[Federal Register Volume 61, Number 217 (Thursday, November 7, 1996)]
[Notices]
[Pages 57714-57719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28656]


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DEPARTMENT OF LABOR
Employment and Training Administration


Federal-State Unemployment Compensation Program: Unemployment 
Insurance Program Letters Interpreting Federal Unemployment Insurance 
Law

    The Employment and Training Administration interprets Federal law 
requirements pertaining to unemployment compensation as part of its 
role in the administration of the Federal-State unemployment 
compensation program. These interpretations are issued in Unemployment 
Insurance Program Letters (UIPLs) to the State Employment Security 
Agencies (SESAs). The UIPL described below is published in the Federal 
Register in order to inform the public.

UIPL 30-96

    This UIPL is being issued to clarify the distinction between 
``work-relief'' and ``work-training'' for purposes of coverage under 
the unemployment compensation (UC) program. This UIPL broadens the 
interpretation previously issued in 1986 in UIPL 15-86 and will not 
require any change to State UC laws. (It should be noted that the 
footnote in that UIPL incorrectly characterizes two court cases as UC 
cases. A program letter correcting this will be issued at a later 
date.)

UIPL 37-96

    The Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (PRWORA), P.L. 104-193, was enacted on August 22, 1996. This 
legislation, popularly known as the welfare reform bill, made several 
changes which affect the UC program. Specifically, the PRWORA: 
establishes New Hire Directories at both the State and National levels; 
requires that certain UC information be provided to State/National New 
Hire Directories; requires that States collect quarterly wage reports 
from State and local governmental entities and ``labor organizations;'' 
authorizes State and local child support enforcement agencies to 
disclose UC data to an agent; requires State and local child support 
agencies to obtain access to UC information for establishing paternity 
and other purposes; affects the eligibility of aliens; and, addresses 
the intercept of food stamp overissuances.
    This UIPL provides information on these amendments and advises 
States of those instances where amendments to State UC law are needed 
to meet Federal UC law requirements. This UIPL does not, however, 
address those amendments relating to the eligibility of aliens. After 
completing its analysis of the amendments relating to aliens, the 
Department will issue guidance to the States as appropriate.

    Dated: November 4, 1996.
Timothy M. Barnicle,
Assistant Secretary of Labor.

U.S. Department of Labor

Employment and Training Administration, Washington, D.C. 20210

CLASSIFICATION: UI
CORRESPONDENCE SYMBOL:TEUL
DATE: August 8, 1996
DIRECTIVE: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 30-96
TO: ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM: MARY ANN WYRSCH, Director, Unemployment Insurance Service
SUBJECT: Work-Relief and Work-Training Exclusion

     1. Purpose. To provide an interpretation of Section 3309(b)(5) 
of the Federal Unemployment Tax Act (FUTA) which permits an 
exception to coverage requirements of Section 3304(a)(6)(A), FUTA, 
for services performed as part of an unemployment work-relief or 
work-training program.
    2. References. The Internal Revenue Code, including the Federal 
Unemployment Tax Act (FUTA), and Unemployment Insurance Program 
Letter (UIPL) 15-86, dated February 13, 1986.
    3. Background. UIPL 15-86 provided the Department's 
interpretation of ``work-relief'' and ``work-training'' for purposes 
of assisting States in determining what services may be excluded 
from coverage for unemployment compensation (UC). Since that UIPL 
did not clearly distinguish between services performed in work-
relief and services performed in work-training, confusion has 
resulted as to what services may actually be excluded. This UIPL 
provides the Department's position on the difference between ``work-
relief'' and ``work-training.'' As this UIPL results in broadening 
the interpretation taken in UIPL 15-86, it will not result in States 
needing to amend their laws.
    4. Federal Law Requirements. The Department has long taken the 
position that, because FUTA is a remedial statute aimed at 
overcoming the evils of unemployment, it is to be liberally 
construed to effectuate its purposes and exemptions to its 
requirements are to be narrowly construed. This interpretation 
avoids ``difficulties for which the remedy was devised and adroit 
schemes by some employers and employees to avoid the immediate 
burdens at the expense of the benefits sought by the legislation.'' 
\1\
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    \1\ These interpretations were stated on page 5 of Supplement 
#5--Questions and Answers Supplementing Draft Language and 
Commentary to Implement the Unemployment Compensation Amendments of 
1976--P.L. 94-566, dated November 13, 1978. Several Federal court 
decisions, including two cases involving UC, United States v. Silk, 
331 U.S. 704, 712 (1947) and Farming, Inc. v. Manning, 219 F.2d 779, 
782 (3d Cir., 1955), are illustrative of this position.
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    Section 3304(a)(6)(A), FUTA, requires that each State pay UC 
based on services performed for certain governmental entities and 
nonprofit organizations. Specifically, Section 3304(a)(6)(A) 
requires coverage of services to which Section 3309(a)(1) applies. 
Section 3309(a)(1) applies to services excluded from the term 
``employment'' solely by reason of either Section 3306(c) (7) or 
(8), FUTA. Section 3306(c)(7) pertains to services performed for a 
``State, or any political subdivision thereof. * * * '' Section 
3306(c)(8) pertains to services performed for ``religious, 
charitable, educational, or other organization described in section 
501(c)(3)'' of the Internal Revenue Code. Exclusions

