[Federal Register: November 2, 2007 (Volume 72, Number 212)]
[Proposed Rules]
[Page 62145-62149]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no07-15]
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DEPARTMENT OF LABOR
Employment and Training Administration
20 CFR Part 616
RIN 1205-AB51
Federal-State Unemployment Compensation Program (UC); Interstate
Arrangement for Combining Employment and Wages
AGENCY: Employment and Training Administration, Labor.
ACTION: Notice of Proposed Rulemaking (NPRM); request for comments.
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SUMMARY: The U.S. Department of Labor (Department) is proposing to
amend its regulations governing combined-wage claims (CWC) filed under
the Federal-State UC program. Most significantly, the Department
proposes to amend the definition of ``paying State.'' The Department
also invites comments on all issues relating to the CWC arrangement and
its governing regulations.
DATES: To be ensured consideration, comments must be submitted in
writing on or before January 2, 2008.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1205-AB51, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Submit comments to Thomas Dowd, Administrator,
Office of Policy Development and Research, U.S. Department of Labor,
Employment and Training Administration, 200 Constitution Avenue, NW.,
Room N-5641, Washington, DC 20210.
Because of security-related concerns, there may be a significant
delay in the receipt of submissions by United States Mail. You must
take this into consideration when preparing to meet the deadline for
submitting comments.
Hand Delivery/Courier: 200 Constitution Avenue, NW., Room
N-5641.
The Department will post all comments received on
http://www.regulations.gov without making any change to the comments,
including any personal information provided. The http://www.regulations.gov
Web site is the Federal e-rulemaking portal and all comments posted
there are available and accessible to the public. The Department
recommends that commenters not include their personal information such
as Social Security Numbers, personal addresses, telephone numbers, and
e-mail addresses in their comments as such submitted information will
become easily available to the public via the http://www.regulations.gov Web
site. Comments submitted through http://www.regulations.gov will not include
the e-mail address of the commenter unless the commenter chooses to
include that information as part of their comment. It is the
responsibility of the commenter to safeguard his or her information.
Instructions: All submissions received must include the agency name
and the RIN for this rulemaking: RIN 1205-AB51. If commenters transmit
comments through the Internet and also submit a hard copy by mail,
please indicate that it is a duplicate copy of the Internet
transmission.
Docket: All comments will be available for public inspection and
copying during normal business hours by contacting the Office of Policy
Development and Research at (202) 693-3700. As noted above, the
Department also will post all comments it receives on
http://www.regulations.gov. This Federal eRulemaking portal is easily
accessible to the public. The Department cautions the public to avoid
providing personal information in your comments that you do not want to
become public via the Internet, such as social security number,
personal address, phone number, and e-mail address.
Copies of the proposed rule are available in alternative formats of
large print and electronic file on computer disk, which may be obtained
at the above-stated address. The proposed rule is available on the
Internet at the Web address http://www.doleta.gov.
FOR FURTHER INFORMATION CONTACT: Jacqui Shoholm, Director of the
Division of Policy, Legislation and Regulations, Office of Policy
Development and Research, Employment and Training Administration, (202)
693-3700 (this is not a toll-free number) or 1-877-889-5627 (TTY), or
Shoholm.jacqui@dol.gov.
SUPPLEMENTARY INFORMATION:
I. Background
General
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 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 Combined Wage
Claim or ``CWC.'' Section 3304(a)(9)(B), FUTA, is implemented 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 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 the claimant files a CWC
in Canada.
Under Sec. 616.8, the ``paying State'' assumes the responsibility
for arranging the transfer of wages from other State(s) where wages
were earned (that is, the ``transferring State,'' as defined at Sec.
616.6(f)) during the ``paying State's'' base period (that is, the
period during which wages earned are counted toward determining benefit
eligibility and amount). In addition to making benefit payments to
eligible individuals, the ``paying State'' also issues all
determinations relating to eligibility for benefits based on its UC
law. Section 616.9 explains the responsibilities of the transferring
State to transfer the covered employment and wages of the CWC claimant
to the ``paying State'' and reimburse the ``paying State'' for benefits
based upon wages earned in the transferring State.
For the reasons explained below, the Department proposes to amend
the definition of ``paying State'' in Sec. 616.6(e) of 20 CFR, add a
new paragraph (f) to
[[Page 62146]]
Sec. 616.7 requiring that where a State denies a CWC it must notify
the claimant of the option of filing in another State, and make a
conforming amendment to Sec. 616.8(a) addressing the responsibilities
of the ``paying State.'' The Department also proposes to delete as
unnecessary Sec. 616.5, which makes December 31, 1971, the effective
date of the arrangement.
