[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Rules and Regulations]
[Pages 7250-7258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1746]



[[Page 7249]]

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Part XVI





Department of Education





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34 CFR Part 361



State Vocational Rehabilitation Services Program; Final Rule

  Federal Register / Vol. 66, No. 14 / Monday, January 22, 2001 / Rules 
and Regulations  

[[Page 7250]]


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DEPARTMENT OF EDUCATION

34 CFR Part 361

RIN 1820-AB52


State Vocational Rehabilitation Services Program

AGENCY: Office of Special Education and Rehabilitative Services, 
Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the regulations governing the State 
Vocational Rehabilitation Services Program (VR program) by revising the 
scope of employment outcomes under the VR program. These regulations 
redefine the term ``employment outcome'' (as it applies to the VR 
program) to mean outcomes in which an individual with a disability 
works in an integrated setting. This action is necessary to reflect the 
purpose of Title I of the Rehabilitation Act of 1973, as amended (Act), 
which is to enable individuals with disabilities who participate in the 
VR program to achieve an employment outcome in an integrated setting.

DATES: These regulations are effective October 1, 2001, but may be 
implemented by States prior to that date, as discussed in the appendix.

FOR FURTHER INFORMATION CONTACT: Beverlee Stafford, U.S. Department of 
Education, 400 Maryland Avenue, SW., room 3014, Mary E. Switzer 
Building, Washington, DC 20202-2531. Telephone (202) 205-8831. If you 
use a telecommunications device for the deaf (TDD), you may call (202) 
205-5538.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to Katie Mincey, Director, Alternate Formats 
Center, U.S. Department of Education, 400 Maryland Avenue, SW., room 
1000, Mary E. Switzer Building, Washington, DC 20202-2531. Telephone 
(202) 260-9895. If you use a telecommunications device for the deaf 
(TDD), you may call the Federal Information Relay Service (FIRS) at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: The VR program provides necessary vocational 
rehabilitation (VR) services to enable eligible individuals with 
disabilities, particularly those with significant disabilities, to 
enter or continue to work in the integrated labor market along with the 
general population. Through the VR program, State agencies work with 
individuals with disabilities to assist those individuals in achieving 
employment, ideally a competitive job in an integrated setting. 
Integrated employment settings refer to those settings that are 
typically found in the community in which individuals with disabilities 
have the same opportunity to interact with others as is given to any 
other person (see 34 CFR 361.5(b)(33)(ii) for a detailed definition). 
Accordingly, these regulations revise the scope of employment outcomes 
under the VR program in order to assist program participants to attain 
jobs in an integrated setting.
    On June 26, 2000, we published a notice of proposed rulemaking 
(NPRM) for this part, 34 CFR part 361, in the Federal Register (65 FR 
39492) in which we proposed the major changes that are to take effect 
in these final regulations. It is important that we clarify that on 
January 17, 2000, we published final regulations for this part in the 
Federal Register to implement changes to the Rehabilitation Act of 1973 
made by the Rehabilitation Act Amendments of 1998 contained in Title IV 
of the Workforce Investment Act of 1998 (WIA), as amended (1998 
Amendments). The final regulations being promulgated in this present 
publication are pursuant to the June 26, 2000 NPRM and establish 
additional changes to 34 CFR part 361 that were not included in the 
final regulations implementing the 1998 Amendments published in the 
Federal Register on January 17, 2000.
    We decided to publish these final regulations (revising the term 
``employment outcome'' as it applies to the VR program) separately from 
the final regulations implementing the 1998 Amendments since these 
regulations do not take effect until fiscal year (FY) 2002 (or sooner 
at the discretion of each State). In contrast, the final regulations 
implementing the 1998 Amendments will be effective for all States 30 
days after the date of publication. Moreover, we are publishing these 
regulations, with their delayed effective date, at this time in order 
to give State units, individuals with disabilities, and other service 
providers sufficient time to prepare for the changes that will result 
from these regulatory changes.
    The proposed regulatory changes that we discussed in the preamble 
to the NPRM preceding these final regulations (65 FR 39492-39494) have 
been maintained in these final regulations. These changes include the 
following:
     Amending the regulatory definition of ``employment 
outcome'' under the VR program to refer to outcomes that occur in 
integrated settings.
     Amending the regulatory referral requirements to require 
the State unit to refer to local extended employment providers any 
individual with a disability who makes an informed choice to pursue 
extended employment (also referred to as ``non-integrated employment'' 
or ``sheltered employment'') as his or her long-term employment goal.
     Making conforming changes to the regulatory requirements 
concerning records of service and annual reviews of non-competitive 
outcomes.
    As we discussed in detail in the preamble to the NPRM, the 
statutory authority for redefining the term ``employment outcome,'' for 
purposes of the VR program, is based on section 7(11) of the Act. That 
statutory provision defines ``employment outcome'' under the VR program 
as full-time or, if appropriate, part-time competitive employment in 
the integrated labor market, supported employment, or any other 
vocational outcome, as defined by the Secretary (including the 
vocational outcome of self-employment, telecommuting, or business 
ownership), that is consistent with the Act. Accordingly, the Act 
entrusts the Secretary to determine the scope of employment outcomes, 
other than competitive employment (i.e., integrated work at or above 
minimum wage--see 34 CFR 361.5(b)(11)) and supported employment (i.e., 
integrated work with ongoing support services--see 34 CFR 
361.5(b)(53)), that individuals with disabilities may pursue under the 
VR program. Pursuant to this authority, the Secretary has determined 
that defining ``employment outcome'' under the VR program as employment 
that occurs in integrated settings is necessary to ensure that persons 
with significant disabilities are supported in pursuing competitive and 
supported employment. We believe this change is consistent with the 
Act's emphasis on the integration into society of persons with 
disabilities and on the ability of individuals with disabilities, 
including those with the most significant disabilities, to achieve 
employment in integrated settings if necessary services and supports 
are provided.
    We also noted in the NPRM, and discuss at length in the Analysis of 
Comments and Changes in the appendix to these regulations, that the 
regulatory changes we are establishing do not affect the ability of 
State VR agencies from serving individuals in extended employment 
settings for purposes of preparing those individuals for employment in 
integrated settings. The key change is that extended employment, for 
purposes of participating in the VR program, represents an interim step 
in the

