[Federal Register Volume 64, Number 232 (Friday, December 3, 1999)]
[Proposed Rules]
[Pages 67972-67979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30445]
[[Page 67971]]
_______________________________________________________________________
Part II
Department of Labor
_______________________________________________________________________
Employment and Training Administration
_______________________________________________________________________
20 CFR Part 604
Birth and Adoption Unemployment Compensation; Proposed Rule
Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 /
Proposed Rules
[[Page 67972]]
DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Part 604
RIN 1205-AB21
Birth and Adoption Unemployment Compensation
AGENCY: Employment and Training Administration, Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Labor (DOL) is issuing for comment a Notice
of Proposed Rulemaking to create, by regulation, an opportunity for
State agencies that administer the Unemployment Compensation (UC)
program to pay, under a voluntary experimental program, UC to parents
who take time off from employment after the birth or placement for
adoption of a child. This effort responds to the President's Executive
Memorandum issued May 24, 1999, directing the Secretary of Labor to
allow States the opportunity to develop innovative ways of using UC to
support parents taking leave to be with their newborns or newly-adopted
children and to evaluate the effectiveness of using the UC system for
these or related purposes. This regulation will permit interested
States to experiment with methods for allowing the use of the UC
program for this purpose.
DATES: DOL invites written comments on this proposal. Comments are to
be submitted by January 18, 2000.
ADDRESSES: Submit written comments to Grace A. Kilbane, Director,
Unemployment Insurance Service, Employment and Training Administration
(ETA), U.S. Department of Labor, 200 Constitution Avenue, N.W., Room S-
4231, Washington, DC 20210. Prior to issuance of this Notice of
Proposed Rulemaking, the DOL received correspondence on the subject
matter of the proposal. This correspondence, along with correspondence
received in response to the Notice of Proposed Rulemaking, will be made
part of the rulemaking record and will be considered in the development
of a final rule.
FOR MORE INFORMATION CONTACT: Gerard Hildebrand, Unemployment Insurance
Service, ETA, U.S. Department of Labor, 200 Constitution Avenue, N.W.,
Room S-4231, Washington, DC 20210. Telephone: (202) 219-5200 ext. 391
(this is not a toll-free number); facsimile: (202) 219-8506.
SUPPLEMENTARY INFORMATION:
I. Background
A. General Overview
(1) Need for Birth and Adoption Leave
On May 23, 1999, the President directed the Secretary of Labor to
issue a regulation allowing unemployment fund moneys to be used to
provide partial wage replacement to mothers and fathers on leave
following the birth or adoption of a child. In discussing the
importance of providing partial wage replacement, the President stated:
``[T]hose first weeks of life are critical to the bonding of parents
and children, and they can have long-term positive developments for the
children. No parent should have to miss them.'' The President also
noted that, ``We can do this in a way that preserves the soundness of
the unemployment insurance system and continues to promote economic
growth.''
The President elaborated on this Birth and Adoption UC proposal in
a May 24, 1999, memorandum to the heads of executive departments:
First, I hereby direct the Secretary of Labor to propose regulations
that enable States to develop innovative ways of using the
Unemployment Insurance (UI) system to support parents on leave
following the birth or adoption of a child. In addition, I direct
the Secretary to develop model State legislation that States could
use in following these regulations. In this effort, the Department
of Labor is to evaluate the effectiveness of using the system for
these or related purposes. In a 1996 study conducted by the
Commission on Family and Medical Leave, lost pay was the most
significant barrier to parents taking advantage of unpaid leave
after the birth or adoption of a child. This new step will help to
give States the ability to eliminate a significant barrier that
parents face in taking leave.
In response to the President's May 24, 1999, Executive Memorandum, the
DOL is exercising its authority to interpret Federal UC statutes, and,
in particular the statutes' longstanding ``able and available''
requirements, by implementing an experimental program to examine the
use of the UC program as a means for providing partial wage replacement
to employees who desire to take approved leave or otherwise leave their
employment following the birth or placement for adoption of a child.
(2) The Federal-State UC System
The Federal-State UC program is administered as a partnership of
the Federal government and the States. States collect State UC taxes
used to pay compensation while the Federal government collects taxes,
used for grants for State UC administration, under the Federal
Unemployment Tax Act (FUTA). (The FUTA is codified at 26 U.S.C. 3301-
3311.) The DOL has broad oversight responsibility for the Federal-State
UC program, including determining whether a State law conforms and its
practices substantially comply with the requirements of Federal UC law.
If a State's law conforms and its practices substantially comply with
the requirements of the FUTA, then the Secretary of Labor issues
certifications enabling employers in the State to receive credit
against the Federal unemployment tax as provided under section 3302,
FUTA. If a State and its law are certified under the FUTA, and the
State's law conforms and its practices substantially comply with the
requirements of Title III of the Social Security Act (SSA), then the
State receives grants for the administration of its UC program. (Title
III of the SSA is codified at 42 U.S.C. 501-504.) The DOL enforces
Federal UC law requirements through the FUTA credit and grant
certification processes.
(3) Ability To Work and Availability for Work
The DOL has the authority and responsibility to interpret the
provisions of Federal UC law such as the ``able and available''
requirements. Although no explicit able and available requirements are
stated in Federal law, the DOL and its predecessors (the Social
Security Board and the Federal Security Agency) interpreted four
provisions of Federal UC law as requiring that claimants be able to and
available for work. Two of these provisions at section 3304(a)(4),
FUTA, and section 303(a)(5), SSA, limit with-drawals, 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 able and available requirements provide a test of a
claimant's ``unemployment.''
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 is to be paid
through the public employment system (the purpose of which is to find
people jobs) ties the payment of UC to an individual's search for
employment and to his or her ability to work and availability for work.
