[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]]

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Part II





Department of Labor





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Employment and Training Administration



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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.

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    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

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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

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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

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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