[Federal Register Volume 70, Number 140 (Friday, July 22, 2005)]
[Proposed Rules]
[Pages 42474-42482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14384]



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Part IV





Department of Labor





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Employment and Training Administration



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20 CFR Part 604



Unemployment Compensation--Eligibility; Proposed Rule

  Federal Register / Vol. 70, No. 140 / Friday, July 22, 2005 / 
Proposed Rules  

[[Page 42474]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 604

RIN 1205-AB41


Unemployment Compensation--Eligibility

AGENCY: Employment and Training Administration, Labor.

ACTION: Notice of proposed rulemaking (NPRM); request for comments.

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SUMMARY: The Department of Labor (Department) is proposing this rule to 
implement the requirements of the Social Security Act (SSA) and the 
Federal Unemployment Tax Act (FUTA) that limit a state's payment of 
unemployment compensation (UC) only to individuals who are able and 
available (A&A) for work. This rule would apply to all state UC laws 
and programs.

Comment Date: Written comments must be submitted on or before September 
20, 2005.

ADDRESSES: You may submit written comments on the proposed rule (please 
identify this proposed rule by Regulatory Information Number (RIN) 
1205-AB41) by any of the following methods:
     Federal e-Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Comments may be mailed or delivered to Cheryl Atkinson, 
Administrator, Office of Workforce Security, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room S-4231, Washington, DC 20210.
     Comments may be submitted electronically to the Office of 
Workforce Security at the e-mail address: [email protected]. 
Receipt of submissions, whether by U.S. mail, other delivery, or e-
mail, will not be acknowledged.
Instructions: all submissions received must include the agency name and 
the RIN for this rulemaking: RIN 1205-AB41. If commenters transmit 
comments by Fax or through the Internet and also submit a hard copy by 
mail, please indicate that it is a duplicate copy of the Fax or 
Internet transmission.
    All comments will be available for public inspection and copying 
during normal business hours at the Office of Workforce Security, 
Employment and Training Administration, U.S. Department of Labor, 200 
Constitution Avenue, NW., Room S-4231, Washington, DC 20210. Copies of 
the proposed rule are available in alternate formats of large print and 
electronic file on computer disk, which may be obtained at the above-
stated address. The proposed rule is also available at the Web address 
http://www.workforcesecurity.doleta.gov.

FOR FURTHER INFORMATION CONTACT: Gerard Hildebrand, Office of Workforce 
Security, ETA, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room C-4518, Washington, DC 20210. Telephone: (202) 693-3038 (voice) 
(this is not a toll-free number); 1-800-326-2577 (TDD); facsimile: 
(202) 693-2874; e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Department and its predecessors (the Social Security Board and 
the Federal Security Agency) have consistently interpreted provisions 
of federal UC law, contained in the SSA and the FUTA, to require that 
individuals must be A&A for work to be eligible for UC. Although this 
interpretation is longstanding, it has never been comprehensively 
addressed in a rule in the Code of Federal Regulations (CFR).
    The A&A requirement is implicit in the structure and purpose of the 
SSA and the FUTA, and Congress has repeatedly adopted, acquiesced in, 
and relied on the Department's interpretation that federal UC law 
includes an A&A requirement. Nevertheless, because the A&A requirement 
is not explicitly stated in federal law or the CFR, there appears to be 
some confusion regarding the validity of the A&A requirement as well as 
its scope and application.
    This confusion became especially clear in rulemakings that created 
and then removed the Birth and Adoption UC (BAA-UC) regulation. (See 65 
FR 37210 (June 13, 2000) for the final BAA-UC rule and 68 FR 58540 
(October 9, 2003) for the final rule removing the BAA-UC rule.) After 
promulgating the BAA-UC rule as an interpretation of the A&A 
requirement, the Department subsequently determined that the BAA-UC 
rule was contrary to the A&A requirement. In both rulemakings, 
commenters argued that there are no specific A&A requirements set out 
in federal law and that Congress expressly rejected A&A requirements. 
In the course of these rulemakings, it also became clear that 
misconceptions existed about the application and scope of the federal 
A&A requirement. For example, some situations where the Department 
deemed the individual to meet the A&A requirement--such as temporary 
lay-offs--were viewed by others as ``exceptions'' to the A&A 
requirement. As another example, some viewed an active work search as a 
necessary component of the A&A requirement, whereas the Department does 
not share this view.
    As a result of this confusion, the Department has determined that 
there is a need to adopt a regulation that clearly sets forth its 
interpretation of the A&A requirement. This proposed rule also sets 
forth the requirement that aliens must meet A&A requirements to receive 
UC. This rule does not regulate other areas of the UC program, such as 
monetary entitlement or disqualifications for such actions as 
voluntarily quitting employment. This rule also does not address 
federal labor laws (such as minimum wage or overtime laws) or 
disability nondiscrimination laws (such as the Section 504 of the 
Rehabilitation Act of 1973).