Agencies administering the Federal-State UC program have for over
60 years interpreted these four statutory provisions to require a
participating State to have able and available requirements.
[[Page 67973]]
In response to practical economic and societal concerns, the DOL
has previously, as discussed below, exercised its authority to
interpret Federal UC statutes regarding the able and available
requirements to address several specific areas: training, illness, jury
duty and temporary layoffs. Under its authority to interpret Federal UC
law and consistent with its broad oversight responsibility, the DOL
interprets the Federal able and available requirements to include a
voluntary experimental program for examining the use of the UC program
to provide partial wage replacement to employees who take approved
leave or otherwise leave employment to be with their newborns or newly-
adopted children. This experiment recognizes the impact of women in the
workforce and responds to the dramatic societal and economic changes
resulting from the large number of families where both parents work. It
should allow parents of newborns and newly-adopted children to
strengthen their availability for work by providing them with the time
and financial support to address several vital needs that accompany the
introduction of a new child into the family. The program would allow
such parents to provide the initial care that the child will need, to
form a strong emotional bond with the child, and to establish a secure
system of child care that, once in place, will promote the parents'
long-term attachment to the workforce.
(4) Minimal Tests of the Able and Available Requirements
Consistent with DOL interpretations, some States have imposed
minimal tests of the able and available requirements for specific
situations, provided the claimant has demonstrated an attachment to the
labor force.
Approved Training. Prior to incorporating the training provision
into the Federal laws, the DOL encouraged States to treat individuals
in training approved by the State agency as meeting the able and
available requirements since such training represents the most
effective step available to the individual to return to work. The DOL
cautioned that State agencies should only approve short-term training
that would make individuals job ready. In 1970, Congress, recognizing
the importance of training in remedying unemployment, made this
training provision mandatory for all States. (Section 3304 (a)(8),
FUTA.) The Federal able and available requirements are preserved
because individuals who fail to attend training, except by specific
waiver, are held to be unavailable for work and ineligible for UC.
Illness. Eleven States allow an individual who initially meets the
able and available requirements, but then becomes ill, to receive UC
payments without interruption, provided that no suitable work is
offered and refused. The DOL approved such State laws in an effort to
deter disqualification for UC where a claimant was not ``able and
available'' for perhaps one day, or even one hour, out of a week. Two
States, Alaska and Massachusetts, cap the number of weeks ill claimants
can collect UC at six weeks and three weeks, respectively; the other
States have no statutory limitations. The Federal able and available
requirements are preserved because claimants must initially demonstrate
their ability to and availability for work before the illness and must
be held ineligible if they refuse an offer of suitable work.
Similarly, under the Federal-State Extended Unemployment
Compensation Act of 1970 (EB) (26 U.S.C. 3304, note), an ill individual
may receive UC only if no suitable work is rejected. The EB program
provides additional weeks of compensation to individuals who have
exhausted their rights to regular compensation during times of high
unemployment and contains a specific ``work search'' requirement. This
work search requirement is suspended for EB claimants who are
hospitalized for an emergency or life-threatening condition (20 CFR
615.8 (g)(3)(i)(B)). This suspension is permitted only if the State law
contains a similar provision to those explained above, which must be
consistent with the Federal able and available requirements.
Jury Duty. The DOL accepts that States may pay UC to individuals
serving on jury duty consistent with the Federal availability
requirement. This is reasonable because individuals are compelled under
the threat of contempt of court by the judicial branch of the
government to go on jury duty, and attendance at jury duty may be taken
as evidence that the employee would otherwise be available for work. It
would be inconsistent for the State to compel jury service and at the
same time disqualify unemployed persons from UC for complying. Most
employment is not considered an excuse for avoiding jury duty, and
unemployment would also likely not be an excuse from jury duty. Indeed,
EB claimants are exempt from the work search provision while on jury
duty (20 CFR 615.8(g)(3)(i)(A)).
Temporary Layoffs. In a temporary layoff, the employer is unable to
provide work for a short period of time, but both the employer and the
employee have the expectation that the employee will return to work on
a specific date. When the employer recalls the employee, the employee
must accept or be denied UC. In these cases, the availability
requirement is essentially limited to the employer who laid off the
employee. This recognizes that such employees are frequently career
employees who would likely quit a new job to return to their former
employer when the layoff ends; therefore, other employers would not
likely hire such employees.
B. The Birth and Adoption Unemployment Compensation (BAA-UC) Experiment
(1) Able and Available Requirements for BAA-UC
The DOL previously exercised its authority to interpret the able
and available requirements in the areas of training, illness, jury
duty, and temporary layoffs. Based on this precedent, the DOL's
experimental BAA-UC program is designed to test whether expansion of
its interpretation of the able and available requirements would promote
a continued connection to the workforce in parents who receive such
payments.
As the number of mothers in the workforce and families with both
parents working rises, the need to test this interpretation increases,
and collecting data under the BAA-UC program to test the existence and
magnitude of this group's connection to the work force, is increasingly
important. Indeed, much in the same way that providing training to
laid-off employees enhances their connection to the workforce by making
them more marketable, the DOL wants to test whether providing parents
with BAA-UC at a point during the first year of a newborn's life, or
after placement for adoption, will help employees maintain or even
promote their connection to the workforce by allowing them time to bond
with their children and to develop stable child care systems while
adjusting to the accompanying changes in lifestyle before returning to
work.
The initial time period during which a new child is introduced into
a home, and how that child's care will be assimilated into the working
lives of the parents, is critical. It is during this period that secure
emotional bonds are formed between children and their parents. It is
also during this period that a system of child care, which will foster
the parents' availability for work, can be firmly established. These
requirements are universal when any working family has a new child.