[[Page 57715]]

from this required coverage are found in the remaining paragraphs of 
Section 3306(c) and Section 3309(b). Section 3309(b)(5) excludes 
services performed--
    (5) as part of an unemployment work-relief or work-training 
program assisted or financed in whole or in part by any Federal 
agency or an agency of a State or political subdivision thereof, by 
an individual receiving such work relief or work training.
    The Department's position is that while ``work-relief'' and 
``work-training'' are both excluded, they are two distinct 
exclusions. Work-relief projects are primarily intended to alleviate 
the disadvantaged status of the individual by providing employment. 
For ``work-training,'' there is no requirement that the individual 
must be economically disadvantaged. Instead, work-training focuses 
on improving the individual's employability. (This does not, 
however, preclude the possibility that some work-training programs 
be limited to the economically disadvantaged.)
    As noted above, UIPL 15-86 did not clearly distinguish between 
work-relief and work-training. The following listing is intended to 
clarify their distinguishing characteristics. No attempt is made to 
list names of programs that fall under the definitions given in this 
UIPL since the characteristics of the program will determine whether 
or not they must be covered.
    A. Both of the following characteristics must be present in 
either work-relief or work-training:
    (1) the employer-employee relationship is based more on the 
participants' and communities' needs than normal economic 
considerations such as increased demand or the filling of a bona 
fide job vacancy;
    (2) the products or services are secondary to providing 
financial assistance, training, or work-experience to individuals to 
relieve them of their unemployment or poverty or to reduce their 
dependence upon various measures of relief, even though the work may 
be meaningful or serve a useful public purpose.
    B. A work-relief or work-training program must have one or more 
of the following characteristics:
    (1) the wages, hours, and conditions of work are not 
commensurate with those prevailing in the locality for similar work;
    (2) the jobs did not, or rarely did, exist before the program 
began (other than under similar programs) and there is little 
likelihood they will be continued when the program is discontinued;
    (3) the services furnished, if any, are in the public interest 
and are not otherwise provided by the employer or its contractors; 
and
    (4) the jobs do not displace regularly employed workers or 
impair existing contracts for services.
    C. The following characteristic must be present only for work-
relief programs:
    The qualifications for the jobs take into account as 
indispensable factors the economic status, i.e., the standing 
conferred by income and assets, of the applicants.
    6. Action Required. State agency administrators are requested to 
provide this UIPL to appropriate staff.
    7. Inquiries. Direct questions to your Regional Office.

RESCISSIONS: UIPL 15-86
EXPIRATION DATE: Continuing

U.S. Department of Labor

Employment and Training Administration, Washington, D.C. 20210

CLASSIFICATION: UI
CORRESPONDENCE SYMBOL: TEUL
DATE: 09/25/96
DIRECTIVE: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 37-96
TO: ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM: MARY ANN WYRSCH, Director, Unemployment Insurance Service
SUBJECT: The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996