Basis for the A&A Requirement

    As noted above, the Department and its predecessors have 
interpreted and enforced federal A&A requirements since the inception 
of the federal-state UC program. Although no A&A requirements are 
explicitly stated in federal law, the Department and its predecessors 
interpreted five provisions of federal UC law, contained in the SSA and 
FUTA, as requiring that states condition the payment of UC upon a 
claimant being able to and available for work. Two of these provisions, 
at Section 3304(a)(4), FUTA, (26 U.S.C. 3304(a)(4)) and Section 
303(a)(5), SSA, (42 U.S.C. 503(a)(5)) with specific exceptions, limit 
withdrawals from a state's unemployment fund to the payment of 
``compensation.'' Section 3306(h), FUTA, (26 U.S.C. 3306(h)) defines 
``compensation'' as ``cash benefits payable to individuals with respect 
to their unemployment.'' The A&A requirements provide a federal test of 
an individual's continuing ``unemployment.'' (The meaning of 
``unemployment'' in this statutory framework is discussed below.) Two 
other provisions, found in Section 3304(a)(1), FUTA, (26 U.S.C. 
3304(a)(1)) and Section 303(a)(2), SSA, (42 U.S.C. 503(a)(2)) require 
that compensation ``be paid through public employment offices.'' The 
requirement that UC be paid through the public employment system (the 
purpose of which is to find people jobs) ties the payment of UC to both 
an individual's ability to work and availability for work. These A&A

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requirements serve, in effect, to limit UC eligibility.
    The experience rating requirements at Section 3303(a), FUTA, 26 
U.S.C. 3303(a)), are also tied to the test of involuntary unemployment 
due to lack of work. Experience rating was originally established to 
ensure an equitable distribution among employers of the cost of the 
system, and to encourage employers to stabilize their work forces. 
(``Credits'' will be provided ``in the form of lower contribution rates 
* * * to employers who have stabilized their employment.'' (S. Rep. 
628, 74th Cong. 1st Sess. 1935 Page 14.)) Under an experience rating 
system approved under Section 3303(a), FUTA, an employer who lays off 
fewer workers will generally pay lower contributions (used to fund 
benefits) than an employer who lays off more workers. If not for the 
A&A requirement, the intent of experience rating would be negated since 
benefits could be based on an individual's own actions without regard 
to an employer's attempt to stabilize employment by offering suitable 
work to its current and former employees.
    In enactments following the original SSA, Congress has acted 
several times to reaffirm that UC is payable only to individuals who 
are able and available for work. In 1946, Congress amended the SSA and 
FUTA to permit states to withdraw certain employee contributions from 
their unemployment funds for the payment of ``cash benefits with 
respect to * * * disability.'' (Current Sections 303(a)(5), SSA, and 
3304(a)(4)(A), FUTA.) Because individuals whose disabilities render 
them completely unable to work do not meet the ``able'' requirements, 
Congress determined that explicit statutory authority was necessary to 
permit payment of cash benefits from state unemployment funds to such 
individuals and, even then Congress limited this authority to 
withdrawals of employee contributions. These individuals would not 
otherwise be entitled to such cash benefits because they are not 
unemployed due to a lack of suitable work; rather they are unemployed 
because the severity of their disabilities prevents them from working.
    When Congress passed a federal prohibition on denying UC solely due 
to pregnancy (Section 3304(a)(12), FUTA), it noted that an individual 
must be ``able to work * * * and be available for employment'' (H. Rep. 
No. 752, 91st Cong. 2d Sess. Page 19 (1970)) and that pregnant workers 
must continue to meet the ``availability for work and ability to work'' 
requirements. (Id. at 21.) Simply put, a state could no longer deny UC 
to a woman merely because she was pregnant, but the woman nevertheless 
would need to be A&A as a condition of eligibility.
    When Congress first enacted a provision requiring the reduction of 
UC due to receipt of retirement pay (Section 3304(a)(15), FUTA), it 
explained that it was establishing a ``uniform rule'' to address the 
fact that some recipients of retirement payments ``have actually 
withdrawn from the labor force,'' that is, are not A&A. (S. Rep No. 
1265, 94th Cong. 2d Sess. 22 (1976).) In seeking to remedy this 
problem, Congress demonstrated its continuing resolve that individuals 
be A&A as a condition of UC eligibility.
    In 1993, Congress required that states refer individuals likely to 
exhaust UC to reemployment services and deny UC to individuals who 
failed to participate in these services. (Sections 303(a)(10) and (j), 
SSA.) This requirement reflected Congress' interest in helping UC 
claimants get back to work, especially those expected to have the 
hardest time returning to work quickly, and its willingness to deny UC 
to those individuals unwilling to take positive steps toward 
reemployment. Providing reemployment services to individuals who are 
not able or willing to accept employment (that is, who are not A&A) 
would waste resources while denying reemployment services to others who 
could benefit.
    The Social Security Board, the original administrator of the 
Federal-State UC program, adopted the federal A&A requirements 
contemporaneously with the passage of the original Social Security Act 
of 1935. The basis for the federal A&A requirements was summarized in a 
March 11, 1939, letter from the Chair of the Social Security Board to 
the Governor of California, concerning whether the state could use its 
unemployment fund to pay benefits for temporary disability:

    The entire legislative history [of the UC titles of the original 
SSA] including the Report to the President of the Committee on 
Economic Security, the report of the House Committee on Ways and 
Means, the report of the Senate Committee on Finance, and the 
Congressional debates all indicate, either expressly or by 
implication, the compensation contemplated under [these titles] is 
compensation to individuals who are able to work but are unemployed 
by reason of lack of work. Several provisions of those titles are 
meaningful only if applied to State laws for the payment of such 
compensation. For example, the requirement that compensation be paid 
through public employment offices, or the requirement that States 
make [certain information] available to agencies of the United 
States charged with the administration of public works or assistance 
through public employment, are obviously without reasonable basis if 
applied to payments to disabled individuals [whose impairments 
render them totally unable to work].\1\ Many of the standards 
contained [in the experience rating provisions] are similarly 
without reasonable basis if applied to a State law for the payment 
of disability compensation [under these circumstances].
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    \1\ The term ``disabled'' as it was used in this letter presumed 
a total disability that rendered the individual completely unable to 
perform any work. In current nondiscrimination law, the presumption 
is that an individual with a disability is able to work and, indeed, 
should be encouraged to work. The effect, if any, of an individual's 
disability on his or her ability to work and availability for work 
for UC purposes must be determined on a case-by-case basis.
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    For these reasons, the Board is of the opinion that the [UC 
titles of the SSA] are applicable solely to State laws for the 
payment of compensation to individuals who are able to work and are 
unemployed by reason of lack of work. [Emphasis added.]

    The ``legislative history'' cited in this letter included 
Congressional Committee Reports asserting that:

    The essential idea in unemployment compensation * * * is the 
accumulation of reserves in time of employment from which partial 
compensation may be paid to workers who become unemployed and are 
unable to find work. * * * In normal times it will enable most 
workers who lose their jobs to tide themselves over, until they get 
back to their old work or find other employment without having to 
resort to relief. [H. Rep. 615, 74th Cong. 1st Sess. 1935 Page 7.]
    The essential idea in unemployment compensation is the creation 
of reserves during periods of employment from which compensation is 
paid to workmen who lose their positions when employment slackens 
and who cannot find other work. Unemployment compensation differs 
from relief in that payments are made as a matter of right, not on a 
needs basis, but only while the worker is involuntarily unemployed. 
* * * Payment of compensation is conditioned upon continued 
involuntary unemployment. Beneficiaries must accept suitable 
employment offered them or they lose their right to compensation. 
[S. Rep. 628, 74th Cong. 1st Sess. 1935 Page 11.]
    For the great bulk of industrial workers unemployment 
compensation will mean security during the period following 
unemployment while they are seeking another job, or are waiting to 
return to their old position. [Id. Page 12.]

    As illustrated by this history, the UC program is designed to 
provide temporary wage insurance for individuals who are unemployed due 
to lack of suitable work. An individual must be able to accept an offer 
of suitable work, must be available to accept that work offer and must 
not refuse suitable work if offered to be eligible for UC. The federal 
A&A requirements implement this design by testing whether the fact that 
an

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individual did not work for any week was involuntary due to the 
unavailability of suitable work.
    The legislative history quoted above indicates that eligibility for 
UC is not based on the individual's personal need, except to the extent 
that his/her ``need'' is created by lack of suitable work. The 
legislative history also establishes a link between the public works 
programs in existence in 1935 and the UC program that bears on the A&A 
requirements. As noted in the Social Security Board's contemporaneous 
interpretation, an SSA provision (Section 303(a)(7)) requires that 
states make the name, address, ordinary occupation, and employment 
status of UC recipients available to agencies of the United States 
charged with the administration of public works or assistance through 
public employment. This requirement is predicated upon the 
understanding that UC recipients must be out of work due to lack of 
available work. It would make no sense to refer an individual, for whom 
work was available, to a public works program, which should be the 
employer of last resort. Senator Wagner, who introduced the SSA in the 
Senate, described the relationship between the proposed UC program and 
the government's public works programs (as well as public employment 
offices) as follows in the floor debate on the SSA:

    [Unemployment insurance] is not designed to supplant, but rather 
to supplement the public-works projects which must absorb the bulk 
of persons who may be disinherited for long periods of time by 
private industry. * * * A provision in the present bill requires 
that the Federal tax rebate shall be used to encourage a close 
connection between State job-insurance laws and unemployment-
exchange offices. This provision emphasizes the fact that the 
[monetary] relief of existent unemployment is but a subordinate 
phase of the main task of providing work for all who are strong and 
willing. [79 Cong. Rec. 9284 (June 14, 1934).]