Addressing these needs is fundamental to helping families flourish and
is also connected to
[[Page 67974]]
sustaining a stable workforce. Where parents continue to work after the
arrival of children, they often need the opportunity to bond with their
child as well as arrange a system of care that will allow the parents
to continue, and indeed strengthen, their attachment to the workforce.
For all the above reasons, the DOL believes that these parents are
an appropriate focus of an experimental extension to the able and
available requirements. Thus, this expanded interpretation of the
Federal able and available requirements applies only to experimental
BAA-UC and does not extend to any other facet of the Federal-State UC
program. BAA-UC is an experiment being conducted within the regular UC
program.
(2) Experimental versus Permanent Program
This proposed rule will give the State agencies that administer the
UC program the opportunity to provide UC, under an experimental
program, to parents who take approved leave or otherwise leave their
employment to be with a newborn or newly-adopted child. The DOL chose
to proceed with an experimental rather than a permanent program in
order to compile the necessary information to evaluate the following
prior to any implementation of a permanent program: whether individuals
compensated for birth and adoption leave are more likely to return to
employment, and, therefore, are more available than those who are
uncompensated; the effects on employers whose employees take such
compensated leave; the effects on employers throughout a State who bear
the BAA-UC costs; and the effects on the State's unemployment fund. The
DOL anticipates that creating this experimental program, which States
can voluntarily choose to put into practice, will give States the
necessary latitude to develop innovative programs permitting the DOL to
measure employees' connections to the workforce after availing
themselves of BAA-UC, as compared to individuals who take unpaid leave
or none at all.
(3) Experimental Program Limitations
The purpose of the able and available requirements is to assure
sufficient attachment to the workforce. The BAA-UC experimental program
is designed to test the proposition that providing UC to the parents of
newborns and newly-adopted children who wish to take approved leave or
otherwise leave their employment will increase their attachment to the
workforce. In order to gain information on the impact of adapting the
UC program to address the needs of such employees, the DOL is defining
the experimental program to cover the parents of newborns and newly-
adopted children. The DOL believes that authorizing States to provide
unemployment compensation for parents of newborns and newly-adopted
children will produce valuable information for evaluating the program.
This information may also serve as a basis for further expanding
coverage to assist a broader group of employees to better balance work
and family needs. The class of employees covered by this proposed rule
is a small, easily-defined group that can be used to test whether
compensating absences from employment will assist individuals to
maintain, or even improve upon, their connection to the workforce by
enabling them to better meet their parental and family needs.
(4) Experimental Program Time Frame and Evaluation
States may enact legislation and begin operation of a BAA-UC
program any time after the effective date of the Final Rule. States
wishing to enact legislation prior to completion of the rulemaking
process should have a contingency provision in their legislation
allowing for State agencies to make changes necessary to comply with
Federal regulations prior to the implementation of their programs.
The DOL will begin collecting administrative data immediately upon
implementation of a BAA-UC program. As States gain experience with
their programs, the DOL will evaluate each State individually. A
comprehensive evaluation will be performed when at least four States
have implemented legislation and operated a BAA-UC program for a
minimum of three years.
The Federal evaluation methodology has not yet been completed.
Because States will have broad latitude in developing BAA-UC
experimental programs, the DOL may use a case study evaluation design.
Some of the issues that may be addressed in the evaluation include:
whether workforce attachment for this population changed; whether
employees faced barriers to taking advantage of BAA-UC; and, if so,
what can be done to break down these barriers. Though not required by
these regulations, it is anticipated that each State will include, as
part of its system development, an evaluation component. Once decisions
have been made regarding the Federal evaluation process and how the
relevant information will be collected, complete information collection
instructions will be issued and, if subject to the Paperwork Reduction
Act, published for public comment in the Federal Register.
C. Rule Format
In keeping with the Administration's commitment to writing
regulations in plain English, the substance and format of this Proposed
Rule is presented in a question-and-answer format so that the
regulations will be clear and easy to understand. In addition, the DOL
has attempted to anticipate and address issues that may arise during
this effort.
II. Explanation
DOL is proposing a rule which is not overly prescriptive. This is
consistent with the general structure of the UC program under which
States have wide latitude in designing their programs.
In accordance with the May 24, 1999, Executive Memorandum, BAA-UC
model State legislation has been developed and is appended (Appendix A)
for comment. This model legislation is optional and is provided for the
convenience of States that choose to implement a BAA-UC program. A
commentary on the model legislation and policy issues to aid States in
the development of methods provided for under the proposed rule is also
appended (Appendix B) for comment. Both appendices are subject to
change based upon comments. They will be issued in final form in the
Federal Register as a program letter and will not appear in the Code of
Federal Regulations.
Description of the Regulation
The proposed rule adds Part 604 to the Code of Federal Regulations.
Subparts are organized by subject matter:
Subpart A discusses the purpose and scope of the regulation and
defines critical terms.
Subpart B discusses Federal UC requirements as they relate to this
experiment.
Subpart C discusses BAA-UC eligibility requirements.
Following is a brief description of each subpart of the proposed
regulation.
Subpart A--General Provisions
Subpart A discusses the purpose and scope of the regulation and
defines critical terms. The purpose of the regulation is to establish
the opportunity for the State agencies that administer the UC program
to provide UC, under an experimental program, to parents who take
approved leave or otherwise leave employment to be with a newborn or
newly-adopted child. This proposal will permit interested States to
[[Page 67975]]
experiment with methods for allowing this use of the UC program.
The scope of the BAA-UC experiment extends to all State UC programs
that provide UC to parents who take approved leave or otherwise leave
their employment to be with their newborns or newly-adopted children.