[[Page 7251]]

rehabilitation process rather than an end point of that process.
    At the same time, we note that some persons with disabilities may 
prefer to work in extended employment facilities long-term. In 
recognition of that fact, and because we fully value the choice of work 
made by each person with a disability (regardless of whether that work 
occurs in an integrated setting), we have sought to ensure through 
these regulations that those wanting to work in extended employment can 
access the services they need directly from local extended employment 
facilities.
    In addition, we note that many jobs obtained by individuals with 
disabilities under certain types of set-aside contracts authorized by 
the Javits-Wagner-O'Day Act (JWOD), 41 USC 46-48, satisfy the 
definition of ``employment outcome'' under the VR program. More 
specifically, those service-related and other jobs performed under JWOD 
contracts or other programs that satisfy the definition of ``integrated 
setting'' in 34 CFR 361.5(b)(33)(ii) would constitute an ``employment 
outcome'' (for purposes of the VR program) under these regulations. The 
determination as to whether any job, including those obtained under 
JWOD contracts, meets the regulatory definition of ``integrated 
setting,'' and therefore qualifies as an ``employment outcome'' (for 
purposes of the VR program), must be made by State units on a case-by-
case basis.
    These final regulations include limited changes from the NPRM. In 
particular, while retaining the proposed October 1, 2001, effective 
date, we have clarified that States may implement the changes sooner at 
their discretion. The purpose of this sliding effective date is to 
reflect the fact that some States already have implemented policies in 
which all VR program participants pursue employment in an integrated 
setting. In addition, we have amended the proposed regulations to--
     Amend the regulatory definition of ``extended employment'' 
to eliminate redundant language. This definition also reflects the fact 
that some individuals may enter extended employment for training and 
other job-readiness purposes through the VR program, while others may 
enter it for long-term employment through other resources. Therefore, 
we have deleted from the definition any implication that training 
serves as the sole purpose of extended employment. Participants in the 
VR program who receive VR training services on a transitional basis in 
an extended employment setting may receive other VR services as well, 
such as diagnostics and assessment services, in an extended employment 
setting;
     Require that, before referring to local extended 
employment providers an individual with a disability who chooses to 
pursue extended employment, the State unit must provide the individual 
with information concerning the VR program, integrated employment 
options, the circumstances in which an individual can receive VR 
services in an extended employment setting, and the individual's 
ability to return to the VR agency at any point that he or she decides 
to pursue employment in an integrated setting, and, as appropriate, 
refer the individual to the Social Security Administration in order to 
obtain information concerning the ability of individuals with 
disabilities to work while receiving benefits from the Social Security 
Administration;
     Require that applicants under the VR program who are 
unable to work in an integrated setting be referred to local extended 
employment providers;
     Require that individuals who were initially found eligible 
for VR services, but are later determined unable to work in an 
integrated setting, be referred to local extended employment providers; 
and
     Include technical amendments to other sections of the 
current regulations (specifically, Secs. 361.45 and 361.46 concerning 
the individualized plan for employment and Sec. 361.56 concerning 
closure of the record of services) that were not included in the NPRM 
but are necessary to conform to the revised definition of the term 
``employment outcome'' under the VR program.
    We explain more fully each of these changes in the Analysis of 
Comments and Changes in Appendix B at the end of these final 
regulations.
    We also include a set of general questions and answers in Appendix 
A to these regulations, which will be codified in the Code of Federal 
Regulations. These questions and answers provide a short explanation of 
the changes made by these final regulations pursuant to comments 
received by the public.
    Finally, we wish to emphasize that nothing in these final 
regulations is intended to alter the fact that extended employment is a 
legitimate and valued employment option for people with disabilities 
(e.g., those who make an informed choice to work in an extended 
employment setting). Nor do these regulations have any effect on the 
requirements of other Federal programs that financially support 
extended employment facilities, including definitions of terms such as 
``employment,'' ``job,'' or ``work'' used in those programs or 
corresponding Federal statutes. The chief purpose of these regulations 
is to ensure, as we believe Title I of the Act intends, that 
participants in the VR program, particularly those with significant 
disabilities, are afforded a full opportunity to integrate within their 
communities and participate in jobs that are available to the general 
population.

Analysis of Comments and Changes

    In response to our invitation in the NPRM, more than 3,000 parties 
submitted comments on the proposed regulations. An analysis of the 
comments and of the changes in the regulations since publication of the 
NPRM is published in Appendix B at the end of these final regulations.
    We group major issues according to subject. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address technical and other minor 
changes, as well as suggested changes that the law does not authorize 
the Secretary to make.

National Education Goals

    The eight National Education Goals focus the Nation's education 
reform efforts and provide a framework for improving teaching and 
learning.
    These regulations address the National Education Goal that every 
adult American, including individuals with disabilities, will possess 
the knowledge and skills necessary to compete in a global economy and 
exercise the rights and responsibilities of citizenship.

Executive Order 12866

    We have reviewed these final regulations in accordance with 
Executive Order 12866. Under the terms of the order, we have assessed 
the potential costs and benefits of this regulatory action.
    The potential costs associated with these final regulations are 
those resulting from statutory requirements and those we have 
determined as necessary for administering this program effectively and 
efficiently.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these final regulations, we have determined that 
the benefits of the final regulations justify the costs.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, and tribal governments in the exercise of 
their governmental functions.

[[Page 7252]]

Summary of Potential Costs and Benefits

    We discussed the potential costs and benefits of these final 
regulations in the preamble to the NPRM (65 FR 39492-39496), including 
throughout the section-by-section analysis. Our analysis of potential 
costs and benefits generally remains the same as in the NPRM, although 
we include additional discussion of potential costs and benefits in 
Appendix B to these final regulations titled Analysis of Comments and 
Changes.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a collection of information unless it displays a valid Office of 
Management and Budget (OMB) control number. We display the valid OMB 
control number assigned to the collection of information in these final 
regulations at the end of the affected sections of the regulations.

Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for this program.

Federalism

    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.
    These regulations implement various statutory changes to the State 
Vocational Rehabilitation Services Program. We do not believe that 
these regulations have federalism implications as defined in Executive 
Order 13132 or that they preempt State law. Accordingly, the Secretary 
has determined that these regulations do not contain policies that have 
federalism implications.

Assessment of Educational Impact

    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at either of the 
following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

    To use PDF you must have Adobe Acrobat Reader, which is available 
free at either of the previous sites. If you have questions about using 
PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-
888-293-6498; or in the Washington, DC, area at (202) 512-1530.


    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://www.access.gpo.gov/nara/index.html

(Catalog of Federal Domestic Assistance Number: 84.126 State 
Vocational Rehabilitation Services Program)

List of Subjects in 34 CFR Part 361

    Reporting and recordkeeping requirements, State-administered grant 
program--education, Vocational rehabilitation.

    Dated: December 18, 2000.
Richard W. Riley,
Secretary of Education.

    For the reasons discussed in the preamble and the appendix to these 
regulations, the Secretary amends part 361 of title 34 of the Code of 
Federal Regulations as follows:

PART 361--STATE VOCATIONAL REHABILITATION SERVICES PROGRAM

    1. The authority citation for part 361 continues to read as 
follows:

    Authority: 29 U.S.C. 709(c), unless otherwise noted.


    2. Section 361.5 is amended by revising paragraphs (b)(16) and 
(b)(19) to read as follows:


Sec. 361.5  Applicable definitions.