    Senator Wagner's remarks demonstrate that Congress intended the UC 
system to be subordinate to the main task of getting people back to 
work. The A&A requirement is integral to this purpose.
    As noted above, the Department and its predecessors have long 
interpreted federal law to require that individuals be A&A. That 
longstanding interpretation is reflected in the Employment Security 
Manual (ESM), which was first issued to the states about 1950 and 
interprets federal law to require that ``a state law provide for * * * 
the payment of benefits only to individuals who are unemployed and who 
are able to work and available for work.'' (See part V, section 5000 B, 
ESM.) Although the A&A requirements described in the ESM were never 
formally promulgated as regulations governing the basic federal-state 
program, they have been codified as appendices to the regulations 
governing federal UC programs. (See 20 CFR 614, Appendix A (the UC 
program for former military personnel (UCX)); 20 CFR 625, Appendix A 
(Disaster Unemployment Assistance (DUA)); and 20 CFR 617, Appendix A 
(Trade Adjustment Assistance (TAA)). They are also made applicable to 
the Unemployment Compensation for former Federal Civilian Employees 
(UCFE) program by 20 CFR 609.5(c). The UCFE and UCX programs provide 
that ``compensation will be paid by the State to a Federal employee * * 
* subject to the same conditions as the compensation which would be 
payable * * * under the unemployment compensation law of the State * * 
*.'' 5 U.S.C. 8502(b). Further, the TAA program provides that the 
``availability and disqualification provisions'' of the state UC law 
apply to trade readjustment allowances (cash benefits in the nature of 
UC), except where inconsistent with the Trade Act or the Secretary's 
regulations. 19 U.S.C. 2294.
    The Department made the A&A requirements of the ESM applicable to 
the federal UCFE, UCX, and TAA programs because those programs are 
required to apply state law regarding eligibility for UC, and the 
Department has in turn always taken the position that federal law 
requires state UC programs to have A&A requirements. Further, although 
the statute (42 U.S.C. 5177) creating the DUA program did not include 
any requirement to follow state law, the Department imposed the ESM's 
A&A requirements on that program in the belief that the A&A 
requirements are such a fundamental part of any unemployment 
compensation program that it could not truly be an unemployment 
compensation program without an A&A requirement. Thus, like Congress, 
the Department, by incorporating the ESM's A&A requirements into 
federal UC programs, has long recognized the A&A requirement to be an 
essential part of the UC program.
    The Department has also stated that whether a claimant is available 
for work should be determined by whether there is a labor market for 
his or her services:

    The availability requirement means that the claimant must be 
available for suitable work which is ordinarily performed in his 
chosen locality in sufficient amount to constitute a substantial 
labor market for his services. A claimant does not satisfy the 
requirement by being available for an insignificant amount of work. 
Ordinarily, for example, a concert pianist in a rural area who 
limits his availability to concert work in that area is not 
available for enough suitable work to meet the requirement. 
[Emphasis added. U.S. Department of Labor, Bureau of Employment 
Security, Unemployment Insurance Legislative Policy--Recommendations 
for State Legislation 1962 (October 1962).]

Section-by-Section Description of Proposed Rule

Section 604.1, Purpose and Scope

    This proposed section sets forth the purpose and scope of the 
proposed rule, which is to implement the requirements of federal UC law 
that limit a state's payment of UC only to individuals who are able to 
work and who are available for work. The regulation applies to all 
state UC laws and programs. It does not, by its terms, apply to the 
federal unemployment compensation programs mentioned above. However, 
those federal programs, as noted above, follow state requirements with 
respect to A&A, and those state requirements would need to meet the 
minimum requirements established by this rulemaking.

Section 604.2, Definitions

    This proposed section provides definitions which apply to the 
proposed rule. In general, these are the same definitions as used in 
other federal regulations pertaining to UC.

Section 604.3, Able and Available Requirement--General Principles

    This proposed section sets forth the Department's general 
interpretation concerning the A&A requirements. It provides that a 
state may pay UC only to an individual who is unemployed due to a lack 
of suitable work for the week for which UC is claimed. To test whether 
the individual is unemployed due to a lack of suitable work for such 
week, the state must ensure the individual is A&A.
    The proposed section goes on to provide that whether an individual 
is able to work and available for work will be tested by determining 
whether that individual is offering services for which a labor market 
exists. This does not mean that job vacancies must exist, only that, at 
a minimum, the type of services the individual is able and available to 
perform is generally performed in the labor market. This ``labor market 
test'' is designed to ensure that an individual's unemployment is due 
to a lack of suitable work. That is, if the services offered by an 
individual are so restricted that there is no labor market for those 
services, then that individual is not able