This group was identified by the President as the focal group for the
experiment with possible expansion, if warranted, after the experiment
has been evaluated. State participation is completely voluntary.
Definitions of terms specific to BAA-UC are also in Subpart A:
Approved Leave--Because ``approved leave'' is commonly interpreted
as an approved, temporary separation from a specific employer, that
definition has been adopted for BAA-UC purposes.
Birth and Adoption unemployment compensation--This is UC paid only
to parents on approved leave or who otherwise leave employment to be
with their newborns or newly-adopted children.
Newborns--To establish the distinguishing characteristics of the
experimental group, it is necessary to define ``newborn.'' For purposes
of the experiment, newborns are defined as children up to one-year old.
Newly-adopted children--Adoptive parents are included in the
experiment. Because adopted children may not be newborns, and a
comparable measurement period is necessary for all parents included in
the BAA-UC experiment, ``newly-adopted'' refers to children, regardless
of age, who have been placed within the previous 12 calendar months
with an adoptive parent(s).
Parents--For BAA-UC experimental purposes, parents are defined as
mothers and fathers--biological, legal or having legal custody of a
child during the adoption process. The BAA-UC experiment does not
include foster parents unless the child has been placed with the foster
parents for adoption.
Placement--The adoption process can be lengthy with completion
occurring long after a child has been placed with a family.
Consequently, for BAA-UC comparability between parents of newborns and
parents of newly-adopted children, ``placement'' for BAA-UC purposes
will be the time a parent becomes legally responsible for a child
pending adoption.
Subpart B--Federal UC Requirements
Subpart B discusses how the Federal UC requirements apply to BAA-
UC. Beyond the proposed interpretation of the able and available
requirements, this regulation does not change Federal UC requirements.
Under its authority to interpret the statutes it administers, the DOL
is interpreting the Federal able and available requirements to include
BAA-UC. This interpretation will give States the opportunity to
experiment with, and demonstrate methods of, providing BAA-UC to
parents of newborns and newly-adopted children. The experiment will
provide compensation only during the periods when parents take approved
leave or otherwise leave employment following the birth or placement
for adoption of their child. This interpretation of the Federal able
and available requirements applies only for purposes of this
experiment.
Subpart C-BAA-UC Eligibility
Subpart C discusses the BAA-UC eligibility requirements. Although
implementation of BAA-UC is entirely at State discretion and States
have wide latitude in BAA-UC program development, certain eligibility
parameters apply. For example, only parents of newborns or newly-
adopted children are included in the experiment. Also, because all
Federal UC law requirements must be met and the insurance nature of the
UC program must be maintained, the introduction of eligibility factors
that are inconsistent with Federal UC law requirements is not permitted
under BAA-UC programs. The introduction of eligibility factors
unrelated to the fact or cause of unemployment, such as industry,
employer size or whether the spouse of a UC recipient also receives (or
has received) UC, is inconsistent with Federal law. Specifically, in a
1964 conformity decision involving the State of South Dakota, the
Secretary of Labor held that Federal law prohibits the introduction of
any eligibility test unrelated to the fact or cause of the individual's
unemployment. (See Secretary of Labor's Decision of September 25, 1964,
In the Matter of the Hearing to the South Dakota Department of
Employment Security Pursuant to Section 3304(a) of the Internal Revenue
Code of 1954, transmitted by Unemployment Insurance Program Letter No.
787, October 2, 1964.) Therefore, all individuals covered under a
State's UC law must be covered for BAA-UC.
For BAA-UC purposes, the first compensable week is the week in
which birth or placement for adoption takes place. States are free to
determine whether to prorate the weekly compensation amount based on
the day of the birth or placement for adoption or whether to fully
compensate for that week. Weeks preceding the week of the birth or
placement and weeks following the end of the one-year period are not
compensable.
The purpose of BAA-UC is to provide support to new parents on
``leave'' from employment to be with their newborns or newly-adopted
children. The term ``leave'' implies that the individual will return to
the last employer after a designated period. However, for experimental
purposes, the DOL will allow States to pay BAA-UC to parents who
otherwise leave employment for this purpose. This will generate data
for evaluating how providing compensation affects the connection of
these individuals to the workforce. The DOL's view is that limiting
BAA-UC to only those individuals who are assured of job retention could
be seen as unfairly excluding parents from BAA-UC who are denied leave
by their employers.
Executive Order 12866
This proposed rule is a ``significant regulatory action'' within
the meaning of Executive Order 12866 because it meets the criteria of
Section 3(f)(4) of that Order in that it raises novel or legal policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order. Accordingly, the
proposed rule has been submitted to, and reviewed by, the Office of
Management and Budget.
However, the proposed rule is not considered an ``economically
significant'' rule because it will not have an annual effect on the
economy of $100 million or more, will not adversely impact a specific
sector of the economy, and will not materially alter the budgeting
impact of entitlements, grants, user fees or loan programs or the
rights and obligations of recipients thereof.
The Department estimates that the possible annual aggregate BAA-UC
cost could range from zero to approximately $68 million. The regulation
is permissive, and the DOL does not know how many States will choose to
enact experimental BAA-UC programs. The estimate of the annual
aggregate BAA-UC cost of $68 million is based on the expressed interest
of a small number of States. The cost depends upon such factors as the
extent to which BAA-UC affects parents' incentives to increase their
leave duration and the percentage of leave-takers applying for BAA-UC.