Reasons for Regulatory Change
The current regulation for determining the ``paying State'' for
CWCs was issued in 1974 (39 FR 45215, December 31, 1974) to replace a
more complicated test for determining the ``paying State.'' It was
intended to speed payments to eligible claimants by streamlining a
manual process which relied on mailing paper forms between States to
determine which State would be the ``paying State.'' That system could
take weeks or months to determine which State should be the ``paying
State'' for a particular claim. The simple solution, adopted in 1974
(Sec. 616.6(e)(1)), makes the ``paying State'' the State in which the
claimant filed the claim. This amendment made the ``paying State''
readily identifiable, and, because UC claims were filed in person in
1974, this amendment also was convenient for the claimant, who would be
physically present in the State in which he or she filed the claim.
Under Sec. 616.9, all of the claimant's wages are to be transferred to
this ``paying State,'' whose law governs the CWC under Sec. 616.8. If
the claimant does not qualify for benefits in the State in which he or
she filed the claim, Sec. 616.6(e)(2) applies.
The Department now proposes to amend the definition of ``paying
State.'' Information-sharing technology now exists among States which
allows for more immediate determinations of where wages have been
earned. Therefore, it is no longer necessary to make the ``paying
State'' the State in which the claimant chooses to file the CWC, as the
current regulations do.
Permitting the claimant to choose the ``paying State'' led to an
unintended consequence, forum shopping. Under the current definition,
the ``paying State'' need not be a State in which the individual has
covered wages. Rather, that definition makes the ``paying State'' any
State in which the claimant files a CWC if the claimant qualifies for
benefits in that State on the basis of combining his or her wages under
that State's law. As a result, an individual may claim in a State with
a higher weekly benefit amount (WBA) than exists in any of the States
in which the claimant had covered employment. Forum shopping occurs
because WBAs vary greatly among States. (For example, the maximum WBA
in Mississippi is $210 compared with $575 (plus allowances for
dependents) in Massachusetts.)
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. However, the current Sec. 616.6(e)(1) permits a CWC claimant to
elect benefits under the UC law of a State in which he or she had no
employment. This approach allows the claimant to choose a plan with the
most favorable coverage even though the claimant otherwise has no
coverage under that plan. Although the CWC arrangement cannot be
amended to provide for the payment of benefits in accordance with the
laws of two or more States, the proposed amendment to Sec. 616.6(e)
would require that the benefits be determined under the law of one
State in which the claimant had insured base period wages. This result
conforms more closely to the insurance principles of the program.
The proposed amendment to Sec. 616.6(e) would to some extent limit
benefit eligibility, because it would limit the determination of
entitlement to a State in which the claimant had base period wages.
Thus, under the proposed section, an individual who had base period
wages in two or more States, but who is unable to qualify for benefits
in any of these States, would be denied benefits. To the contrary, the
current Sec. 616.6(e) permits a claimant's entitlement to also be
determined under a State law where he or she had no wages. Thus, under
the current section, that claimant might be able to find another State
under whose law he or she would qualify and file the CWC there.
However, this scenario is likely to have been rare and the Department
believes that this result is reasonable. It is consistent with the
insurance principles that benefit rights be determined under the State
law under which the claimant had employment and wages in the State's
base period.
The Department considered a number of options for preventing forum
shopping. The proposed rule provides the most practical and least
complicated set of tests for determining the ``paying State'' and is
also the least restrictive in allowing the claimant some choice in
selecting that State. The Department considered using a ``majority of
wages'' test; however, that test would require the State against which
the claim was originally filed to obtain the wages from all States
where the claimant earned wages and then determine where the majority
of base period wages were located. Although information-sharing
technology now exists among States allowing for more immediate
determinations of where wages were earned, wages are not immediately or
automatically entered into a State's wage data base; State practices
vary widely in how wages are captured and entered into the State
system. Therefore, many such preliminary determinations could be
erroneous, requiring that the CWC be cancelled in one State and filed
again in another State with a resulting overpayment in the first State.
Also, alternative base periods are a complicating factor. It is
possible the claimant would have the ``majority'' of wages under State
A's regular base period, but also have the ``majority'' of wages under
State B's alternative base period. Thus, the State against which the
CWC was filed would need to complete a complex and cumbersome process
to determine which State had the majority of wages. Should the
``majority'' State not be the State against which the claim was filed,
the State against which the claim was filed would need to deny the
claim and advise the claimant where to file. This process would create
delays and confusion, and would be much more complex than allowing the
claimant to file in any State where he or she earned wages. Those
States would, contrary to the ``majority'' State, be readily
identifiable.