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and available, and is not unemployed due to a lack of suitable work. 
Rather, the individual is unemployed because of those restrictions. 
Those restrictions on services could be for any number of reasons, such 
as hours of availability, limitations on the distance the individual is 
willing to commute, or what types of jobs the claimant is willing to 
accept.
    For example, if an individual limits his or her availability only 
to evening hours, the test of availability is whether there is a labor 
market for the individual's services given these restrictions. 
Similarly, if, for reasons such as the need to care for parents or a 
child, an individual limits his or her availability only to part-time 
work in certain occupations, the test of availability is whether there 
is a labor market for part-time work in those occupations. If there is 
a market, the State may regard the individual as meeting the 
availability test. If there is not, the individual must be denied. In 
sum, while individuals are not expected to be available for all work to 
be eligible for UC, they may not impose restrictions that effectively 
remove them from the labor market.
    The same principle applies with respect to the ``able to work'' 
requirement: a state may find that an individual with one or more 
disabilities is ``able'' to work if there are jobs in the individual's 
labor market that the individual can perform with reasonable 
accommodation.
    Under the proposal, states retain the authority to determine what 
constitutes the labor market for an individual under their UC laws. 
States already have well established laws concerning the labor market, 
and the regulation is not intended to disturb this. Generally, states 
look at local labor markets, but in some cases, due to telecommuting, 
it is possible for individuals to be legitimately attached to the labor 
force even though they will not relocate and their employment 
opportunities are outside the local area. As a result, the rule would 
permit states to consider such individuals to be available for work.
    The proposed section also clarifies how the A&A requirement relates 
to the individual's initial separation from the labor market. It does 
not look to why the individual was separated from employment, except to 
the extent that the individual may not have been A&A for the week of 
the separation. Thus, there is no Federal requirement that the initial 
separation be involuntary for an individual to be eligible for UC. As a 
result, state eligibility requirements concerning voluntarily leaving 
employment are outside the scope of this rule. What the rule does test 
is whether an individual is able to work and available for work for the 
week for which UC is claimed.
    An example may help explain how the separation provisions of state 
law, such as voluntary leaving provisions, are distinct from the A&A 
requirements. Assume an individual left work to care for an ill child. 
Whether to disqualify this individual for voluntarily leaving 
employment is entirely left to state law. However, if the state does 
not disqualify the individual for voluntarily leaving employment, the 
individual must still be A&A to be eligible for UC. If caring for the 
ill child prevents the individual from being available for a new job, 
the individual will be held ineligible for not meeting the state's A&A 
requirements because the individual is not involuntarily unemployed due 
to lack of suitable work. However, after the child no longer needs care 
and the individual becomes available for work, the individual may 
immediately commence collecting UC.
    In this regard, the Department stresses that the proposed 
regulation places minimum requirements on states. It does not prohibit 
states from imposing more stringent A&A tests, assuming that these 
tests are consistent with other applicable Federal laws.

Section 604.4, Application--Ability To Work

    Proposed paragraph (a) provides that an individual may be 
considered able to work under the state UC law if the individual is 
able to work for all or a portion of the week claimed, provided that 
any limitation on his or her ability to work does not constitute a 
withdrawal from the labor market. An individual may, under this 
proposed paragraph, be able to work only part-time, provided this 
limitation does not constitute a withdrawal from the labor market. In 
this case, the individual is able to perform some work, which is the 
minimum federal requirement.
    Proposed paragraph (b) provides for the treatment of individuals 
who initially meet the A&A requirements, but who later refuse suitable 
work because of illness. These individuals may, at a state's option, be 
found eligible for the period before they refuse suitable work. The 
reasoning behind this is that, until work is refused, the unemployment 
is due to lack of work, which is what the A&A requirements are designed 
to test. The A&A requirements are preserved because the individual must 
initially demonstrate ability and availability before the illness, 
cannot have voluntarily withdrawn from the work force, and must be held 
ineligible if he or she refuses suitable work offered during the 
illness.

Section 604.5, Application--Availability for Work

    This proposed section provides for application of the available for 
work requirement. Proposed paragraph (a)(1) provides that an individual 
may be considered available under the state UC law if the individual is 
available for any work for all or a portion of the week claimed, 
provided that any limitation placed by the individual on his or her 
availability does not constitute a withdrawal from the labor market. An 
individual may, under this proposed paragraph, limit his or her 
availability to part-time work, provided this limitation does not 
constitute a withdrawal from the labor market. In this case, the 
individual is available for some employment, which is the minimum 
federal requirement. States may craft additional stipulations on any 
part-time availability requirement they may create as long as such 
stipulations are consistent with other applicable Federal laws. For 
example, a state may require the worker to have had previous part-time 
work in the base period, or limit its part-time provision to 
individuals who can work only part-time due to disability.
    Proposed paragraph (a)(2) takes into account that, since the A&A 
requirement tests whether an individual is unemployed due to a lack of 
suitable work, a state may find an individual to be available when the 
individual limits his or her availability to suitable work as defined 
under state UC law. Limitations on what constitutes suitable work for 
an individual are treated the same as any other restriction that might 
be imposed on the services an individual offers in the labor market. As 
a result, the concept of suitable work is flexible--generally, the 
longer an individual is unemployed, the more types of work will be 
considered suitable for the individual.
    The proposed paragraph provides that an individual may be 
considered to be available for work if the individual limits his/her 
availability to ``suitable work'' as defined under a state's UC law, 
provided such limitation does not constitute a withdrawal from the 
labor market. Generally, suitable work involves a determination of 
whether the work for which the individual is available is consistent 
with the individual's education and training, whether the job is in the 
local labor market (usually measured by the distance or time of commute 
from the