The derivation of this estimate begins
[[Page 67976]]
with 1997-98 Current Population Survey data showing the annual U.S.
average number of women in the labor force with a child under one-year
old. After this number is disaggregated by State, the likely proportion
of leave-takers for newborns and newly-adopted children is determined
based on percentages provided in a report by the Commission on Family
and Medical Leave, titled A Workable Balance: Report to Congress on
Family and Medical Leave Policies (April 30, 1996). Other factors used
in determining the cost estimate include the percent of leave-takers
with employer-paid leave, monetary eligibility rates, and average
weekly UC payments.
Further, the DOL has evaluated the proposed rule and found it
consistent with the regulatory philosophy and principles set forth in
Executive Order 12866, which governs agency rulemaking. Although the
proposed rule will impact States and State agencies, it will not
adversely affect them in a material way. The proposed rule would permit
States to voluntarily establish experimental programs to determine the
effectiveness of using the UC program to support parents taking leave
from their employment to be with their newborns or adopted children; it
would not impose any new requirements on States.
Paperwork Reduction Act
The DOL has determined that this proposed rule contains no
information collection requirements.
Executive Order 12612
These proposed regulations have been reviewed in accordance with
Executive Order 12612 regarding federalism. The order requires that
agencies, to the extent possible, refrain from limiting State policy
options, consult with States prior to taking any actions which would
restrict States' policy options, and take such action only when there
is clear constitutional authority and the presence of a problem of
national scope. Since this proposed rule does not limit State policy
options under the current UC program, it complies with the principles
of federalism and with Executive Order 12612.
Executive Order 12988
This proposed rule 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 has been written to minimize
litigation and provide a clear legal standard for affected conduct, and
has been reviewed carefully to eliminate drafting errors and
ambiguities.
Unfunded Mandates Reform Act of 1995 and Executive Order 12875
This proposed rule has been reviewed in accordance with the
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501 et seq.) and
Executive Order 12875. The DOL has determined that this proposal does
not include any Federal mandate that may result in 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 States have full discretion to decide whether or not to enact a
BAA-UC program. See the section entitled ``Executive Order 12866'' for
further information on the BAA-UC cost estimate.
Regulatory Flexibility Act
This proposed rule will not have a significant economic impact on a
substantial number of small entities. The proposal affects States and
State agencies, which are not within the definition of ``small entity''
under 5 U.S.C. 601(6). Moreover, States have complete discretion in
deciding whether or not they will enact a program permitted under this
proposed regulation. 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.
Small Business Regulatory Enforcement Fairness Act
This proposed rule is not a ``major rule'' as defined by section
804 of the Small Business Regulatory Enforcement Fairness Act of 1996
(5 U.S.C. Chapter 8). This proposed rule will not 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 of
United States-based entities to compete with foreign-based entities in
domestic and export markets.
Effect on Family Life
The DOL certifies that this proposed rule has been assessed in
accordance with section 654 of Pub. L. 105-277, 112 Stat. 2681, for its
effect on family well-being. The DOL concludes that the proposed rule
will not adversely affect the well-being of the nation's families.
Rather, it should have a positive effect on family well-being by
permitting States to enable more parents to take leave from their
employment to be with their newborns or newly-adopted children.
List of Subjects in 20 CFR Part 604
Employment and Training Administration, Labor, and Unemployment
Compensation.
Catalogue of Federal Domestic Assistance Number
This program is listed in the Catalogue of Federal Domestic
Assistance at No. 17.225, Unemployment Insurance.
Signed at Washington, D.C. on November 18, 1999.
Alexis M. Herman,
Secretary of Labor.
Words of Issuance
For the reasons set forth in the preamble, the DOL proposes that
Chapter V of Title 20, Code of Federal Regulations, be amended by
adding new part 604 to read as follows:
PART 604--REGULATIONS FOR BIRTH AND ADOPTION UNEMPLOYMENT
COMPENSATION
Subpart A--General Provisions
Sec.
604.1 What is the purpose of this regulation?
604.2 What is the scope of this regulation?
604.3 What definitions apply to this regulation?
Subpart B--Federal Unemployment Compensation Program Requirements
604.10 Beyond the interpretation of the able and available
requirements for Birth and Adoption unemployment compensation, does
this regulation change the Federal requirements for the unemployment
compensation program?
Subpart C--Eligibility
604.20 Who is covered by Birth and Adoption unemployment
compensation?
604.21 When does eligibility for Birth and Adoption unemployment
compensation commence?
604.22 Are parents who leave employment to be with their newborns
or newly-adopted children eligible for Birth and Adoption
unemployment compensation, or is it limited only to parents who take
approved leave?
Authority: 42 U.S.C. 1302(a); 42 U.S.C. 503(a)(2) and (5); 26
U.S.C. 3304(a)(1) and (4); 26 U.S.C. 3306(h); Secretary's Order No.
4-75 (40 FR 18515); and Secretary's Order No. 14-75 (November 12,
1975).
Subpart A--General Provisions
Sec. 604.1 What is the purpose of this regulation?
This regulation allows the States to develop and experiment with
innovative methods for paying unemployment compensation to parents on
approved leave or who otherwise leave employment to be with their
[[Page 67977]]
newborns or newly-adopted children. States' experiences with Birth and
Adoption unemployment compensation will enable the Department of Labor
to test whether its interpretation of the Federal ``able and
available'' requirements promotes a continued connection to the
workforce in parents who receive such payments.
Sec. 604.2 What is the scope of the regulation?
This regulation applies to and permits all State unemployment
compensation programs to provide benefits to parents on approved leave
or who otherwise leave employment to be with their newborns or newly-
adopted children. A State's participation is voluntary.
Sec. 604.3 What definitions apply to the regulation?
The following definitions apply to this regulation:
(a) Approved Leave means a specific period of time, agreed to by
both the employee and employer, during which an employee is temporarily
separated from employment and after which the employee will return to
work for that employer.