    1. Purpose. To advise the States of amendments made to Federal 
law by the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 which affect the Federal-State 
Unemployment Compensation (UC) program.
    2. References. The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (P.L. 104-193); the Internal Revenue Code 
of 1986 (IRC), including the Federal Unemployment Tax Act (FUTA); 
the Social Security Act (SSA); Unemployment Insurance Program 
Letters (UIPLs) No. 37-86 and 23-96; and Office of Management and 
Budget (OMB) Circular No. A-87 (60 Fed. Reg. 26484, May 17, 1995).
    3. Background. The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA), P.L. 104-193, was enacted on 
August 22, 1996. This legislation, popularly known as the ``welfare 
reform'' bill, made several changes which affect the UC program. 
These changes--
     Establish New Hire Directories at both the State and 
National levels,
     Require that certain UC information be provided to 
State/National New Hire Directories,
     Require that States collect quarterly wage reports from 
State and local governmental entities and ``labor organizations,''
     Authorize State and local child support enforcement 
agencies to disclose UC data to an agent,
     Require State and local child support agencies to 
obtain access to UC information for establishing paternity and other 
purposes,
     Affect the eligibility of aliens, and
     Address the intercept of food stamp overissuances.
    This UIPL provides information on these amendments and advises 
States of those instances where amendments to State UC law are 
needed to meet Federal UC law requirements. This UIPL does not, 
however, address those amendments relating to the eligibility of 
aliens. After completing its analysis of the amendments relating to 
aliens, the Department will issue guidance to the States as 
appropriate.
    4. State Directory of New Hires (``State Directory'')--Section 
453A, SSA, as added by Section 313(b), PRWORA. The PRWORA replaced 
the Aid to Families with Dependent Children program with the 
Transitional Assistance to Needy Families (TANF) program. A State's 
TANF grant is conditioned on meeting certain requirements, including 
a requirement that the State operate a child support enforcement 
program. As part of the child support enforcement program, the State 
must operate a Directory of New Hires by October 1, 1997. This 
Directory must contain the name, address, and social security number 
of each newly hired individual and the name, address, and Federal 
employer identification number of the hiring employer. (Section 
453(b)(1), SSA, as amended.) If a State chooses to use its UC agency 
as the collection point for the State Directory, the UC agency will 
need to meet any conditions for such Directory established by the 
PRWORA as interpreted by the Secretary of Health and Human Services 
(HHS).
    If the UC agency maintains the State Directory and uses the 
State Directory for UC purposes, UC grant funds may be used to pay 
UC costs associated with the Directory consistent with OMB Circular 
No. A-87. However, UC grants may not be used to pay for any costs of 
providing State Directory information to the TANF agency or to the 
National New Hires Directory discussed below.
    New Section 453A(g)(2)(B), SSA, specifically references Federal 
UC law--
    Wage and Unemployment Compensation Information.--The State 
Directory of New Hires shall, on a quarterly basis, furnish to the 
National Directory of New Hires extracts of the reports required 
under section 303(a)(6) to be made to the Secretary of Labor 
concerning the wages and unemployment compensation paid to 
individuals, by such dates, in such format, and containing such 
information as the Secretary of Health and Human Services shall 
specify in regulations.
    In other words, as a condition of receiving its TANF grant, the 
State Directory must obtain certain information from the UC agency 
and furnish that information to the Secretary of HHS. This 
requirement for the transfer of data is effective October 1, 1997. 
(Section 453A(a)(1)(B), SSA, as amended.) Section 303(a)(6), SSA, 
requires States to make ``such reports as the Secretary of Labor may 
from time to time require.'' \1\ Under Section 453(i), SSA, as 
amended by the PRWORA, the above information is required to be 
transmitted from the State Directory to the National Directory of 
New Hires.
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    \1\ The Secretary does not currently require the submittal of 
data on individuals under Section 303(a)(6), SSA. However, as 
discussed below, both the FUTA and SSA have been amended to require 
UC agencies to provide wage and claim information to the State 
Directory.
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    5. National Directory of New Hires (``National Directory'')--
Section 453(i), SSA, as amended by Section 316, PRWORA. Section 453, 
SSA, requires the Secretary of HHS to establish and conduct a 
Federal Parent Locator Service (FPLS). The mission of the FPLS is to 
obtain and transmit to any authorized person (as defined under 
Section 453(c)) information as to the whereabouts of any absent 
parent. This information is to be used to locate the parent for the 
purpose of enforcing child support obligations.

[[Page 57716]]