[[Page 42478]]

individual's home to the worksite) and the individual's previous work 
history (which may include factors such as occupation, pay and fringe 
benefits), and how long the individual has been unemployed.
    As noted, the proposed paragraph provides that the limitation to 
suitable work may in some circumstances constitute a withdrawal from 
the labor market. Such a withdrawal could happen if, for example, the 
individual's availability is limited to his or her traditional 
occupation and to the local labor market. If that occupation no longer 
exists in the local labor market, then, in this case, the individual 
cannot be said to be available for work. The expectation is that, prior 
to denying any individual, the state would first advise the individual 
that because such work is no longer available in the local labor 
market, such a limited availability is unacceptable and the individual 
should expand his or her availability to jobs for which a labor market 
exists.
    Proposed paragraph (a)(3) provides that an individual on temporary 
lay-off from an employer may limit his or her availability to that 
employer. What constitutes a ``temporary'' lay-off will be determined 
under state law. (Typically, the employer must advise the state UC 
agency of when the employee is expected to return to work, and the 
state agency uses this response in determining, under its law, whether 
the lay-off is temporary.) An individual on temporary lay-off must be 
available to work for the employer who laid-off the individual as soon 
as the employer again offers work to the individual. While this limits 
an individual's availability for work to only one employer, it is 
nonetheless a test of whether the unemployment is due to lack of 
suitable work. Indeed, payment of UC to individuals on temporary lay-
off allows employers to preserve their skilled workforces, which has 
been cited as one of the purposes of the UC program. It also reflects a 
practical reality: Most other employers are unlikely to hire an 
individual on temporary lay-off because that individual will leave any 
new employment to return to the prior employment.
    Proposed paragraph (b) provides that an unemployed individual, who 
is appearing for jury duty before any court under a lawfully issued 
summons, may, if the state UC law so provides, be considered to be 
available, provided that, prior to any required appearance at such 
court, the individual demonstrated that s/he was available for work. 
The availability requirement still applies because the individual must 
initially demonstrate availability before being called for jury duty 
and because while serving on the jury the individual is no less 
available for work than he or she would have been if required to serve 
while employed. Attendance at jury duty may be taken as evidence that 
the individual continues to be available for work. This exception does 
not apply to individuals who are employed but unable to go to work 
because of jury duty. Nor does this exception apply to an individual 
who is laid-off from employment to attend jury. These individuals have 
not previously established availability and the unemployment is not due 
to a lack of suitable work, but instead, absence from work due to the 
call for jury duty. We note that other state laws may provide 
employment protections for individuals called to jury duty. This 
regulation is not meant to supersede or alter those laws or their 
interpretation.
    This proposed paragraph is also consistent with Congress's 
treatment of jury duty in the Federal-State Extended Unemployment 
Compensation Act (EUCA) of 1970, which provides that extended benefits 
shall not be denied to an individual during a week in which s/he fails 
to actively engage in seeking work if the individual has been summoned 
to appear for jury duty before any court of the United States or any 
state for that week if such exemption applies to recipients of regular 
benefits. (Section 202(a)(3)(A) of Pub. L. 91-373, as amended.)
    An individual summoned to jury duty is available in the same sense 
that an employee is available for work; that is, the individual would 
be available but for the fact that the court summoned him or her to 
jury duty. This application of the availability requirement recognizes 
that it is unreasonable to deny UC to an individual who has initially 
met the availability requirement because of a governmental compulsion 
to serve on a jury.
    Finally, if the individual does not appear as required by the jury 
summons, the proposed paragraph would provide that the state must 
determine if the reason for non-appearance indicates that the 
individual is not able to work or is not available for work.
    Proposed paragraph (c) addresses a specific case in which UC may 
not be denied due to the application of the availability requirement. 
It implements Section 3304(a)(8), FUTA, with respect to its ban on 
applying availability provisions to individuals who are in state-
approved training. Specifically, this section of FUTA provides that UC 
``shall not be denied to an individual for any week because he is in 
training with the approval of the State agency (or because of the 
application, to any such week in training, of State law provisions 
relating to availability for work, active search for work, or refusal 
to accept work).'' The proposed paragraph provides that an individual 
may not be denied UC for failure to be available for a week if, during 
such week, the individual is in training with the approval of the state 
agency. Since failure to attend or participate in approved training may 
mean the individual is no longer interested in maintaining an 
attachment to the labor market, the paragraph goes on to provide that 
if the individual fails to attend or participate in training during a 
week, then the state must evaluate the individual's eligibility under 
its A&A provisions.
    The proposed rule does not otherwise implement the requirements of 
Section 3304(a)(8), FUTA, because those requirements are beyond the 
scope of this rule. What types of training will be approved continues 
to be left to the individual states, although the Department encourages 
states to consider approving training under the Workforce Investment 
Act, Public Law 105-220 (29 U.S.C. 2801 et seq.) While states may not 
deny individuals who are actually ``in'' (that is, attending) state 
approved training under their availability provisions, states remain 
free to otherwise determine what constitutes being ``in training.'' For 
example, states may consider an individual to be ``in'' training during 
breaks in training. If, however, an individual fails to attend or 
otherwise participate in such training, the proposed rule requires 
states to determine whether the reason for non-attendance or non-
participation indicates the individual is not able to work or is not 
available for work.
    Section 236(d) of the Trade Act of 1974, as amended, prohibits a 
state from denying UC to a worker ``in'' TAA-approved training 
``because of the application'' of ``provisions of State law or Federal 
unemployment insurance law relating to availability for work, active 
search for work, or refusal to accept work.'' This rule does not 
address this provision because it is already implemented by TAA rules 
at 20 CFR 617.18(b)(i).
    Proposed paragraph (d) addresses the treatment of availability for 
purposes of the Self-Employment Assistance (SEA) program under Section 
3306(t)(2), FUTA. That section provides that ``State requirements 
relating to availability for work, active search for work, and refusals 
to accept work are not