* * * * *
    (b) * * *
    (16) Employment outcome means, with respect to an individual, 
entering or retaining full-time or, if appropriate, part-time 
competitive employment, as defined in Sec. 361.5(b)(11), in the 
integrated labor market, supported employment, or any other type of 
employment in an integrated setting, including self-employment, 
telecommuting, or business ownership, that is consistent with an 
individual's strengths, resources, priorities, concerns, abilities, 
capabilities, interests, and informed choice.
* * * * *
    (19) Extended employment means work in a non-integrated or 
sheltered setting for a public or private nonprofit agency or 
organization that provides compensation in accordance with the Fair 
Labor Standards Act.
* * * * *

    3. Section 361.37 is amended by--
    A. Redesignating paragraphs (b) and (c) as paragraphs (c) and (d) 
respectively;
    B. Adding a new paragraph (b); and
    C. Revising the authority citation following the section to read as 
follows:


Sec. 361.37  Information and referral programs.

* * * * *
    (b) The State unit must refer to local extended employment 
providers an individual with a disability who makes an informed choice 
to pursue extended employment as the individual's employment goal. 
Before making the referral required by this paragraph, the State unit 
must--
    (1) Consistent with Sec. 361.42(a)(4)(i) of this part, explain to 
the individual that the purpose of the vocational rehabilitation 
program is to assist individuals to achieve an employment outcome as 
defined in Sec. 361.5(b)(16) (i.e., employment in an integrated 
setting);
    (2) Consistent with Sec. 361.52 of this part, provide the 
individual with information concerning the availability of employment 
options, and of vocational rehabilitation services, in integrated 
settings;
    (3) Inform the individual that services under the vocational 
rehabilitation program can be provided to eligible individuals in an 
extended employment setting if necessary for purposes of training or 
otherwise preparing for employment in an integrated setting;
    (4) Inform the individual that, if he or she initially chooses not 
to pursue employment in an integrated setting, he or she can seek 
services from the designated State unit at a later date if, at that 
time, he or she chooses to pursue employment in an integrated setting; 
and

[[Page 7253]]

    (5) Refer the individual, as appropriate, to the Social Security 
Administration in order to obtain information concerning the ability of 
individuals with disabilities to work while receiving benefits from the 
Social Security Administration.
* * * * *
(Authority: Sections 7(11), 12(c), 101(a)(5)(D), 101(a)(10)(C)(ii), 
and 101(a)(20) of the Act; 29 U.S.C. 709(c), 721(a)(5)(D), 
721(a)(10)(C)(ii), and 721(a)(20))


    4. Section 361.43 is amended by revising paragraph (d) and revising 
the authority citation following the section to read as follows:


Sec. 361.43  Procedures for ineligibility determination.

* * * * *
    (d) Refer the individual--
    (1) To other programs that are part of the One-Stop service 
delivery system under the Workforce Investment Act that can address the 
individual's training or employment-related needs; or
    (2) To local extended employment providers if the ineligibility 
determination is based on a finding that the individual is incapable of 
achieving an employment outcome as defined in Sec. 361.5(b)(16).
* * * * *
(Authority: Sections 12(c), 102(a)(5), and 102(c) of the Act; 29 
U.S.C. 709(c), 722(a)(5), and 722(c))


    5. Section 361.45 is amended by revising paragraph (b)(2) to read 
as follows:


Sec. 361.45  Development of the individualized plan for employment.

* * * * *
    (b) * * *
    (2) The IPE must be designed to achieve a specific employment 
outcome, as defined in Sec. 361.5(b)(16), that is selected by the 
individual consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice.
* * * * *

    6. Section 361.46 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 361.46  Content of the individualized plan for employment.

    (a) * * *
    (1) A description of the specific employment outcome, as defined in 
Sec. 361.5(b)(16), that is chosen by the eligible individual and is 
consistent with the individual's unique strengths, resources, 
priorities, concerns, abilities, capabilities, career interests, and 
informed choice.
* * * * *

    7. Section 361.47 is amended by revising paragraphs (a)(8) and 
(a)(10) to read as follows:


Sec. 361.47  Record of services.

    (a) * * *
    (8) In the event that an individual's IPE provides for vocational 
rehabilitation services in a non-integrated setting, a justification to 
support the need for the non-integrated setting.
* * * * *
    (10) In the event an individual achieves an employment outcome in 
which the individual is compensated in accordance with section 14(c) of 
the Fair Labor Standards Act or the designated State unit closes the 
record of services of an individual in extended employment on the basis 
that the individual is unable to achieve an employment outcome 
consistent with Sec. 361.5(b)(16) or that an eligible individual 
through informed choice chooses to remain in extended employment, 
documentation of the results of the annual reviews required under 
Sec. 361.55, of the individual's input into those reviews, and of the 
individual's or, if appropriate, the individual's representative's 
acknowledgment that those reviews were conducted.
* * * * *

    8. Section 361.55 is revised to read as follows:


Sec. 361.55  Annual review of individuals in extended employment and 
other employment under special certificate provisions of the Fair Labor 
Standards Act.

    (a) The State plan must assure that the designated State unit 
conducts an annual review and reevaluation in accordance with the 
requirements in paragraph (b) of this section for an individual with a 
disability served under this part--
    (1) Who has achieved an employment outcome in which the individual 
is compensated in accordance with section 14(c) of the Fair Labor 
Standards Act; or
    (2) Whose record of services is closed while the individual is in 
extended employment on the basis that the individual is unable to 
achieve an employment outcome consistent with Sec. 361.5(b)(16) or that 
the individual made an informed choice to remain in extended 
employment.
    (b) For each individual with a disability who meets the criteria in 
paragraph (a) of this section, the designated State unit must--
    (1) Annually review and reevaluate the status of each individual 
for 2 years after the individual's record of services is closed (and 
thereafter if requested by the individual or, if appropriate, the 
individual's representative) to determine the interests, priorities, 
and needs of the individual with respect to competitive employment or 
training for competitive employment;
    (2) Enable the individual or, if appropriate, the individual's 
representative to provide input into the review and reevaluation and 
must document that input in the record of services, consistent with 
Sec. 361.47(a)(10), with the individual's or, as appropriate, the 
individual's representative's signed acknowledgment that the review and 
reevaluation have been conducted; and
    (3) Make maximum efforts, including identifying and providing 
vocational rehabilitation services, reasonable accommodations, and 
other necessary support services, to assist the individual in engaging 
in competitive employment as defined in Sec. 361.5(b)(11).

(Approved by the Office of Management and Budget under control 
number 1820-0500.)

(Authority: Sections 12(c) and 101(a)(14) of the Act; 29 U.S.C. 
709(c) and 721(a)(14))


    9. Section 361.56 is amended by revising paragraph (a) to read as 
follows:


Sec. 361.56  Requirements for closing the record of services of an 
individual who has achieved an employment outcome.