    As a result of the PRWORA, the FPLS is now charged with 
establishing and maintaining a National Directory of New Hires no 
later than October 1, 1997. The National Directory will consist of 
new hire information as well as information supplied ``pursuant to 
section 453A(g)(2),'' SSA, as quoted in part above. The Conference 
Report for the PRWORA explains that--
    When fully implemented the Federal Directory of New Hires will 
contain identifying information on virtually every person who is 
hired in the United States. In addition, the FPLS [Directory of New 
Hires] will contain quarterly data supplied by the State Directory 
of New Hires on wages and Unemployment Compensation paid. * * * The 
information is to be used for purposes of locating individuals to 
establish paternity, and to establish, modify, or enforce child 
support orders. [H. Rep. 104-725, as quoted in the Congressional 
Record for July 30, 1996, page H8918.]
    As this National Directory contains information which may be in 
the files of the State UC agency, two amendments concerning the 
provision of this information were made to Federal UC law. First, 
Section 314(g)(2), PRWORA, amended Section 3304(a)(16), FUTA, to 
provide, as a condition of a State law being certified for tax 
credit that--
    (A) wage information contained in the records of the agency 
administering the State law which is necessary (as determined by the 
Secretary of Health and Human Services in regulations) for purposes 
of determining an individual's eligibility for assistance, or the 
amount of such assistance, under a State program funded \2\ under 
part A of title IV of the Social Security Act, shall be made 
available to a State or political subdivision thereof when such 
information is specifically requested by such State or political 
subdivision for such purposes,
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    \2\ The bolded language commencing with ``eligibility'' was 
inserted by Section 110(k)(2), PRWORA, as a conforming amendment. It 
recognizes the repeal of the AFDC program and the creation of the 
TANF program.
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    (B) wage and unemployment compensation information contained in 
the records of such agency shall be furnished to the Secretary of 
Health and Human Services (in accordance with regulations 
promulgated by such Secretary) as necessary for the purposes of the 
National Directory of New Hires established under section 453(i) of 
the Social Security Act, and
    (C) such safeguards are established as are necessary (as 
determined by the Secretary of Health and Human Services in 
regulations) to insure that information furnished under subparagraph 
(A) or (B) is used only for the purposes authorized under such 
subparagraph; [New language bolded.]
    Second, Section 316(g)(2), PRWORA, amended Section 303(h), 
SSA,\3\ to provide, as a condition of States receiving 
administrative grants for their UC programs, that--
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    \3\ Prior to amendment, Section 303(h), SSA, required State UC 
agencies to ``take such actions * * * as may be necessary to enable 
the Secretary of Health and Human Services to obtain prompt access 
to any wage and unemployment compensation claims information'' for 
purposes of carrying out the child support enforcement program. See 
UIPL 11-89.
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    (1) The State agency charged with the administration of the 
State [UC] law shall, on a reimbursable basis--
    (A) disclose quarterly, to the Secretary of Health and Human 
Services, wage and claim information, as required pursuant to 
section 453(i)(1) [establishing the National Directory], contained 
in the records of such agency;
    (B) ensure that information provided pursuant to subparagraph 
(A) meets such standards relating to correctness and verification as 
the Secretary of Health and Human Services, with the concurrence of 
the Secretary of Labor, may find necessary; and
    (C) establish such safeguards as the Secretary of Labor 
determines are necessary to insure that information disclosed under 
subparagraph (A) is used only for purposes of section 453(i)(1) in 
carrying out the child support enforcement program under title IV.
    (2) Whenever the Secretary of Labor, after reasonable notice and 
opportunity for hearing to the State agency charged with the 
administration of the State law, finds that there is a failure to 
comply substantially with the requirement of paragraph (1), the 
Secretary of Labor shall notify such State agency that further 
payments will not be made to the State until the Secretary of Labor 
is satisfied that there is no longer any such failure. Until the 
Secretary of Labor is so satisfied, the Secretary shall make no 
future certification to the Secretary of the Treasury with respect 
to the State.
    (3) For purposes of this subsection--
    (A) the term ``wage information'' means information regarding 
wages paid to an individual, the social security account number of 
such individual, and the name, address, State, and the Federal 
employer identification number of the employer paying such wages to 
such individual; and
    (B) the term ``claim information'' means information regarding 
whether an individual is receiving, has received, or has made 
application for, unemployment compensation, the amount of such 
compensation being received (or to be received by such individual), 
and the individual's current (or most recent) home address.
    Although the amendment to the FUTA, is less specific, both 
amendments have the same effect: The State UC agency must provide 
certain information to the National Directory. Specifically ``wage 
information'' and ``claim information'' as defined in Section 
303(h)(3), SSA, must be supplied on a quarterly basis. The UC agency 
is required to supply only wage and claim information which is 
already contained in its records. It is not required to obtain 
additional information for purposes of the National Directory.
    The SSA amendment requires that the State must provide such 
safeguards as the Secretary of Labor determines are necessary to 
determine that the information is used only for the purposes of the 
National Directory of New Hires. However, the FUTA amendment 
provides that the Secretary of HHS will establish such safeguards. 
The Department of Labor will be studying this matter, in conjunction 
with the Department of HHS, to determine what, if any, safeguards 
individual States must establish prior to providing the FPLS with UC 
information.
    Costs of Providing Information. Under amended Section 303(h), 
SSA, UC information will be provided to the National Directory ``on 
a reimbursable basis.'' Section 453(e)(2) provides that the costs of 
providing information to the Secretary of HHS ``shall be 
reimbursed'' to ``any State.'' Section 453(g), SSA, describes what 
amounts ``may'' reimbursed to the States:
    Reimbursement for Reports by State Agencies.--The Secretary may 
reimburse Federal and State agencies for the costs incurred by such 
entities in furnishing information requested by the Secretary under 
this section in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall 
not include payment for the costs of obtaining, compiling, or 
maintaining the information). [Emphasis added.]
    In brief, the States are not required to disclose UC information 
under Section 303(h) unless they are reimbursed by the Secretary of 
HHS. However, the Secretary of HHS has sole authority to determine 
the amount to be reimbursed. If the Secretary of HHS does not 
reimburse the State for what the State determines to be the entire 
cost of providing UC information, Federal funds provided for the 
administration of the State's UC program may not be used to make up 
the difference. Under section 303(a)(8), SSA, UC grants may be used 
only for the proper and efficient administration of the State's UC 
law, which does not include the costs of disclosing this 
information.
    Effective date for UC conformity provisions. Under new Section 
453(a)(1), SSA, each State is required to establish a State 
Directory effective October 1, 1997. (States which already have 
State Directories are given until October 1, 1998, to meet the 
requirements of Section 453A, except that the State must transmit 
information to the National Directory effective October 1, 1997.) 
Under Section 453(i), SSA, the FPLS is required to establish and 
maintain a National Directory by October 1, 1997.
    However, Section 395(a)(2), PRWORA provides that ``all other 
provisions of this title [pertaining to the Directories] shall 
become effective upon the date of enactment.'' Section 395(b) 
further provides that:
    Grace Periods For State Law Changes.--The provisions of this 
title shall become effective with respect to a State on the later 
of--
    (1) the date specified in this title, or
    (2) the effective date of laws enacted by the legislature of 
such State implementing such provisions, but in no event later than 
the 1st day of the 1st calendar quarter beginning after the close of 
the 1st regular session of the State legislature that begins after 
the date of the enactment of this Act. For purposes of the previous 
sentence, in the case of a State that has a 2-year legislative 
session, each year of such session shall be deemed to be a separate 
regular session of the State legislature.
    Thus, notwithstanding the requirement that the State and 
National Directories be