(b) Birth and Adoption unemployment compensation means unemployment
compensation paid only to parents on approved leave or who otherwise
leave employment to be with their newborns or newly-adopted children.
(c) DOL means the United States Department of Labor.
(d) Newborns means children up to one-year old.
(e) Newly-adopted children means children, regardless of age, who
have been placed within the previous 12 calendar months with an
adoptive parent(s).
(f) Parents means mothers and fathers (biological, legal or who
have legal custody of a child during the adoption process).
(g) Placement means the time a parent becomes legally responsible
for a child pending adoption.
(h) State(s) means one of the States of the United States of
America, the District of Columbia, the Commonwealth of Puerto Rico, and
the United States Virgin Islands.
Subpart B--Federal Unemployment Compensation Program Requirements
Sec. 604.10 Beyond the interpretation of the able and available
requirement for Birth and Adoption unemployment compensation, does this
regulation change the Federal requirements for the unemployment
compensation program?
No. This regulation does not change the Federal unemployment
compensation requirements. Under its authority to interpret Federal
unemployment compensation law, the DOL interprets the Federal able and
available requirements to include experimental Birth and Adoption
unemployment compensation. The regulation applies only to parents who
take approved leave or otherwise leave employment to be with their
newborns or newly-adopted children.
Subpart C--Eligibility
Sec. 604.20 Who is covered by Birth and Adoption unemployment
compensation?
If a State chooses to provide Birth and Adoption unemployment
compensation, all individuals covered by the State's unemployment
compensation law must also be covered for Birth and Adoption
unemployment compensation. Just as with current unemployment
compensation programs, individuals may not be denied experimental Birth
and Adoption unemployment compensation based on facts or causes
unrelated to the claimant's unemployment, such as industry, employer
size or the unemployment status of a family member. The introduction of
such facts or causes would be inconsistent with Federal unemployment
compensation law.
Sec. 604.21 When does eligibility for Birth and Adoption unemployment
compensation commence?
Parents may be eligible for Birth and Adoption unemployment
compensation during the one-year period commencing with the week in
which their child is born or placed with them for adoption. Weeks
preceding the week of the birth or placement and weeks following the
end of the one-year period are not compensable.
Sec. 604.22 Are parents who leave employment to be with their newborns
or newly-adopted children eligible for Birth and Adoption unemployment
compensation, or is it limited only to parents who take approved leave?
States may limit Birth and Adoption unemployment compensation to
parents who take approved leave or may extend Birth and Adoption
unemployment compensation to parents who otherwise leave employment to
be with their newborns or newly-adopted children. However, the intent
of Birth and Adoption unemployment compensation is to support all
parents who wish to take time from employment to be with their newborns
or newly-adopted children.
The following appendix will not appear in the Code of Federal
Regulations.
Appendix A--Model State Legislation
Section ______. Birth and Adoption Unemployment Compensation.
(a) An individual who is on a leave of absence from his or her
employer or who left employment to be with the individual's child
during the first year of life, or during the first year following
placement with the individual for adoption, shall not be denied
compensation under Section ______ for voluntarily leaving
employment, Section ______ relating to availability for work,
Section ______ relating to inability to work, or Section ______ for
failure to actively seek work.
(b) Section ______, concerning the reduction of the amount of
compensation due to receipt of disqualifying income, shall apply to
payments under this section. In addition, the following payments
shall cause a reduction in the compensation amount:
(1) any payment from the employer resulting from a birth or
adoption described in subsection (a); and
(2) any payment resulting from a birth or adoption described in
subsection (a) from a disability insurance plan contributed to by an
employer, in proportion to the employer's contribution to such plan.
(c) Compensation is payable to an individual under this section
for a maximum of 12 weeks with respect to any birth or placement for
adoption.
(d) Each employer shall post at each site operated by the
employer, in a conspicuous place, accessible to all employees,
information relating to the availability of Birth and Adoption
unemployment compensation.
(e) Any compensation paid under this section shall not be
charged to the account of the individual employer.
(f) Two years following the effective date of this legislation,
the commissioner shall issue a report to the governor and the
legislature evaluating the effectiveness of the Birth and Adoption
unemployment compensation program.
(g) This section shall be applied consistent with regulations
issued by the U.S. Department of Labor.
The following appendix will not appear in the Code of Federal
Regulations.
Appendix B--Commentary on Model State Legislation, Including Policy
Issues
General
Must States Implement a Birth and Adoption Unemployment Compensation
(BAA-UC) Program?
No. This program is voluntary for the States. However,
implementation of BAA-UC will require some legislation on the part
of every State seeking to adopt the program. The Model State
Legislation is provided for the convenience of States that wish to
implement a BAA-UC program.
Does This Regulation Enable a State To Pay UC for Other Types of Family
or Medical Leave?
No. This regulation enables a State to pay UC to parents on
approved leave or who
[[Page 67978]]
otherwise leave employment to be with their newborns or newly-
adopted children. Permitting payment of UC for other types of family
leave or care would be inconsistent with this experimental program.
Must All Employer-Paid Leave Be Exhausted Before BAA-UC Is Available?
No. BAA-UC is designed to provide partial wage replacement to
parents of newborns or newly-adopted children. The Model State
Legislation assumes that any wages paid for the period of employer-
provided leave will be deducted. However, States need not deduct
these wages from BAA-UC.
Does This Regulation Impose Any Solvency Requirements Upon the States
Before They Enact BAA-UC?