* * * * *
    (a) Employment outcome achieved. The individual has achieved the 
employment outcome that is described in the individual's IPE in 
accordance with Sec. 361.46(a)(1) and is consistent with the 
individual's strengths, resources, priorities, concerns, abilities, 
capabilities, interests, and informed choice.
* * * * *

    10. Sections 361.10, 361.12, 361.13, 361.14, 361.15, 361.16, 
361.17, 361.18, 361.19, 361.20, 361.21, 361.22, 361.23, 361.24, 361.25, 
361.26, 361.27, 361.28, 361.29, 361.30, 361.31, 361.32, 361.34, 361.35, 
361.36; 361.37, 361.38, 361.40, 361.41, 361.46, 361.47, 361.48, 361.49, 
361.50, 361.51, 361.52, 361.53, 361.54, 361.57, 361.60 and 361.62 are 
amended by adding after the section and before the authority citation 
``(Approved by the Office of Management and Budget under control number 
1820-0500)''.

    11. Appendix A is added to part 361 to read as follows:

Appendix A to Part 31--Questions and Answers

    The following questions and answers provide a summary of some of 
the most

[[Page 7254]]

common and critical questions that we received regarding this part 
361 and the applicable responses. As is evident from the responses, 
we maintain that redefining the term ``employment outcome'' for 
purposes of the VR program to mean outcomes that occur in integrated 
settings will promote the provision of opportunities for all VR-
eligible individuals to pursue the types of jobs that generally are 
available to the public.

Is Extended Employment Still a Legitimate Employment Option?

    Yes. Employment in a sheltered setting is a legitimate and 
valuable employment option for individuals with disabilities. 
Implementation of these regulations will not change that fact. 
Individuals still may choose to pursue long-term extended employment 
outside of the VR program, and these regulations ensure that those 
individuals' needs are met by requiring the VR agency to make the 
necessary referral to local extended employment providers.

Do the Regulations Restrict Individual Choice?

    No. We interpret the concept of individual choice in the Act as 
a choice among the employment outcomes under the VR program 
specified in the statute or by the Secretary in regulations.
    Extended employment (i.e., sheltered or non-integrated 
employment) remains both an initial step toward achieving integrated 
employment under the VR program and a long-term employment option 
through sources of support other than the VR program. In recognizing 
that some individuals with disabilities may wish to work in an 
extended employment setting, these regulations require the VR agency 
to ensure that these individuals are afforded the opportunity to do 
so by referring them to local extended employment providers. Those 
providers currently support the vast majority of sheltered workers 
through non-VR program resources. Moreover, persons wishing to 
prepare for integrated employment by initially working in an 
extended employment setting also may do so. In these cases, the VR 
agency cannot discontinue VR services until the individual 
transitions to integrated work in the community.

Can State Agencies Refuse To Serve Those With the Most Significant 
Disabilities?

    No. Both the Act and regulations guard against that result. 
Persons with disabilities may not be excluded from the VR program 
based on an assumption or belief that the individual is incapable of 
working in an integrated setting. Rather, State units are required 
to establish clear and convincing evidence that an individual is 
incapable of achieving an employment outcome, for purposes of the VR 
program, and must conduct a trial work assessment of the 
individual's abilities before it can refuse services to any 
individual who it initially believes is incapable of working in an 
intergrated job setting.

Are Homemaker and Unpaid Family Worker Considered Employment 
Outcomes for Purposes of the VR Program?

    Yes. The chief purpose of the regulations is to ensure that 
individuals with disabilities participating in the VR program are 
able to pursue the same type of employment opportunities that are 
available to the general public. Extended employment jobs, unlike 
homemakers and unpaid family workers, are primarily reserved for 
those with disabilities.

Will the Regulations Serve To Close Down Sheltered Workshops?

    No. Sheltered workshops are primarily supported by other State, 
local, and private resources and rely very little on VR program 
funds. Persons who prefer to work in extended employment on a long-
term basis are assured access to local extended employment programs 
through the referral requirements in the regulations. Also, those 
participants in the VR program who can best prepare for integrated 
employment by working in an extended employment setting as part of a 
training and assessment program are able to follow that path as 
well. Thus, extended employment programs and sheltered workshops 
continue to serve essentially the same role that they currently 
serve.

Appendix B

Analysis of Comments and Changes

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Sec. 361.5(b)(15)  Applicable Definitions; Employment Outcome

General

    Comments: More than 3,000 comments were received in response to 
the NPRM published in the Federal Register on June 26, 2000 (65 FR 
39492).
    Many commenters voiced strong support for the proposed 
definition of ``employment outcome'' that would revise the scope of 
that term under the VR program to include only those outcomes in 
which an individual with a disability works in an integrated 
setting. Several commenters predicted that the proposed revision 
would result in more opportunities for individuals with disabilities 
to work in integrated settings (also referred to throughout this 
appendix as ``integrated employment'') and in the elimination of 
barriers to competitive jobs for individuals with significant 
disabilities. Other commenters noted that, consistent with the 
purpose of the Act, the proposed regulations supported the 
transition of adults with significant disabilities from extended 
employment settings (also referred to as sheltered or non-integrated 
settings) to integrated employment. Finally, several commenters, 
while supporting the proposed regulations, asked for additional 
clarification on several issues. Those issues, and any corresponding 
changes to the proposed regulations, are addressed in this appendix.
    Many commenters strongly opposed the proposed regulations and 
asked that the NPRM be rescinded or that any final rulemaking be 
delayed for further study of the potential impact of the proposed 
regulations. A number of commenters believed that the proposed 
revision to the definition of ``employment outcome,'' for purposes 
of the VR program, was inconsistent with the spirit and intent of 
the Act, particularly the Act's emphasis on giving individuals with 
disabilities the opportunity to make informed choices in selecting 
an employment outcome under the VR program. Other commenters 
declared that the proposed regulations would restrict the number and 
variety of job options available to individuals with significant 
disabilities, lead to individuals being denied access to VR 
services, and weaken the priority the Act places on serving 
individuals with the most significant disabilities.
    We also received many comments from individuals with 
disabilities, as well as their friends, family members, and 
advocates, who expressed the fear that the proposed regulations 
would lead to the elimination of extended (also referred to as 
sheltered) employment programs in which individuals with 
disabilities often participate.
    Discussion: Due to the extensive detail of the previous comments 
on the proposed definition of ``employment outcome,'' and the 
significance of the issues raised in each, we address these 
comments, and other related comments, under applicable topical 
headings that follow.