[[Page 42479]]

applicable to such individuals * * * long as such individual meet the 
requirements'' for the SEA program. Thus, the rule provides that 
individuals who meet SEA program requirements may not be denied UC 
because they are not available for work. The proposed rule does not 
otherwise implement the SEA provisions of federal UC law.
    Proposed paragraph (e) addresses the treatment of availability for 
purposes of short-time compensation (STC) programs described by Section 
401 of Public Law 102-318. In STC (or ``worksharing'') programs, the 
employees of a company may work a reduced workweek in lieu of some of 
the employees being totally laid-off so long as certain conditions are 
met. The proposed paragraph recognizes that, under the STC legislation, 
individuals working a reduced work week are not required to meet a 
state UC law's availability requirement, but instead may be required to 
be available only for his/her regular work week. The proposed rule does 
not otherwise address STC programs.
    Proposed paragraph (f) addresses the treatment of aliens. It 
provides that aliens must meet the A&A requirements of the regulation. 
In addition, it provides that, to be considered available for work in 
the United States for a week, the alien must be legally authorized to 
work in the United States during such week by the appropriate agency of 
the United States government. That agency is currently the United 
States Citizenship and Immigration Services (USCIS), a bureau of the 
Department of Homeland Security. An alien not legally authorized to 
work is not available for work; thus, the regulations would require a 
state to deny an alien benefits for any week the alien was not legally 
authorized to work.
    The proposed rule does not address specific classes of aliens, nor 
does it specifically address what evidence is needed to prove the alien 
is authorized to work, as these may change over time. In determining 
whether the alien is legally authorized to work, including the 
acceptability of any documentation provided, the proposed rule requires 
the state to follow the requirements of Section 1137(d), SSA, (42 
U.S.C. 1320b-7(d)). These requirements, commonly called ``Systematic 
Alien Verification for Entitlements,'' or SAVE, are made applicable to 
the UC program by Section 1137(b)(3), SSA, (42 U.S.C. 1320b-7(b)(3)). A 
state must meet these requirements to receive UC administrative grants 
under Section 303(f), SSA, (42 U.S.C. 503(f)).
    The proposed rule does not address Title IV of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, which 
limits the eligibility of aliens for public benefits, including UC, 
based upon their alien status. Since it does not govern the ability or 
availability of aliens for work, it is beyond the scope of this 
rulemaking. However, states will need to take account of the provisions 
of Title IV in determining the eligibility of aliens for UC.
    Proposed paragraph (g) clarifies the relationship between the 
availability requirement and the requirement, found in almost every 
state law, that the individual conduct an active search for work. It 
provides that an active work search is not required by the rule, 
although a state may require an individual to be actively seeking work 
to be considered available for work, or impose a separate requirement 
that the individual must actively seek work.
    An active search for work is not a necessary component of 
availability and is not, therefore, a federal requirement for regular 
UC. Although an active work search is one way for the individual to 
indicate availability, it is not the only way and, in some cases, such 
as temporary lay-offs, requiring an active search for work may be 
viewed as unreasonable. Other ways of determining availability may be 
an individual's active registration with the state's employment service 
or, when appropriate, the individual's use of union hiring halls or 
private recruiting firms.

Section 604.6, Conformity and Substantial Compliance

    For a state to receive federal grants to fund UC administration, 
and for employers in the state to receive credit against the federal 
unemployment tax, state law must conform to federal UC law. A state law 
would conform to federal UC law as interpreted by this rulemaking when 
the state law includes provisions which meet or exceed the minimum A&A 
requirements established by this rulemaking. A state must also 
administer its UC laws so as to substantially comply with the 
requirements of federal UC law. Substantial compliance with federal UC 
law, as interpreted by this rulemaking, means the state's 
administration of its law is substantially consistent with the minimum 
A&A requirements established by this rulemaking. Additionally, where a 
state consistently administers its law differently from its express 
provisions, the Department assumes that a state's administration of its 
law reflects the requirements of its law. Thus, a state's 
administration of its law may raise issues of whether its law conforms 
to the federal requirements. ``Conformity,'' unlike ``compliance,'' is 
not preceded by the adjective ``substantial,'' meaning that a state law 
must conform with the federal requirements without qualification.
    This proposed section provides that the requirements of the rule 
are requirements for purposes of conformity and substantial compliance. 
It also sets forth how the Department of Labor would determine and 
enforce conformity and substantial compliance with the A&A requirements 
of Title III of the SSA and the FUTA. The procedures in 20 CFR 601.5 
would apply, meaning that if any issue involving conformity and 
substantial compliance arose, the Department would generally first hold 
informal discussions with state officials. Should informal discussions 
fail to resolve the issue, the Department would offer the state UC 
agency an opportunity for a hearing. If the Secretary of Labor were to 
find, after reasonable notice and opportunity for a hearing, a failure 
to conform or substantially comply with the rule's A&A requirements, 
the Secretary would notify the Governor of the state that grants to 
fund state administration of the UC program would be withheld and the 
Secretary would make no certification under FUTA to the Secretary of 
the Treasury that employers in the state are eligible to receive credit 
against the federal unemployment tax.
    Because this rule is intended to implement long-standing 
Departmental interpretations, it does not, in and of itself, require 
amendments to state law (including regulations).

