or she qualified for benefits and had wages. However, the
claimant would lose this right if he or she had the misfortune of
initially filing in a State which did not meet the definition of
``paying State.'' In that event, the selection of the ``paying State''
would default to a particular State, that is, the State of last
employment, thereby eliminating any choice the claimant originally had
in selecting the ``paying State''. Thus, the Department declines to
adopt this alternative.
Another commenter suggested that the ``paying State'' be either the
State in which the claimant had the most recent covered employment or
the most recent base period employment, regardless of where the claim
was filed. This approach raises concerns because the identification of
a claimant's most recent employer may not be readily available at the
time a claim is filed due to the fact that wages are often not reported
until several weeks after the end of the last calendar quarter in which
the claimant was employed. Moreover, if a claimant had more than one
employer during that quarter, those reports will not identify which one
was the claimant's last employer during that quarter, and the claimant
may not know the correct name of the last employer. The delay is even
greater for CWCs that are based in whole or in part on Federal
employment, as wages are not reported by Federal employers until after
a claim is filed, and thus States cannot immediately determine Federal
employment and wages at the time of filing in order to make a
determination of the ``last employer.''
In addition, the proposed alternative fails to treat CWCs
consistently with ``regular'' claims, because ``regular'' claims are
based on base period wages and employment rather than the claimant's
most recent wages and employment. Moreover, the claimant's most recent
employment in a State might be only incidental, yet this definition
would require the filing of a CWC in that State even though the
claimant had earned considerable base period wages in one or more other
States. This approach is therefore inconsistent with the insurance
principles of the UC program since it permits the claimant to receive
UC benefits from a State in which the claimant's employer made
incidental contributions. Thus, the Department declines to adopt this
alternative.
Another commenter proposed a residency requirement for CWC
claimants. As discussed above, the Department values consistency in the
treatment of CWC and ``regular'' claimants. For a claimant with base
period wages and employment in only one State, the claimant's
eligibility is determined under that State's law, regardless of where
the claimant resides. Similarly, residency should not be taken into
account in a CWC. Also, determining residency is not always a simple
matter. For example, establishing the residency of a claimant who
recently moved from one State to another could be complex,
unnecessarily delaying the payment of UC. Therefore, the Department
declines the suggestion to incorporate residency into the requirements.
Accordingly, after due consideration of the comments, the final
rule adopts the proposed amendment of the ``paying State'' definition
without change.
Administrative Burden. Commenters addressing the administrative
burden of the proposed amendments were concerned about proposed
paragraph (f) in Sec. 617.7, providing that if a State denies a CWC,
``it must inform the claimant of the option to file in another State in
which the State finds that the claimant has wages and employment.''
Eleven of the 19 commenters expressed concern that State agencies would
be required to provide detailed information on claim filing and
research claimant options.
The commenters apparently read the word ``finds'' in paragraph (f)
to mean that a State must issue a formal determination listing the
States in which the claimant has wages and employment. That is not
correct. The purpose of proposed Sec. 617.7(f) was to assure the
notification of any claimant whose CWC was denied under one State's law
that the individual has the option to file against another State. It
did not intend to require that a State make a formal finding, but
merely to direct a State to inform the claimant of this option.
However, to clarify this matter and eliminate any confusion, the final
rule deletes the words ``State finds that.''
Workload Shifts. One commenter was concerned that the proposed rule
would shift CWC workload from one State to another, which would shift
the amount of funding provided by the Department for State UC
administration. Another commenter was also concerned about workload
increases.
CWCs are generally not a large part of the UC claims workload and,
as a result, workload shifts likely would be minimal and have little
effect on administrative funding. For example, in calendar year 2007,
only about 4 percent of initial claims were CWCs. Moreover, the
Department believes that any rule related to claimant eligibility
should be based on fair and equitable treatment of claimants, and not
be influenced by incidental workload shifts. The proposed rule would
achieve this fair and equitable treatment by allowing the claimant to
choose to file in any State in which the claimant qualified for
unemployment benefits based upon insured base period wages and
employment in that State. Accordingly, the final rule is adopted as
proposed.
Another commenter noted that State Information Technology (IT)
systems would require re-programming in order to add an advisement to
claimants who are denied CWCs of the possibility of filing against
another State. Although the amendment may require a relatively minor
change(s) to a State's IT system this is a one time change that is
within the scope of States' customary updates to claim filing systems
and does not impose additional workload responsibilities on State
agencies.
Implementation and other Administrative Issues. Several commenters
raised questions related to the implementation and the timing of
implementation. The Department believes that specific procedural
guidance for implementation is best addressed through program letters
and similar guidance. The Department plans to issue this guidance
immediately after publication of the final rule.
The Department recognizes the significance of the questions related
to
[[Page 63071]]
implementation. All States must convert to the new definition of
``paying State'' at the same time; failure to achieve this would be
confusing and unfair to claimants and the employers who bear the
benefit costs and would create additional implementation issues. To
assure that all States have adequate time to address operational
issues, including training new staff, the final rule will be effective
January 6, 2009.