Informed Choice

    Comments: As previously indicated, several commenters asserted 
that the proposed regulations would limit choices for individuals 
who prefer to work in extended employment settings and, therefore, 
would be contrary to the Act's emphasis on informed choice of the 
individual.
    Discussion: While we fully agree that the Act places a premium 
on individuals with disabilities being able to exercise informed 
choice throughout the rehabilitation process, we do not agree that 
these regulations are inconsistent with that emphasis. We interpret 
the statute as allowing individuals to exercise their choice among 
employment outcomes under the VR program that are specified in the 
Act or by the Secretary in regulations.
    Moreover, despite the changes made by these regulations, we want 
to make it clear that extended employment remains both an initial 
step toward achieving integrated employment under the VR program and 
a long-term employment option through sources of support other than 
the VR program. These regulations continue to allow State VR 
agencies to provide individuals with VR services by enabling persons 
to work in extended employment settings in order to prepare for 
employment in an integrated setting. We recognize that extended 
employment settings offer some individuals with significant 
disabilities valuable training and work experience for that purpose. 
The key change made by these regulations is that extended employment 
serves as an interim step in the rehabilitation process rather than 
an end point to the VR process.
    If an individual makes an informed choice (as will be explained 
in more detail later in this appendix), that he or she wants to 
pursue long-term employment in a non-integrated setting (e.g., 
extended or sheltered

[[Page 7255]]

employment), he or she may still do so. These final regulations 
require the designated State unit to refer that individual to local 
extended employment providers who can meet the individual's needs.
    Extended employment providers support the vast majority of 
sheltered workers through other State, local, and private resources. 
Currently, the VR program provides very few financial resources to 
extended employment providers. Given this fact, these regulations 
will not have the effect, as feared by some, of ending the existence 
of extended employment opportunities.
    In addition, we have amended the referral requirements in 
Sec. 361.37 of the regulations to ensure that individuals receive 
sufficient information concerning the scope of the VR program and 
integrated employment opportunities. This information will enable 
individuals to make a fully informed choice regarding whether to 
pursue integrated employment through the VR program or extended 
employment through other sources.
    The changes made by these regulations ensure that the VR program 
promotes opportunities for individuals with disabilities, 
particularly those with significant disabilities, to pursue 
integrated employment options. Moreover, the regulations require 
each State unit to preserve individual choice in the manner in which 
the Act intends.
    Changes: None.

Employment Options

    Comments: Several commenters who supported the proposed 
regulations suggested that removing sheltered employment from the 
scope of ``employment outcomes'' under the VR program will enable 
counselors to assist individuals with disabilities to obtain jobs in 
integrated settings and with potentially better pay.
    Other commenters who opposed the proposed regulations suggested 
that the proposed requirements would restrict the number and variety 
of job options for individuals with the most significant 
disabilities, many of whom do not have the skills or abilities to 
work in integrated employment settings.
    Discussion: We believe, as do many of the commenters who wrote 
in favor of these regulations, that these regulatory changes will 
lead to more individuals with significant disabilities entering 
integrated employment. Moreover, we believe that these regulations 
will serve to expand job options in general for individuals with 
significant disabilities while, at the same time, ensuring that 
individuals still can access extended employment through appropriate 
resources.
    Specifically, these regulations require VR agencies to ensure 
(to the extent they have not done so already) that individuals with 
significant disabilities are assisted in pursuing work in the 
integrated labor market. Prior to these final regulations, 
participants in the VR program sometimes have been directed toward 
sheltered work at the outset of entering the rehabilitation process 
without first having the opportunity to pursue employment in an 
integrated setting as they may have preferred.
    We recognize that a small number of individuals with the most 
significant disabilities may not have, or be able to obtain, the 
skills and abilities to work in integrated employment settings. In 
those cases in which that decision is reached, it is the 
responsibility of the State VR agency to refer the individual to 
extended employment providers.
    Finally, we again note that extended employment remains an 
interim step in the rehabilitation process leading to employment in 
an integrated setting. As such, extended employment represents a 
means of receiving support services and valuable work experience 
rather than a final employment outcome under the VR program.
    Changes: In recognizing that some individuals with the most 
significant disabilities may not have, or be able to obtain, the 
skills and abilities to work in integrated employment settings, we 
have added to the final regulations, in Sec. 361.43(d)(2), the 
requirement that State agencies also refer to extended employment 
providers any individual who the agency determines is incapable of 
achieving an employment outcome (i.e., integrated employment) under 
the VR program.

Homemakers and Unpaid Family Workers

    Comments: Several commenters stated that the Rehabilitation 
Services Administration should not eliminate from the VR program 
paid jobs in extended employment while continuing to accept 
homemakers and unpaid family workers as unpaid employment outcomes. 
Other commenters felt that the proposed definition of ``employment 
outcome,'' for purposes of the VR program, effectively eliminated 
homemakers and unpaid family workers from the scope of employment 
outcomes under the VR program.
    Discussion: The definition of ``employment outcome,'' for 
purposes of the VR program, in these final regulations modifies the 
prior regulatory definition by requiring that ``employment 
outcomes'' under the VR program occur in integrated settings. The 
final regulations do not address wage issues, meaning that non-wage 
earning (and other sub-minimum wage) employment outcomes, as long as 
they occur in integrated settings, satisfy the VR program definition 
of ``employment outcome'' in Sec. 361.5(b)(16). While we strongly 
believe that individuals with disabilities receiving VR services 
should pursue employment outcomes with competitive wages, the final 
regulations do not mandate that result.
    The chief purpose of the regulations is to ensure that 
individuals with disabilities participating in the VR program are 
able to pursue the same type of outcomes that are available to the 
general public. Because homemaker and unpaid family worker outcomes 
are available in the community, homemakers and unpaid family workers 
are considered to occur in integrated settings, as defined in 
Sec. 361.5(b)(33), and thus meet the revised definition of 
``employment outcome'' under the VR program, as defined in 
Sec. 361.5(b)(16).
    Changes: None.

Access to VR Services for Persons With Significant Disabilities

    Comments: Some commenters predicted that the proposed 
regulations would result in fewer individuals with significant 
disabilities receiving services under the VR program. These 
commenters expressed concern that VR counselors will be reluctant to 
serve individuals with significant or the most significant 
disabilities if they believe those individuals are less likely to 
achieve employment outcomes in integrated settings. The commenters 
believed that counselors will focus their efforts only on those who 
are clearly capable of integrated work.
    Discussion: We recognize the commenters' concerns, yet believe 
that those concerns are addressed through the eligibility criteria 
and procedures that VR agencies must follow. Those criteria and 
corresponding procedures are unchanged by these regulations. We 
emphasize that it is critical for VR agencies to ensure that persons 
with significant disabilities are not excluded from the VR program 
based on an assumption, belief, or preliminary impression that the 
individual is incapable of working in an integrated setting.
    The Act establishes a clear priority for serving persons with 
the most significant disabilities (through the order of selection 
requirements) and requires that the eligibility process specified in 
the Act be followed in determining whether an individual is to 
receive VR services. A discussion of that process and its 
application to persons with significant disabilities follows.
    In accordance with section 102(a) of the Act and Sec. 361.42 of 
the regulations, an individual is eligible to receive VR services if 
he or she is ``an individual with a disability'' (i.e., the 
individual has an impairment that results in an impediment to 
employment and can benefit in terms of an employment outcome from VR 
services). The individual also must require VR services in order to 
prepare for, secure, retain, or regain employment.
    In light of these criteria, a counselor's decision not to serve 
(but rather refer to an extended employment provider) an individual 
with a disability on the basis that the individual cannot achieve 
integrated employment would mean, in effect, that the counselor has 
concluded that the individual cannot benefit in terms of an 
employment outcome under the VR program (i.e., integrated work) from 
VR services. The Act and regulations, however, state that any 
individual seeking VR services is ``presumed [able] to benefit in 
terms of an employment outcome from VR services.'' Moreover, for the 
State agency to overcome that statutory presumption, it must 
demonstrate with clear and convincing evidence that the individual 
is incapable of benefiting in terms of an employment outcome under 
the VR program due to the severity of the applicant's disability. 
Finally, in order to establish the requisite ``clear and convincing 
evidence,'' the agency first must explore the individual's 
abilities, capabilities, and capacity to perform in work situations 
by affording the individual trial work experiences (see section 
102(a) of the Act and Sec. 361.42 of the regulations).
    Thus, in the absence of clear and convincing evidence following 
a trial work