[[Page 57717]]

operative on October 1, 1997, States which need to amend their UC 
laws may qualify for a grace period which extends beyond this date 
to the first day of the first calendar quarter following the close 
of the first regular session of the State legislature. Since each 
year of a legislative session is deemed a separate session and since 
all annual sessions will adjourn by December 31, 1997, this means 
all States qualifying for a grace period must be in a position to 
provide wage and claim information to the National Directory by 
January 1, 1998.\4\
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    \4\ Section 395(c), PRWORA, provides for a longer grace period 
if the State needs to amend its Constitution. This longer grace 
period will end at the earlier of (1) one year after the effective 
date of the necessary State constitutional amendment or (2) 5 years 
after the date of enactment of the PRWORA.
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    States will need to review their UC laws and regulations to 
determine if disclosure to the National Directory is permissible. If 
it is not, States must take all actions necessary to ensure that the 
information will be disclosed.
    6. State UC Agency Access to State Directory--Section 
453A(h)(3), SSA, as added by Section 313(b), PRWORA. Provision of 
Information in National Directory to State UC Agency--Section 
453(k), SSA, as added by Section 316(f), PRWORA. New Section 
453A(h)(3), SSA, requires, as a condition of a State receiving a 
TANF grant, that access to the State Directory be provided to State 
employment security (that is, UC and employment service) agencies:
    Administration of Employment Security and Workers' 
Compensation.--State agencies operating employment security and 
workers' compensation programs shall have access to information 
reported by employers pursuant to subsection (b) [that is, New Hire 
data] for the purposes of administering such programs.
    New Section 453A(h)(2), SSA, contains an identical provision 
requiring the granting of access to a State agency responsible for 
administering a program specified in Section 1137(b), SSA, 
pertaining to the Income Eligibility Verification System. Paragraph 
(3) of Section 1137(b), specifies the UC program. Therefore, 
additional authority exists for requiring the granting of access to 
UC agencies.
    The PRWORA does not address how the costs of a UC agency 
accessing a State Directory will be determined. The allowability of 
these costs for UC grant purposes is governed by OMB Circular No. A-
87.
    States should be aware that, under new Section 453(n), SSA, (as 
added by Section 316(f), PRWORA), Federal departments, agencies and 
instrumentalities are required to submit certain information to the 
National Directory:
    Federal Government Reporting.--Each department, agency, and 
instrumentality of the United States shall on a quarterly basis 
report to the Federal Parent Locator Service the name and social 
security number of each employee and the wages paid to the employee 
during the previous quarter, except that such a report shall not be 
filed with respect to an employee of a department, agency, or 
instrumentality performing intelligence or counterintelligence 
functions, if the head of such department, agency, or 
instrumentality has determined that filing such a report could 
endanger the safety of the employee or compromise an ongoing 
investigation or intelligence mission.
    In addition, new Section 453A(b)(1)(C), SSA, requires Federal 
entities to report new hire information:
    Federal Government Employers.--Any department, agency, or 
instrumentality of the United States shall comply with subparagraph 
(A) [requiring employers to furnish new hire information] by 
transmitting the report described in subparagraph (A) to the 
National Directory of New Hires * * *
    As this information may be useful for UC purposes, the 
Department will be discussing its potential uses with the Department 
of HHS. States should be aware that the Secretary of HHS has the 
sole authority for determining the extent, if any, to which any 
information in the National Directory may be shared with State UC 
agencies.\5\ In the event that States may obtain such information, 
Section 453(K)(3), SSA, addresses costs for providing information 
from the National Directory--
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    \5\ Section 453(1), SSA, as added by Section 316(f), PRWORA, 
limits the use of information ``in the Federal Parent Locator 
Service,'' which includes information in the National Directory. The 
information in the Federal Parent Locator Service ``shall not be 
used or disclosed, except as expressly provided'' in Section 453, 
SSA. Section 453(j)(3)(B), SSA, also added by Section 316(f), 
PRWORA, authorizes the Secretary of HHS to disclose information in 
the directories to ``State agencies.'' Under Section 453(j)(3), 
these agencies are limited to TANF and child support agencies.
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    FOR INFORMATION FURNISHED TO STATE AND FEDERAL AGENCIES.--A 
State or Federal agency that receives information from the Secretary 
[of HHS] pursuant to this section shall reimburse the Secretary for 
costs incurred by the Secretary in furnishing the information, at 
rates which the Secretary determines to be reasonable (which rates 
shall include payment for the costs of obtaining, verifying, 
maintaining, and comparing the information). [Emphasis added.]
    Thus, the Secretary of HHS has the sole authority for 
determining what fees will be paid by State UC agencies for any 
information obtained from the National Directory.
    7. Income Eligibility Verification System--Amendment to Section 
1137(a)(3), SSA, made by Section 313(c)(1), PRWORA. Section 303(f), 
SSA, requires a State to operate an income eligibility verification 
system (IEVS) which meets the requirements of Section 1137(a), SSA. 
Section 1137(a)(3) requires employers ``to make quarterly wage 
reports to a State agency'' which may be the State UC agency. The 
PRWORA amended the SSA to expand the types of employers required to 
submit quarterly wage reports while at the same time allowing an 
exception. As a result Section 1137(a)(3) now reads, in part, as 
follows--