Some commenters also expressed concerns over more long-range
implementation issues. Several expressed concern that not all wages are
reported by employers in a correct or timely fashion to State UC
agencies. These commenters emphasized the importance of cooperation and
participation among all States to ensure that timely information is
available. The Department agrees and will facilitate such efforts
through procedural guidance and ongoing training efforts.
Technical Changes. We did not receive comments addressing the
deletion as unnecessary of Sec. 616.5, which makes December 31, 1971,
the effective date of the arrangement. Nor were there any comments
about a conforming amendment to Sec. 616.8(a), which eliminates
language deemed irrelevant in light of the new definition of ``paying
State'' because it addressed a scenario in which a State issues CWC
determinations, even if the claimant had no covered wages in the
``paying State.'' These amendments are included in the final rule.
One commenter noted language in Sec. 616.8(a), which mentions
``wages in the paying State, if any.'' The final rule deletes the words
``if any'' because, under the new definition of ``paying State,'' there
must always be wages in the paying State.
Lastly, the proposed rule solicited comments on the desirability of
amending any of the provisions of Part 616, because the CWC arrangement
has been in existence for over thirty-five years without change to its
basic structure. We received no comments. Accordingly, we have made no
amendments other than those described above.
IV. Administrative Provisions
Executive Order 12866--Regulatory Planning and Review
The Department has determined that this final rule is not
economically significant. Under Executive Order 12866, a rule is
economically significant if it materially alters the budgetary impact
of entitlements, grants, user fees, or loan programs; has an annual
effect on the economy of $100 million or more; or adversely affects the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities in a material way. The Department has
determined that this rule is not economically significant under this
Executive Order because it will not have an economic impact of $100
million or more on the State agencies or the economy. The Department
has consulted with the Office of Management and Budget (OMB) on this
final rule. Based on their analysis, OMB has deemed that this rule is
not a significant action under Executive Order 12866, therefore the
Department is not required to submit the final rule to OMB for
approval.
Paperwork Reduction Act
Under the Paperwork Reduction Act (PRA), the Department of Labor is
required to submit any information collection requirements to the
Office of Management and Budget (OMB) for review and approval (44
U.S.C. 3501 et seq.). As it does not impose any new requirements or
modifications of existing requirements on the States that have not
already been approved by OMB for collection, the Department has
determined that this final rule does not contain new information
collection requiring it to submit a paperwork package to OMB.
Executive Order 13132: Federalism
Executive Order 13132 at section 6 requires Federal agencies to
consult with State entities when a regulation or policy may have a
substantial direct effect on the States or the relationship between the
National Government and the States, or the distribution of power and
responsibilities among the various levels of government, within the
meaning of the Executive Order. Section 3(b) of the Executive Order
further provides that Federal agencies must implement regulations that
have a substantial direct effect only if statutory authority permits
the regulation and it is of national significance.
Further, section 3304(a)(9)(B) of FUTA requires consultation with
the State agencies in developing the CWC arrangement. Section 616.2 of
the CWC regulations also provides that for purposes of ``such
consultation in its formulation and any future amendment the Secretary
recognizes, as agents of the State agencies, the duly designated
representatives of the National Association of State Workforce Agencies
(NASWA).''
Consultation has occurred on an informal basis with the States
through NASWA. The Department consulted with the UC Committee and other
representatives of the States selected by the NASWA, during the 60-day
comment period for this proposed rule.
Unfunded Mandates Reform Act
This regulatory action has been reviewed in accordance with the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Under the Act, a
Federal agency must determine whether a regulation proposes a Federal
mandate that would result in the increased expenditures by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year. The Department has
determined that this final rule does not create any unfunded mandates
because it will not significantly increase aggregate costs of the CWC
arrangement, as these changes are considered to be within the scope of
States' customary updates to claim filing systems. The effect of this
final rule is to preclude ``forum shopping'' and tie UC eligibility
more closely to the insurance principle of the Federal-State UC
program, and it does not create additional entitlements.
Assessment of Federal Regulations and Policies on Families
The final rule does not have an impact on the autonomy or integrity
of the family as an institution, as it is described under section 654
of the Treasury and General Government Appropriations Act. We have
assessed that while there may be costs associated with the rule, they
are not of a magnitude to adversely affect family well-being. This
provision protects the stability of family life, including marital
relationships, financial status of families, and parental rights.
Regulatory Flexibility Act/Small Business Regulatory Enforcement Act
We have notified the Chief Counsel for Advocacy, Small Business
Administration, and made the certification according to the Regulatory
Flexibility Act (RFA) at 5 U.S.C. 605(b), that this rule will not have
a significant economic impact on a substantial number of small
entities. Under the RFA, no regulatory flexibility analysis is required
where the rule ``will not * * * have a significant economic impact on a
substantial number of small entities'' (5 U.S.C. 605(b)). A small
entity is defined as a small business, small not-for-profit
organization, or small governmental jurisdiction (5 U.S.C. 601(3)-(5)).