[[Page 7256]]

assessment of the individual's abilities (or, as appropriate, an 
extended evaluation under Sec. 361.42(f) of the regulations), VR 
agencies must consider each individual, including those with the 
most significant disabilities, capable of achieving integrated 
employment. In other words, the Act establishes the general 
expectation that individuals with the most significant disabilities, 
if given necessary services and supports, are able to work in 
integrated settings. These regulations ensure that every opportunity 
is afforded so that this expectation is realized.
    In addition, because extended employment remains an interim step 
in the rehabilitation process, VR agencies may not refuse to serve 
an individual who wishes to receive services in an extended 
employment setting for purposes of preparing for employment in an 
integrated setting.
    We recognize that the regulations impose heightened 
accountability and greater effort on the part of VR agencies. For 
those reasons, we intend to monitor closely State implementation of 
the final regulations during our annual review and periodic on-site 
monitoring of State VR agencies in order to ensure that persons with 
significant disabilities receive VR services in pursuit of 
integrated employment. We also want to ensure that individuals who 
receive initial services in an extended employment setting also 
receive the VR services they need to transition to integrated 
employment in the community.
    Changes: None.

Effectiveness of Extended Employment

    Comments: A number of commenters, citing relevant research over 
the past three decades, stated that many individuals in extended 
employment have not been able to transition to the competitive labor 
market. These commenters observed that entities that operate 
sheltered workshops often retain their most productive workers, thus 
resulting in few of these individuals transitioning to integrated 
employment. Consequently, the commenters urged that the proposed 
regulations be revised to disallow extended employment as an interim 
step in the rehabilitation process.
    Other commenters who supported the proposed regulations asserted 
that nearly 90 percent of individuals with developmental 
disabilities and more than 65 percent of individuals who are blind 
earn less than the minimum wage working in extended employment.
    Several commenters who opposed the revised regulatory definition 
of ``employment outcome,'' for purposes of the VR program, stated 
that ``place-and-train methodologies'' used by VR programs have left 
numerous people with disabilities adrift in the labor market with 
part-time, low-wage jobs, no peer group, and limited social outlets. 
These commenters further contend that extended employment programs 
function as a safety net for individuals with significant 
disabilities, providing additional opportunities for training and 
employment in a safe, protective work environment. Other commenters 
stated that the proposed regulations ``devalued'' individuals in 
extended employment programs and the work they perform.
    Discussion: We agree that extended employment programs have 
traditionally served as a safety net for individuals with 
significant disabilities who cannot perform integrated work in the 
community or who choose to work only among their disabled peers. We 
also recognize that extended employment programs offer opportunities 
in which individuals with significant disabilities can obtain useful 
training and work experience. For these reasons, we wish to 
emphasize that we in no way devalue the dignity or the worth of 
extended employment programs or the individuals who work in those 
settings. Rather, we have amended the existing regulations in order 
to focus the VR program on the statutory purpose (i.e., the purpose 
reflected in Title I of the Rehabilitation Act) of giving persons 
with disabilities, including those with significant or the most 
significant disabilities, the opportunity to work in the community 
and to achieve economic self-sufficiency.
    While extended employment settings serve a useful purpose in 
society and benefit some VR participants, we again note that 
extended employment providers receive very little financial support 
from the VR program. As we noted in the NPRM, a relatively small 
number of VR program participants have achieved employment outcomes 
in sheltered settings in recent years--approximately 3.5 percent of 
VR program outcomes nationwide in 1998, according to the most 
current data available. Thus, it is evident that many State units 
already have not been treating extended employment as a final 
employment outcome under the VR program. Those agencies have come to 
realize, as is reflected through the Act's legislative history, that 
historically participants in the VR program too often were placed in 
sheltered settings as a final outcome rather than as a temporary 
placement from which they could transition to a job in the 
community. While this philosophy has evolved in many State VR 
agencies, and is followed nationally through these regulations, 
extended employment remains a safety net, and an appropriate work 
environment, and continues to be supported by those resources on 
which it has primarily relied.
    We also believe that these regulatory changes will spur VR 
agencies to closely follow program participants in extended 
employment settings and assist in their transition to integrated 
work. Prior to these regulations, VR agencies were permitted to 
terminate VR services to an individual in extended employment. We 
expect these final regulations will cause VR agencies to increase 
their efforts with regard to individuals whom they serve in non-
integrated settings until the individual transitions to integrated 
employment.
    Changes: None.

Availability of Opportunities for Integrated Employment

    Comments: As noted earlier, many individuals who supported the 
proposed regulations believed that the change would hasten the 
movement toward integrated employment and the elimination of 
barriers to integrated jobs for individuals with significant 
disabilities.
    In contrast, a number of commenters who opposed the proposed 
regulations reasoned that extended employment should continue to be 
included as an ``employment outcome'' under the VR program because 
integrated employment opportunities are rarely available in rural 
areas or Indian reservations. These commenters stated that extended 
employment is often the sole work opportunity for people with 
significant disabilities who reside in these underserved areas.
    Discussion: Extended employment, whether accessed through 
resources other than the VR program or used as an interim step 
toward integrated employment under the VR program, remains a viable 
opportunity for individuals in rural areas or elsewhere. As 
indicated previously, extended employment facilities offer some 
persons with disabilities important services. Accordingly, we expect 
that many individuals with disabilities will continue to pursue 
extended employment and, therefore, have ensured through these 
regulations that opportunities in extended employment can be 
accessed. At the same time, however, we do not believe that the 
prevalence of extended employment options in certain areas should 
mean that VR program participants not be given the opportunity to 
pursue integrated employment as is intended by the Act.
    We recognize that defining ``employment outcome'' under the VR 
program as a job in an integrated setting will require some VR 
agencies to work to broaden integrated job options for program 
participants. Nevertheless, we fully believe, like many of the 
commenters, that the obligations on VR agencies resulting from the 
regulations are consistent with the VR program's statutory emphasis 
on integration. Thus, to the extent integrated employment 
opportunities are limited in rural, reservation, or other areas, it 
is incumbent on the local VR unit to work with employers to expand 
integrated job opportunities for individuals with significant 
disabilities.
    Changes: None.