The Department also considered redefining ``paying State'' as the
State in which the individual was last employed. The Department values
consistency in the treatment of claimants and believes that, to the
extent possible, CWC claimants should be treated the same as non-CWC
claimants. For a claimant with base period wages and employment in only
[[Page 62147]]
one State, the determination of entitlement will be based solely on
his/her wages and employment during the base period. Similarly, the
Department believes that, when a claimant has base period wages and
employment in more than one State, the determination of entitlement
should be based solely on his/her base period wages and employment in
those States, rather than whether the claimant has wages with a non-
base period employer in another State.
Additionally, there is difficulty in ensuring the accurate and
timely identification of the most recent employer for UI purposes.
Claimants do not always know the correct name of their last employer.
Also, in some cases, wages are not required to be reported by employers
until months after a claimant has been separated from employment. These
more recent wages will not be available at the time of filing and would
need to be requested by the State, which would be administratively
cumbersome and possibly delay the initial payment of UC.
Accordingly, the proposed definition of ``paying State'' as any
State in which the claimant earned base period wages would make that
State readily identifiable without the need for complex procedures and
determinations. It would not totally eliminate claimant choice, but
still serve the purpose of preventing forum shopping.
For these reasons, the Department proposes to update the CWC
regulations as follows to prevent forum shopping and conform them to
the UC program's insurance principles.
II. Summary of the Proposed Rule
The proposed rule would amend the definition of ``paying State'' at
Sec. 616.6(e) to provide that the ``paying State'' is a ``single State
against which the claimant files a Combined-Wage Claim,'' if--
(1) The claimant has wages and employment in the State's base
period(s) (that is, the time period(s) during which the claimant's
wages count toward eligibility for, and the amount of, UC); and
(2) the claimant qualifies for UC under the law of that State using
combined wages and employment.
Under the proposed Sec. 616.6(e), 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, 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 had wages in the base period(s) of no other State.
Under Sec. 616.6(i) of 20 CFR, ``base period'' is defined as the
base period ``applicable under the unemployment compensation law of the
paying State.'' Thus, the proposed rule would apply the elected
``paying State's'' definition of ``base period.'' If an individual had
insufficient wages and employment to qualify under the elected ``paying
State's'' regular base period, then that State's rules of monetary
entitlement (including any provisions regarding alternative base
periods) would govern. (Some States use an ``alternative base period''
in addition to the regular base period to afford a claimant with wages
outside the regular base period an opportunity to qualify for
benefits.) Thus, a claimant, who could not qualify under the regular
base period, would be able to seek benefits under the elected ``paying
State's'' alternative base period, if one existed.
The proposed definition at Sec. 616.6(e) would replace the current
Sec. 616.6(e)(1) and Sec. 616.6(e)(2). The current Sec. 616.6(e)(2)
addresses what happens if the claimant fails to qualify under the law
of the State in which he or she filed a CWC, by providing that in that
event the ``paying State'' is the ``State where the Combined-Wage
Claimant was last employed in covered employment among the States in
which the claimant qualifies for unemployment benefits on the basis of
combined employment and wages * * *.'' The Department proposes removing
this provision because it would no longer be necessary. The proposed
definition of ``paying State'' would permit a claimant whose CWC was
denied to file another CWC in a second State where he or she had base
period wages. At the time of claim filing, or shortly thereafter, the
claimant's base period wage and earnings history is reviewed for
accuracy with the claimant. Because current technology now permits
State agency staff to view claimant wages and eligibility criteria for
other States, where they find such wages, they are able to provide
prompt notice to the claimant of all claim filing options.
If that second State denied the CWC, the claimant could file in a
third State where he or she had wages, and so on. Thus, where a
claimant failed to qualify under the law of the State in which he or
she filed the CWC, the claimant could file again in another State where
he or she had wages. The proposed rule would add a new paragraph (f) to
Sec. 616.7 requiring the denying State to inform the claimant of this
option to file again elsewhere.
It should also be noted that the current Sec. 616.6(e)(2) provides
that if a CWC is filed in Canada, then the ``paying State'' is the
``State where the Combined-Wage Claimant was last employed in covered
employment among the States in which the claimant qualifies for
unemployment benefits on the basis of combined employment and wages * *
*.'' The preamble of the 1974 rule (39 FR 45215-16) explained that it
referenced Canada to acknowledge that while Canada could not be a
``paying State,'' claims may be filed in Canada against a State of the
United States under the Interstate Benefit Payment Plan (IBPP). That
Plan provides for a State, or Canada, helping a claimant file a UC
claim against another State. In eliminating the current Sec.
616.6(e)(2), the proposed rule would eliminate the reference to Canada.