No. The DOL expects that a State will not enact changes without
assessing the effect on the solvency of its unemployment fund. Each
State has the responsibility to assess the cost to the State's
unemployment fund whenever coverage, benefit expansions, or tax
changes are considered within the State's UC program. Consequently,
DOL expects prudent decision makers in a State to examine the
State's solvency position and projected taxes and benefit payments
under current law before deciding to enact BAA-UC legislation.
Monetary Qualifications and Benefits
What Are the Earnings and Employment Requirements for BAA-UC?
States may establish their own requirements. The Model State
Legislation assumes that States will use the same earnings and
employment criteria that apply to all other individuals.
What Is the Weekly Benefit Amount for Individuals Eligible for BAA-UC?
States may establish their own weekly benefit amounts. The Model
State Legislation assumes that individuals eligible for BAA-UC will
receive the same weekly benefit amount as other individuals eligible
for UC.
How Does the Receipt of Other Income Effect Payment of BAA-UC ?
States will determine whether BAA-UC will be reduced by other
income. Under the Model State Legislation, the amount of BAA-UC will
be reduced in the same manner as any other payment of UC as provided
under State law. The Model State Legislation also provides for the
deduction of any payment from the employer as a result of the birth
or placement for adoption, and for the deduction of any disability
insurance payment received as a result of the birth or placement for
adoption in proportion to the employer's contribution to the
disability insurance plan. This provision, which is limited to
payments triggered by the same event which triggers BAA-UC, reflects
the view that the unemployment fund should not be held responsible
when wage replacement is available from other sources, particularly
when both payments are financed by the employer. States should
examine their laws to determine if all types of appropriate income
are, or should be, deductible. For example, some leave payments
which are not normally deductible under State law may cover costs of
birth and adoption leave.
How Does the BAA-UC Entitlement Relate to Regular UC Payments?
States are free to determine this. The Model Legislation assumes
that BAA-UC counts toward the maximum number of weeks of regular UC.
Period of Eligibility
When May BAA-UC Benefits Begin?
Under Section 604.21 of the proposed regulations, parents may
receive BAA-UC only during the one-year period commencing with the
week in which the child is born or placed for adoption. For example,
an individual taking leave in the 51st week following birth or
placement for adoption, would be eligible for BAA-UC only for weeks
51 and 52. Periods preceding the week of birth or placement for
adoption are not compensable. States are free to reduce the one-year
period.
How Many Weeks of BAA-UC May Individuals Receive?
States are free to determine this. The Model State Legislation
provides a maximum duration of 12 weeks per individual with respect
to any one birth or adoption. Since the Family and Medical Leave Act
of 1993 (FMLA) allows up to 12 weeks of unpaid leave for such
events, States may wish to have an identical amount. States may also
relate the duration of leave to the individual's weekly amount of
UC. For example, for each birth or adoption, an individual may
receive an amount equal to 12 times the individual's weekly UC.
To prevent confusion between FMLA and BAA-UC, States should
inform potential BAA-UC beneficiaries of the dissimilarities between
the two programs (for example, BAA-UC does not guarantee job
retention).
If a Child Is Born in the Middle of the Week or the Placement Occurs in
the Middle of the Week, is BAA-UC Payable for This Week?
Under the Model State Legislation, BAA-UC would be payable for
this week, assuming all applicable eligibility conditions, such as
the deductible income provisions, are met. States may provide the
full weekly compensation amount for this week or prorate the weekly
amount to reflect only periods following birth or adoption. If the
amount is prorated, the State may pay the remaining balance for the
last partial week if the individual is still on leave.
Must the Individual Serve a Waiting Period?
No. Nothing in Federal law requires States to have a waiting
week for regular UC or BAA-UC. However, not having a waiting week
for BAA-UC would eliminate the 50 percent Federal share for the
first week of all Extended Benefits claims. Under 20 CFR
615.14(c)(3), a State is not entitled to a Federal share for the
first week of Extended Benefits if the State's law provides ``at any
time or under any circumstances'' for the payment of UC for the
first week of unemployment.
When Is a Child Considered ``Placed'' for Adoption?
Under 604.3(g) of the proposed rule, placement occurs at the
time a parent becomes legally responsible for a child pending
adoption. State UC agencies should consult the adoption laws of
their States to determine precisely when placement occurs.
Other Eligibility Issues
May Both Parents Receive BAA-UC? If So, May They Both Receive Such
Compensation at the Same Time?
The answer to both questions is ``yes.'' States implementing
BAA-UC must allow both parents, if otherwise eligible, to receive
BAA-UC concurrently or consecutively. A State may not prohibit
payment of BAA-UC simply because the other parent is taking leave
for the same purpose. A State law which does so is inconsistent with
Federal law because the eligibility of one parent will be determined
based on whether the other parent is receiving UC. Specifically, in
a 1964 conformity decision involving the State of South Dakota, the
Secretary of Labor held that Federal law prohibits the introduction
of any eligibility test unrelated to the fact or cause of the
individual's unemployment. (See Secretary of Labor's Decision of
September 25, 1964, In the Matter of the Hearing to the South Dakota
Department of Employment Security Pursuant to Section 3304(a) of the
Internal Revenue Code of 1954, transmitted by Unemployment Insurance
Program Letter No. 787, October 2, 1964.) The recipient status of
the other parent is unrelated to the fact or cause of an
individual's unemployment. Thus, both parents may receive BAA-UC,
whether concurrently or consecutively. Similarly, States may not
limit use of BAA-UC to the ``primary'' parent.
Must BAA-UC Apply to Individuals Employed by All Employers Subject to
State UI Law?
Yes. As explained in the previous answer, States may not impose
eligibility conditions not related to the fact or cause of the
individual's unemployment. Assuming the services are taxable for UC,
States may not, for example, limit BAA-UC based on employer size.