Therefore, the definition of the term ``small entity'' does not include
States.
[[Page 63072]]
This rule describes procedures governing State administration of
the CWC arrangement under the Federal-State UC program, which does not
extend to small governmental jurisdictions. Therefore, the Department
certifies that this final rule will not have a significant impact on a
substantial number of small entities and, as a result, no regulatory
flexibility analysis is required.
In addition, the Department certifies that this rule is not a major
rule as defined by section 804 of the Small Business Regulatory
Enforcement Act of 1996 (SBREFA). Under section 804 of SBREFA, a major
rule is one that is an ``economically significant regulatory action''
within the meaning of Executive Order 12866. Because this final rule is
not an economically significant rule under Executive Order 12866, the
Department certifies that it also is not a major rule under SBREFA.
Executive Order 13045--Protection of Children From Environmental Health
Risks and Safety Risks
Executive Order 13045 concerns the protection of children from
environmental health risks and safety risks. This NPRM addresses UC, a
program for unemployed workers, and has no impact on safety or health
risks to children.
Executive Order 13175--Consultation and Coordination With Indian Tribal
Governments
Executive Order 13175 addresses the unique relationship between the
Federal Government and Indian tribal governments. The order requires
Federal agencies to take certain actions when regulations have ``tribal
implications.'' Required actions include consulting with tribal
governments prior to promulgating a regulation with tribal implications
and preparing a tribal impact statement. The order defines regulations
as having ``tribal implications'' when they have substantial direct
effects on one or more Indian tribes, on the relationship between the
Federal Government and Indian tribes, or on the distribution of power
and responsibilities between the Federal Government and Indian tribes.
The Department has reviewed this NPRM and concludes that it does
not have tribal implications. This regulation does not affect the
relationship between the Federal Government and the tribes, nor does it
affect the distribution of power and responsibilities between the
Federal Government and tribal governments. Accordingly, we conclude
that this rule does not have tribal implications for the purposes of
Executive Order 13175.
Executive Order 12630--Government Actions and Interference With
Constitutionally Protected Property Rights
The final rule does not impose limitations on private property use
as described under Executive Order 12630, Governmental Actions and the
Interference with Constitutionality Protected Property Rights. It does
not propose or implement licensing, permitting or other condition
requirements on the use thereof, nor require dedications or exactions
from owners of private property. Accordingly, we have determined this
rule does not have takings implications.
Executive Order 12988--Civil Justice
This regulation has been drafted and reviewed in accordance with
Executive Order 12988, Civil Justice Reform, and will not unduly burden
the Federal court system. The regulation has been written so as to
minimize litigation and provide a clear legal standard for affected
conduct, and has been reviewed carefully to eliminate drafting errors
and ambiguities.
Plain Language
The Department drafted this rule in plain language.
List of Subjects in 20 CFR Part 616
Unemployment compensation.
0
For the reasons stated in the preamble, the Department amends 20 CFR
part 616 as set forth below:
PART 616--INTERSTATE ARRANGEMENT FOR COMBINING EMPLOYMENT AND WAGES
0
1. The authority citation for 20 CFR part 616 is revised to read as
follows:
Authority: 26 U.S.C. 3304(a)(9)(B); Secretary's Order No. 3-
2007, Apr. 3, 2007 (72 FR 15907).
Sec. 616.5 [Removed]
0
2. Remove Sec. 616.5.
Sec. 616.6 [Amended]
0
3. Revise paragraph (e) of Sec. 616.6 to read as follows:
Sec. 616.6 Definitions.
* * * * *
(e) Paying State. A single State against which the claimant files a
Combined-Wage Claim, if the claimant has wages and employment in that
State's base period(s) and the claimant qualifies for unemployment
benefits under the unemployment compensation law of that State using
combined wages and employment.
* * * * *
Sec. 616.7 [Amended]
0
4. Add new paragraph (f) to Sec. 616.7 of 20 CFR to read as follows:
Sec. 616.7 Election to file a Combined-Wage Claim.
* * * * *
(f) If a State denies a Combined-Wage Claim, it must inform the
claimant of the option to file in another State in which the claimant
has wages and employment during that State's base period(s).
Sec. 616.8 [Amended]
0
5. In Sec. 616.8(a) remove the words ``, if any'' and the words ``,
even if the Combined-Wage Claimant has no earnings in covered
employment in that State''.
* * * * *
Signed at Washington, DC, this 16th day of October 2008.
Brent R. Orrell,
Deputy Assistant Secretary for Employment and Training.
[FR Doc. E8-25097 Filed 10-22-08; 8:45 am]
BILLING CODE 4510-FW-P