However, that reference is unnecessary since, as the 1974 rule noted,
Canada cannot be a ``paying State.'' Further, the CWC regulations do
not implement the IBPP and the current regulations do not, in any
event, explicitly indicate that Canada is a party to it. In removing
that reference, the Department does not intend to signal that Canada is
not a party to the IBPP.
The proposal also includes a conforming amendment to Sec.
616.8(a), which sets forth the responsibilities of the ``paying State''
regarding the transfer of employment and wages and the payment of
benefits. One requirement in this section is that the ``paying State''
must, with an exception not relevant to the Department's proposed
amendment, apply its own law to CWC determinations, even if the
claimant had no covered wages in the ``paying State.'' The Department's
proposed amendment to the definition of ``paying State'' ensures that
there always will be covered wages in a ``paying State.'' Therefore,
since the reference to a claimant having no covered wages in the
``paying State'' would no longer be relevant and would contradict the
Department's purpose in amending the regulations, the Department
proposes to eliminate it.
Lastly, the Department proposes to delete the effective date
provision of the CWC arrangement because it is no longer needed.
Request for Comments
The Department sets forth in this NPRM a proposal to modernize the
CWC system by amending the definition of ``paying State'' and amending
other regulatory provisions to take into account the amended
definition. The Department is interested in receiving comments on its
proposed amendments
[[Page 62148]]
to Part 616, as well as alternative proposals for preventing forum
shopping. Additionally, since the CWC arrangement has been in existence
for over thirty-five years without change to its basic structure, the
Department requests comments on the desirability of amending any of its
provisions at Part 616.
III. Administrative Provisions
Executive Order 12866
This proposed 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 proposed rule is
not economically significant under the Executive Order because it will
not have an economic impact of $100 million or more on the State
agencies or the economy.
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. This proposed rule does not impose any new
requirements or modification of the existing requirements on the States
that have not already been approved by OMB for collection. Therefore,
the Department has determined that this proposed rule does not contain
a 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), 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 NASWA.''
Consultation has occurred on an informal basis with the States
through NASWA. The Department intends to consult with the UI Committee
or any other representative(s) of the States selected by the NASWA,
during the 60-day comment period for this proposed rule.
Unfunded Mandates Reform Act of 1995
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 proposed rule does not create any unfunded
mandates because it will not significantly increase aggregate costs of
the CWC arrangement. The effect of this proposal 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. This proposed modification does not add an additional
burden on States with respect to claim processing because it does not
alter the States' delivery of claim filing services.
Effect on Family Life
The Department certifies that this proposed rule has been assessed
according to section 654 of Pub. L. 105-277 for its effect on family
well-being. This provision protects the stability of family life,
including marital relationships, financial status of families, and
parental rights.
The Department concludes that this proposed rule will not adversely
affect the well-being of the nation's families. This proposed rule's
change in the definition of ``paying State'' will more closely tie CWC
eligibility to the insurance principle underlying the Federal-State UC
program without affecting an individual's ability to file a CWC. The
Department also intends that the proposed rule will eliminate the
practice of forum shopping that has occurred under the current CWC
arrangement. The proposed change maintains consistency and equity in
the treatment of claimants across all program areas. Therefore, the
Department certifies that this proposed rule does not adversely impact
family well-being.
Regulatory Flexibility Act / SBREFA
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 proposed 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.
This proposed 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 proposed 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 proposed 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 proposed rule is not an economically significant rule
under Executive Order 12866, the Department certifies that it also is
not a major rule under SBREFA.
List of Subjects in 20 CFR Part 616
Labor, and Unemployment compensation.
Words of Issuance
For the reasons stated in the preamble, the Department proposes to
amend 20 CFR part 616 as set forth below:
PART 616--INTERSTATE ARRANGEMENT FOR COMBINING EMPLOYMENT AND WAGES
1. The authority citation for 20 CFR part 616 is revised to read as
follows:
[[Page 62149]]
Authority: 26 U.S.C. 3304(a)(9)(B); Secretary's Order No. 3-
2007, April 3, 2007 (72 FR 15907).
Sec. 616.5 [Removed]
2. Remove Sec. 616.5.
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.
* * * * *
4. Add paragraph (f) to Sec. 616.7 to read as follows:
Sec. 617.7 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 State
finds that claimant has wages and employment during that State's base
period(s).
Sec. 616.8 [Amended]
5. In Sec. 616.8(a) remove the words ``, even if the Combined-Wage
Claimant has no earnings in covered employment in that State''.
Signed at Washington, DC, this 29th day of October 2007.
Emily Stover DeRocco,
Assistant Secretary for Employment and Training.
[FR Doc. E7-21513 Filed 11-1-07; 8:45 am]
BILLING CODE 4510-FW-P