May States Provide BAA-UC to Individuals Who Otherwise Leave Employment
(Not on Approved Leave) To Be With Their Newborns or Newly-Adopted
Children?
Yes. While States are free to determine their own requirements,
there are compelling reasons for providing BAA-UC to individuals who
otherwise leave employment. Although many employers may grant leave,
others may not. The DOL believes that all parents should be treated
identically for UC purposes when they take time away from employment
to be with their newborn or newly-adopted child. As such, their
eligibility for BAA-UC should not be based on whether an employer is
required to grant the leave, but on the parent's reason for wanting
to take the leave.
May Eligibility Be Conditioned on Whether the Individual Gave Notice to
the Employer?
Yes. Although the Model State Legislation does not provide for
such a condition because it may result in denials due to the
technicality of when the individual requested leave, States may
impose it. The basis of such a requirement is that employers should
be given sufficient time to accommodate the
[[Page 67979]]
leaving/absence of the individual. If such a provision is included,
the DOL recommends that the notice be required to be given no more
than 30 days prior to birth or placement, but only where
practicable. The FMLA contains a 30-day requirement or shorter
notice period where giving 30-day notice is not practicable; it does
not require notice when the necessity to take leave is
unforeseeable. (Section 102(e), Family and Medical Leave Act, Pub.
L. 103-3 (February 5, 1993).)
May Eligibility Be Conditioned on Whether the Individual Chooses Not To
Return to Work?
Yes. However, based upon Jenkins v. Bowling, 691 F.2d 1225 (7th
Cir. 1982), States may not delay payment until after the individual
returns to work. Section 303(a)(1), SSA, requires the full payment
of benefits when due, precluding States from delaying payment while
awaiting the individual's return to work. A State may, however,
declare an overpayment of benefits after the individual fails to
return to work.
May An Individual Be Paid BAA-UC Under the Federal-State Extended
Benefit Program or Any of the Federally Funded Unemployment Programs?
It depends on the program. Benefits under the UC for Federal
Employees (UCFE) and UC for Ex-Servicemembers (UCX) programs are, by
Federal law, required to be paid on the same terms and subject to
the same conditions as State benefits (with exceptions not relevant
here). Therefore, BAA-UC will be paid to individuals under these
programs to the same extent as under State law.
Individuals may only receive Disaster Unemployment Assistance
(DUA) when their unemployment is caused by a disaster as provided in
20 CFR Part 625. However, if they meet their State's Birth and
Adoption UC provisions, then they will satisfy the availability
requirement at Sec. 625.4(g), and so may qualify for DUA. For
example, an individual who is unemployed due to a major disaster may
later give birth. If this individual satisfies the BAA-UC
requirements in the State's law, she may receive DUA.
Extended Benefit claimants may not receive Birth and Adoption UC
since they cannot meet the systematic and sustained work search
requirements in 20 CFR 615.8(g).
Individuals claiming trade readjustment allowances (cash
benefits) under the Trade Adjustment Assistance and the North
American Free Trade Act Transitional Adjustment Assistance programs
will be ineligible since such individuals are required to either be
in full-time training or conduct the systematic and sustained work
search required for the Extended Benefit program.
Financing Costs of BAA-UC
May BAA-UC Costs Be Socialized Among Employers?
Yes. States are free to socialize or not socialize costs of BAA-
UC. The Model State Legislation socializes costs--also called
``noncharging.'' An employer may be reluctant to bear all the costs
of BAA-UC caused by an employee taking leave since the employer will
not have caused the individual's unemployment. Since noncharging is
permitted when the unemployment is caused by the employee, it is
permitted in this situation. This position applies to both
contributory and reimbursable employers.
May BAA-UC Costs Be Paid From a State Fund Other Than the State's
Unemployment Fund, for Example, a State's Temporary Disability (TDI)
Fund?
Yes. Nothing in Federal UC law governs the treatment of moneys
in these funds because they are financed by a separate tax and held
separately from the State's unemployment fund. For example, a State
with a TDI program may enact a special disability insurance tax on
employers and deposit the proceeds in a disability fund. If the
State chooses to use one of these funds (or create such a fund) to
pay birth and adoption leave benefits, the requirements of DOL's
BAA-UC regulation will not apply.
Administrative Costs
May States Use Administrative Grants Received From the Federal
Government To Pay for the Administration of a BAA-UC Program?
Provided that all the requirements of the BAA-UC regulation are
met, the use of administrative grants is permissible, including for
purposes of studying and evaluating the BAA-UC program. However, if
the regulation's requirements are not met, the expenditures of grant
funds are not for the proper and efficient administration of the
State's law as required by section 303(a)(8) of the Social Security
Act.
Reporting
Will States Need To Amend Their Laws To Address any Federal Reporting
Requirements Concerning BAA-UC?
Although this is a matter for States to determine, the DOL
anticipates that few, if any, States will need to amend their laws
since most State laws already contain language concerning reporting.
Many of these laws are based on the language on page 95 of The
Manual of Employment Security Legislation, as revised September
1950, which requires that the agency ``make such reports, in such
form and containing such information as the Secretary of Labor may
from time to time require, and shall comply with such provisions as
the Secretary of Labor may from time to time find necessary to
assure the correctness and verification of such reports.''
What Are the Reporting Requirements?
The DOL has not yet finalized a methodology for evaluating State
BAA-UC programs. When that methodology is completed, State reporting
requirements will be issued in a separate information collection
request and, if subject to the Paperwork Reduction Act, published
for public comment in the Federal Register.
[FR Doc. 99-30445 Filed 11-30-99; 8:45 am]
BILLING CODE 4510-30-P