employers (including State and local governmental entities and labor 
organizations (as defined in section 453A(a)(2)(B)(iii)) [sic--
should probably be (ii)] in such State are required * * * to make 
quarterly wage reports to a State agency (which may be the agency 
administering the State's unemployment compensation law) except that 
the Secretary of Labor (in consultation with the Secretary of Health 
and Human Services and the Secretary of Agriculture) may waive the 
provision of this paragraph if he determines that the State has in 
effect an alternative system which is as effective and timely for 
purposes of providing employment related income and eligibility data 
for the purposes described in paragraph (2), and except that no 
report shall be filed with respect to an employee of a State or 
local agency performing intelligence or counterintelligence 
functions, if the head of such agency has determined that filing 
such a report could endanger the safety of the employee or 
compromise an ongoing investigation or intelligence mission; 
[Amendments bolded.]
    New Section 453A(a)(2)(B)(ii), SSA, as added by Section 313(b), 
PRWORA, provides that ``labor organization''--

shall have the meaning given such term in section 2(5) of the 
National Labor Relations Act, and includes any entity (also known as 
a ``hiring hall'') which is used by the organization and an employer 
to carry out requirements described in section 8(f)(3) of such Act 
of an agreement between the organization and the employer.''
    Section 2(5) of the National Labor Relations Act (NLRA) defines 
``labor organization'' as--

any organization of any kind, or any agency or employee 
representation committee or plan, in which employees participate and 
which exists for the purpose, in whole or in part, of dealing with 
employers concerning grievances, labor disputes, wages, rates of 
pay, hours of employment, or conditions of work.
    Section 8(f)(3) of the NLRA pertains to agreements covering 
employees in the building and construction industry under which the 
employer notifies the labor organization ``of opportunities for 
employment with such employer, or gives such labor organization an 
opportunity to refer qualified applicants for such employment.''
    As a result of the amendments to Section 1137(a)(3), SSA, all 
States must require State and local governments and the labor 
organizations described above to submit quarterly wage reports to a 
State agency which may be the UC agency. States will need to examine 
their laws and regulations to determine if any amendments are 
necessary. Also as a result of the amendments to Section 1137(a)(3), 
SSA, States are prohibited from requiring the filing of a report 
concerning an employee who is performing ``intelligence or counter 
intelligence functions'' if the head of a State or local agency 
employing the individual determines that the filing of such a report 
``could endanger the safety of the employee or compromise an ongoing 
investigation or intelligence mission.''
    UC agencies should be aware that Section 409(a)(4), SSA, as 
amended by Section 103(a), PRWORA, provides that, if the Secretary 
of HHS determines that a State TANF program is not participating 
during a fiscal year in the IEVS as required, the