Continuation of Extended Employment Programs

    Comments: We received many comments from individuals with 
disabilities, and their family members and friends, who expressed 
the fear that the changes to the prior regulations would lead to the 
elimination of extended employment programs and the closing of 
sheltered workshops where individuals with disabilities currently 
work.
    Discussion: As indicated throughout this analysis of comments, 
the regulations do not eliminate extended employment programs or 
serve to close sheltered workshops. We again note the valuable 
contributions these facilities make to society and the high regard 
in which they are held by some of the commenters to the proposed 
regulations. Still, extended employment programs generally are 
funded by other State, local, and private resources and rely very 
little on VR program funds as evidenced by (1) the small percentage 
of VR program participants who have exited the program while in a 
sheltered setting, and (2) the fact that several

[[Page 7257]]

VR agencies already follow a policy of working with individuals in 
pursuit of integrated employment. Moreover, the regulations ensure 
that persons who choose to work in extended employment on a long-
term basis are able to access local extended employment programs 
through the required referral process under Sec. 361.37 of the 
regulations.
    At the same time, individuals who choose to prepare for 
integrated employment under the VR program by temporarily working in 
an extended employment setting are able to follow that path as well. 
The State VR agencies will continue to provide necessary services to 
enable these individuals to gain valuable work experience in 
extended employment facilities and transition to integrated 
employment at a later time. If an individual chooses to remain in 
extended employment or if it is determined that the individual is 
unable to achieve employment in an integrated setting (although 
Sec. 361.55 of the regulations requires the agency later to review 
whether the individual's choice or readiness for integrated 
employment has changed), the VR agency must refer that individual to 
the local extended employment provider to ensure that the 
individual's needs continue to be met. In this way, extended 
employment programs and sheltered workshops continue to serve the 
same valued role in the society as they currently serve.
    Changes: None.

Sec. 361.37  Establishment and Maintenance of Information and 
Referral Programs

    Comments: A few commenters viewed as unduly burdensome the 
proposed requirements concerning the State unit's obligation to 
refer to local extended employment providers any individual who 
chooses extended employment as their employment goal.
    Some commenters stated that State, local, and private resources 
that support extended employment programs are insufficient to absorb 
the additional referrals that would result from the proposed 
regulations. In contrast, other commenters supported the proposed 
regulations, including the referral requirements, stating that 
extended employment programs operated by community rehabilitation 
programs will continue since those organizations do not rely on VR 
program funds to support their extended employment operations.
    Discussion: As discussed previously, the proposed regulations in 
this section required State VR agencies to refer individuals with 
disabilities to local extended employment providers if the 
individual chooses to work in an extended employment setting on a 
long-term basis rather than pursue employment in an integrated 
setting under the VR program.
    We do not believe that the limited burden associated with the 
referral requirements in this section are inappropriate or 
unjustified. While we recognize that the requirements in Sec. 361.37 
imposed additional responsibilities on VR agencies, those 
requirements are designed to ensure that each individual with a 
disability can receive services through applicable resources. As for 
those applicants under the VR program who choose to pursue extended 
employment long-term, the VR agency should ensure that those 
individuals are made aware of the scope of available extended 
employment service providers and should make referrals that are 
consistent with each individual's informed choice.
    Section 361.37 of the final regulations requires State VR 
agencies to provide sufficient information to all applicants to 
ensure that they are making an informed choice in either applying 
for VR services or choosing to pursue extended employment on a long-
term basis. In particular, these regulations require State agencies 
to inform individuals of the purpose of the VR program, the 
availability of VR services and employment options in an integrated 
setting, the availability of services in an extended employment 
setting as a means of assisting the individual to transition into 
integrated employment, the right to return to the VR program for 
assistance if the individual chooses later to seek employment in an 
integrated setting, and, when appropriate, the availability of 
information from the Social Security Administration concerning the 
ability of individuals with disabilities to work while receiving 
benefits from the Social Security Administration.
    Many of these information requirements are consistent with the 
informational requirements in Sec. 361.42. In addition, it is 
important that individuals with disabilities who are receiving, or 
have been found eligible for, Social Security benefits be informed 
of recent reforms that are designed to reduce a key work 
disincentive by enabling individuals with disabilities to work and 
continue receiving Social Security benefits. We believe that the 
need for this critical information, and its potential effect on an 
individual's interest in pursuing integrated work in the community, 
justifies requiring VR agencies to ensure that an individual with a 
disability can access it when appropriate. The purpose behind this 
requirement, as with each of the informational requirements in 
Sec. 361.37(b), is to ensure that individuals make truly informed 
choices among the wide scope of employment options--both integrated 
and non-integrated--available to persons with disabilities. We do 
note, however, that if the individual proceeds to complete the VR 
agency's application, pursuant to Sec. 361.42(a)(4), after receiving 
the information specified in this section of the regulations, there 
can be no question that the individual intends to pursue integrated 
employment under the VR program.
    Moreover, an individual with a disability who requires VR 
services to achieve an employment outcome cannot be refused services 
unless the State unit establishes clear and convincing evidence, 
following a trial work assessment, that the severity of the 
individual's disability prevents that individual from working in an 
integrated setting.
    Finally, in the limited instances in which the State unit 
establishes the requisite clear and convincing evidence that the 
individual is incapable of achieving integrated employment, the 
amended regulations also require that those persons be referred to 
local extended employment programs in the community that can better 
address their employment needs (that added referral requirement is 
located in Sec. 361.43 of the final regulations).
    Changes: We have amended the proposed regulations to ensure that 
VR agencies provide individuals with sufficient information to make 
a fully informed choice between pursuing integrated employment under 
the VR program or extended employment through other sources. Section 
361.37 of these final regulations requires the State unit, prior to 
referring an individual with a disability who chooses to pursue 
extended employment to local extended employment providers, to 
inform the individual of the purpose of the VR program, the 
availability of integrated employment options, the fact that VR 
services can be provided to eligible individuals in an extended 
employment setting for purposes of training or otherwise preparing 
for integrated employment, and the ability of the individual to seek 
VR services at a later date if at that time the individual chooses 
to pursue employment in an integrated setting, and, as appropriate, 
to refer the individual to the Social Security Administration in 
order to obtain information concerning the ability of individuals 
with disabilities to work while receiving benefits from the Social 
Security Administration.