[[Page 57718]]

Secretary of HHS will reduce the State's TANF grant for the 
following fiscal year by up to 2 percent.
    The effective date of the amendment to Section 1137(a)(3), SSA, 
is the date of enactment of the PRWORA. (Section 395(a)(2), PRWORA.) 
However, if the State must amend its law to require such reporting, 
the effective date is the effective date of the law enacted by the 
State legislature, but in no case later than January 1, 1998. 
(Section 395(b)(2), PRWORA. See item 5 of this UIPL for an 
explanation of this January 1, 1998 effective date.)
    8. Use of UC Information for Child Support Enforcement 
Purposes--Section 303(e), SSA, as amended by Section 313(d), PRWORA. 
Section 303(e), SSA, among other things, requires States to provide 
certain UC information to child support enforcement agencies. The 
PRWORA added the following new paragraph to the end of Section 
303(e)--
    (5) A State or local child support enforcement agency may 
disclose to any agent of the agency that is under contract with the 
agency to carry out the purposes described in paragraph (1)(B) 
[i.e., for purposes of establishing and collecting child support 
obligations from, and locating, individuals owing such obligation] 
wage information that is disclosed to an officer or employee of the 
agency under paragraph (1)(A) [i.e., a state or local child support 
enforcement agency]. Any agent of a State or local child support 
agency that receives wage information under this paragraph shall 
comply with the safeguards established pursuant to paragraph (1)(B). 
[Emphasis added.]
    Section 303(a)(1), SSA, requires that State law contain ``[s]uch 
methods of administration * * * as are found by the Secretary of 
Labor to be reasonably calculated to insure full payment of 
unemployment compensation when due.'' This provision has long been 
interpreted to prohibit, with certain exceptions, disclosure of 
claimant and employer UC information. Although disclosure to public 
officials in the performance of their duty has been permitted, 
disclosure to private entities without the consent of the individual 
is generally not allowed. (See UIPL 23-96.)
    The amendment partially removes this restriction on disclosure 
to private entities for purposes of Section 303(e), SSA. Federal law 
now authorizes a State UC agency to provide UC information to a 
State or local child support agency which turns that information 
over to a private contractor for purposes of establishing and 
collecting child support obligations from, and locating, individuals 
owing such obligations. This authorization is contingent on the 
existence of safeguards consistent with Section 303(e)(1)(B), SSA, 
as determined in regulations issued by the Secretary of Labor. The 
Secretary of Labor has not yet prescribed regulations on these 
safeguards. Therefore, until these regulations are issued, States 
will assure compliance with Section 303(e)(1)(B) by following the 
confidentiality protection provisions of 20 CFR 603.7 pertaining to 
requesting agencies.
    A State wishing to use this new authority will need to determine 
whether its UC law must be amended. The amendment to Section 303(e), 
SSA, is effective on the date of enactment of the PRWORA.
    9. Use of Employment Security Information to Establish Paternity 
and for Other Purposes--Section 466(c)(1), SSA, as added by Section 
325(a)(2), PRWORA. Section 466(c)(1), SSA, requires that State and 
local child support enforcement agencies use certain expedited 
procedures relating ``to the establishment of paternity or to 
establishment, modification, or enforcement of support orders. * * 
*'' One of these procedures is obtaining access to employment 
security records--
    (D) Access to Information Contained in Certain Records.--To 
obtain access, subject to safeguards on privacy and information 
security, and subject to the nonliability of entities that afford 
such access under this subparagraph, to information contained in the 
following records (including automated access, in the case of 
records maintained in automated data bases):
* * * * *
    (V) employment security records. * * *
    Federal UC law was not amended to require State UC agencies to 
provide such access. Specifically, Section 303(e), SSA, relating to 
the provision of UC information to child support agencies was not 
amended. However, Section 303(e)(1)(A), SSA, already requires that 
wage information be disclosed, upon request and on a reimbursable 
basis, to child support agencies. Also, Section 303(a)(1), SSA, 
permits disclosure of UC information, including claim information, 
to public officials in the performance of their duties.
    States will need to review their UC laws and regulations to 
determine if granting access to child support agencies--subject to 
safeguards, nonliability and payment of any costs associated with 
granting such access--requires amendment to State UC law to 
accommodate the child support agency.
    10. Food Stamp Overissuances--Section 13(b)(1) of the Food Stamp 
Act of 1977 (FSA) as amended by Section 844(a), PRWORA. Under 
Section 303(d)(2), SSA, ``uncollected overissuances'' of food stamp 
allotments may be intercepted from an individual's UC under certain 
limited conditions. See UIPL 37-86 for a complete explanation of 
these conditions.
    Although the PRWORA did not amend Section 303(d)(2), SSA, it did 
amend Section 13(b)(1) of the FSA to require that a State Food Stamp 
agency must now collect any overissuance of food stamp coupons 
issued ``to a household'' by withholding amounts from UC payable to 
``a member of the household''\6\ as provided under Section 13(c), 
FSA, which establishes certain procedures for the food stamp agency. 
Under subsection (2) of Section 13(b), FSA, the Secretary of 
Agriculture may waive this requirement under certain conditions.
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    \6\ Under Section 13(a)(2), FSA, ``[e]ach adult member of a 
household shall be jointly and severally liable for the value of any 
overissuance of coupons.'' Since food stamps are allotted to 
households, this means every adult member of the household may be 
liable for the overissuance.
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    Section 13(b)(1), FSA, does not affect the requirements of 
Section 303(d)(2), SSA. It merely mandates that State food stamp 
agencies take an action that previously was optional under the FSA 
and that is permitted under the SSA.
    As all State laws contain provisions which prohibit attachment 
of UC, States which have not already enacted provisions implementing 
Section 303(d)(2), SSA, will need to amend their UC laws to 
accommodate the State food stamp agency. The following draft 
language will, as adjusted for State usage, assure UC conformity 
requirements are met:
    (1)(a) An individual filing a new claim for unemployment 
compensation shall, at the time of filing such claim, disclose 
whether or not he or she owes an uncollected overissuance (as 
defined in section 13(c)(1) of the Food Stamp Act of 1977) of food 
stamp coupons. The commissioner shall notify the State food stamp 
agency enforcing such obligation of any individual who discloses 
that he or she owes child support obligations and who is determined 
to be eligible for unemployment compensation.
    (b) The commissioner shall deduct and withhold from any 
unemployment compensation payable to an individual who owes an 
uncollected overissuance--
    (A) the amount specified by the individual to the commissioner 
to be deducted and withheld under this clause,
    (B) the amount (if any) determined pursuant to an agreement 
submitted to the State food stamp agency under section 13(c)(3)(A) 
of the Food Stamp Act of 1977; or
    (C) any amount otherwise required to be deducted and withheld 
from unemployment compensation pursuant to section 13(c)(3)(B) of 
such Act.
    (c) Any amount deducted and withheld under this section shall be 
paid by the commissioner of the appropriate State food stamp agency.
    (d) Any amount deducted and withheld under subsection (b) shall 
for all purposes be treated as if it were paid to the individual as 
unemployment compensation and paid by such individual to the State 
food stamp agency as repayment of the individual's uncollected 
overissuance.
    (e) For purposes of this section, the term ``unemployment 
compensation'' means any compensation payable under this Act 
including amounts payable by the commissioner pursuant to an 
agreement under any Federal law providing for compensation, 
assistance, or allowances with respect to unemployment.
    (f) This section applies only if arrangements have been made for 
reimbursement by the State food stamp agency for the administrative 
costs incurred by the commissioner under this section which are 
attributable to the repayment of uncollected overissuances to the 
State food stamp agency.
    As State food stamp agencies must reimburse the State UC agency 
for the administrative costs incurred in intercepting food stamps 
(Section 303(d)(2)(D), SSA), State UC agencies may not perform any 
food stamp intercept activities without entering into an agreement 
for reimbursement of all costs which will be incurred by such 
activities. (UIPL 37-86, page 4.)

[[Page 57719]]

    If the State food stamp agency does not wish the State UC agency 
to perform all the activities listed in Section 303(d)(2), SSA, the 
State UC agency need only perform those activities for which it is 
paid. For example, if the State food stamp agency does not wish the 
UC agency to require applicants for UC is to disclose whether an 
overissuance is owed, then the State UC agency need not do so.
    11. Action. Each State must take appropriate action to assure 
that its law authorizes the disclosure of UC wage and claim 
information to the National Directory of New Hires. State UC 
agencies which maintain State wage record files will need to assure 
that State and local governmental entities and labor organizations 
submit quarterly wage reports as required. UC agencies are 
encouraged to cooperate with other State agencies in implementing 
the requirements of the PRWORA.
    12. Inquiries. Please direct inquiries to the appropriate 
Regional Office.

RESCISSIONS: None
EXPIRATION DATE: Continuing
[FR Doc. 96-28656 Filed 11-6-96; 8:45 am]
BILLING CODE 4510-30-M