Sec. 361.43  Procedures for Ineligibility Determination

    Comments: None.
    Discussion: Although amendments to this section of the current 
regulations were not proposed in the NPRM, we have determined, based 
on the comments we received, that a change to this section is 
warranted. We believe that it is important to ensure that persons 
found too severely disabled to work in an integrated setting are 
referred to local extended employment facilities so that these 
individuals can still take advantage of the work opportunities that 
the facilities offer.
    The proposed regulations, in particular Sec. 361.37, would have 
applied a referral requirement only to those who initially choose to 
pursue extended employment as their long-term employment goal. 
However, we also believe that persons who seek to participate in the 
VR program but are found, based on clear and convincing evidence 
following a trial work assessment, incapable of achieving integrated 
employment should be given the same valuable opportunity to work in 
an extended employment setting with support from appropriate 
sources. As we indicated in the discussion under Sec. 361.37, we 
also believe it is important for the VR agency to ensure that these 
individuals are made aware of the different extended employment 
service providers available in the area so that individuals can be 
referred to providers consistent with their informed choice.
    Changes: We have amended the proposed regulations to require in 
Sec. 361.43 that individuals who are found unable to work in an 
integrated setting be referred to local extended employment 
providers.

[[Page 7258]]

Sec. 361.45  Development of the Individualized Plan for Employment 
and Sec. 361.46  Content of the Individualized Plan for Employment

    Comments: None.
    Discussion: Both Sec. 361.45 (concerning the development of the 
individualized plan for employment (IPE)) and Sec. 361.46 
(concerning IPE content) require technical changes to conform to the 
revised definition of the term ``employment outcome'' under the VR 
program and have been amended accordingly.
    Changes: We have revised Secs. 361.45 and 361.46 to conform to 
the revised definition of ``employment outcome'' under the VR 
program.

Sec. 361.55  Annual Review of Individuals in Extended Employment 
and Other Employment Under Special Certificate Provisions of the 
Fair Labor Standards Act

    Comments: A few commenters who opposed the proposed regulations 
stated that the annual review requirements in the NPRM would not be 
effective in identifying individuals who may be ready to transition 
from extended employment to integrated employment in the community, 
including supported employment. The commenters asserted that under 
existing regulations State VR agencies have not conducted annual 
reviews of persons in extended employment; have been reluctant to 
reopen service records of those in extended employment and 
investigate alternative work settings; and have not taken into 
consideration advances in rehabilitation technology and the 
availability of community supports that may facilitate transition to 
integrated employment.
    On the other hand, at least one State unit stated that annual 
reviews of individuals in extended employment have been effective 
and that it is unlikely that persons would remain in extended 
employment if they sought and were capable of competitive 
employment.
    Finally, one commenter asked that we clarify this section of the 
proposed regulations, in particular the circumstances under which 
individuals are to receive annual reviews.
    Discussion: We understand that there is uncertainty in the 
disability field concerning the extent to which reviews of VR 
program participants in extended employment have resulted in 
individuals transitioning to jobs in integrated settings. VR 
agencies must be vigorous in determining which individuals can, and 
wish to, transition to integrated employment (particularly 
competitive employment); in providing necessary supports to 
facilitate that transition; and in ensuring that annual reviews are 
more than cursory exercises (see e.g., Senate Report No. 105-166, p. 
13, for more information on that point).
    The statutory requirements concerning annual reviews of those in 
extended employment are key factors underlying these regulations. 
Those requirements, specifically section 101(a)(14) of the Act, 
establish an expectation that extended employment is not intended to 
serve as a final outcome under the VR program, but rather as an 
interim step through which eligible individuals can prepare for 
competitive employment. Given the importance of the reviews in 
enabling individuals with significant disabilities to transition to 
work in an integrated setting when desired by the individual, those 
reviews should be thorough evaluations of readiness for integrated 
work so that the State unit can effectively determine the interests, 
priorities, and needs of the individual with respect to employment 
in integrated settings.
    To enhance the effectiveness of the annual reviews, Sec. 361.55 
of the regulations requires that the review and reevaluation of an 
individual's readiness for competitive employment provide for input 
from the individual or the individual's representative. We believe 
this requirement, which is based on corresponding requirements in 
the Act, will help ensure that State units make maximum efforts to 
assist individuals in transitioning from extended employment to 
integrated employment consistent with their desires.
    While we do not believe it is necessary to revise 
Sec. 361.55(a), we wish to clarify the instances in which reviews 
under this section of the regulations must be conducted. 
Specifically, annual reviews (for two years, and thereafter at the 
individual's request) are required if a VR program participant has-- 
(1) achieved an employment outcome in which the individual is 
compensated in accordance with section 14(c) of the Fair Labor 
Standards Act (i.e., the individual is working in an integrated 
setting, but is compensated at less than the minimum wage); (2) had 
his or her record of services closed while in extended employment on 
the basis that the individual is unable to achieve an employment 
outcome; or (3) had his or her record of services closed while in 
extended employment because the individual has made an informed 
choice to remain in extended employment.
    If an individual with a disability, in conjunction with the 
State unit, chooses to receive VR services initially in an extended 
employment setting in order to prepare for competitive employment, 
it is incumbent on the State unit to monitor closely the 
individual's progress. However, it is important to note that the 
annual review requirements of this section do not apply in that 
situation since the individual's program of VR services is ongoing 
and the individual's record of services remains open.
    Changes: None.

Sec. 361.56  Requirements for Closing the Record of Services of an 
Individual Who Has Achieved an Employment Outcome

    Comments: None.
    Discussion: Section 361.56, which specifies the criteria for 
closing the record of services for an individual who has achieved an 
employment outcome under the VR program, like Secs. 361.45 and 
361.46 discussed previously, has been slightly revised in these 
final regulations to reflect the revised definition of the term 
``employment outcome'' under the VR program.
    Changes: We have amended Sec. 361.56 to conform to the revised 
definition of ``employment outcome'' in Sec. 361.5(b)(16).

Effective Date

    Comments: A number of commenters suggested that the final 
regulations should provide VR agencies with the flexibility to 
implement the new regulations before the effective date proposed in 
the NPRM (October 1, 2001).
    Discussion: As explained in the NPRM, we proposed requiring 
States to implement the regulatory changes in FY 2002 to minimize 
any potentially adverse impact on VR agencies or eligible 
individuals. At the same time, however, we are aware that some 
agencies already have established policies under which all VR 
program participants pursue integrated employment. We believe those 
policies are entirely consistent with the Act and the purpose of 
these regulations. Therefore, we are requiring that States implement 
these regulatory changes on or before October 1, 2001. After that 
date, an ``employment outcome'' under the VR program means 
employment in an integrated setting.
    Changes: We have amended the regulations to allow VR agencies to 
implement the requirements in these regulations prior to FY 2002 at 
their discretion. The final regulations require that the 
requirements be implemented no later than October 1, 2001.

[FR Doc. 01-1746 Filed 1-19-01; 8:45 am]
BILLING CODE 4000-01-P