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 (OMB).
    However, the proposed rule is not ``economically significant'' 
because it would not have an annual effect on the economy of $100 
million or more. The proposed rule merely codifies in regulation 
interpretations which have existed since the beginning of the program 
and which are already applied by the states. Thus, it imposes no new 
conditions on states, employers, or workers. We have also determined 
that the proposed rule would have no

[[Page 42480]]

adverse material impact upon the economy and that it would not 
materially alter the budgeting impact of entitlements, grants, user 
fees or loan programs, or the rights and obligations of recipients 
thereof.
    Further, we have 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 would impact states and state UC agencies, it would not 
adversely affect them in a material way. The proposed rule would ensure 
that the UC program operates as wage insurance by setting forth a test 
to assure that only individuals involuntarily unemployed due to lack of 
suitable work receive benefits.

Executive Order 13132

    We have reviewed this regulatory action in accordance with 
Executive Order 13132 regarding federalism. This Executive Order 
requires agencies, when formulating and implementing policies that have 
federalism implications, to the extent possible, to refrain from 
limiting state policy options, to consult with states before taking any 
action which would restrict states' policy options, and to take such 
action only where there is clear statutory and constitutional authority 
and the presence of a problem of national scope. The UC program is a 
matter of national scope, as evidenced by existing federal legislation, 
which limits state flexibility in certain areas.
    Policies with federalism implications are those with 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. We have 
determined that this proposed rule may have federalism implications. We 
intend to consult with organizations representing state elected 
officials about this rule in the upcoming weeks.

Executive Order 12988

    We drafted and reviewed this proposed regulation in accordance with 
Executive Order 12988, Civil Justice Reform, and it would not unduly 
burden the federal court system. The proposed rule was written to 
minimize litigation and provide a clear legal standard for affected 
conduct, and was reviewed carefully to eliminate drafting errors and 
ambiguities.

Unfunded Mandates Reform Act of 1995 and Executive Order 12875

    This proposed rule was reviewed in accordance with the Unfunded 
Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501 et seq.) and 
Executive Order 12875. We have determined that this proposed rule 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. 
Accordingly, we have not prepared a budgetary impact statement.

Paperwork Reduction Act

    This regulatory action contains no information collection 
requirements.

Regulatory Flexibility Act

    This proposed rule would not have a ``significant economic impact 
on a substantial number of small entities.'' The proposed rule affects 
states and state agencies, which are not within the definition of 
``small entity'' under 5 U.S.C. 601(6). 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.

Congressional Review Act

    This proposed rule is not a ``major rule'' as defined by Section 
804 of the Small Business Regulatory Enforcement Fairness Act of 1996. 
This proposed rule would 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 
companies to compete with foreign-based companies in domestic and 
export markets.

Effect on Family Life

    We certify that this proposed rule was assessed in accordance with 
Public Law 105-277, 112 Stat. 2681, and that the proposed rule would 
not adversely affect the well-being of the nation's families.

List of Subjects in 20 CFR Part 604

    Employment and Training Administration, Labor, 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, DC on July 14, 2005.
Emily Stover DeRocco,
Assistant Secretary of Labor, Employment and Training Administration.

Words of Issuance

    For the reasons set forth in the preamble, the Department of Labor 
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 ELIGIBILITY FOR UNEMPLOYMENT COMPENSATION

Sec.
604.1 Purpose and scope.
604.2 Definitions.
604.3 Able and available requirement--general principles.
604.4 Application--ability to work.
604.5 Application--availability for work.
604.6 Conformity and substantial compliance.

    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); 42 U.S.C. 1320b-7(d); 
Secretary's Order No. 4-75 (40 FR 18515); and Secretary's Order No. 
14-75 (November 12, 1975).


Sec.  604.1  Purpose and Scope.

    The purpose of this part is to implement the requirements of 
federal UC law that limit a state's payment of UC to individuals who 
are able to work and available for work. This part applies to all state 
UC laws and programs.


Sec.  604.2  Definitions.

    Department means the United States Department of Labor.
    FUTA means the Federal Unemployment Tax Act, 26 U.S.C 3301 et seq.
    Social Security Act means the Social Security Act, 42 U.S.C.
    State means a state of the United States of America, the District 
of Columbia, the Commonwealth of Puerto Rico, and the United States 
Virgin Islands.
    State UC agency means the agency of the state charged with the 
administration of the state's UC law.
    State UC law means the law of a state approved under Section 
3304(a), FUTA (26 U.S.C. 3304(a)).
    Unemployment Compensation (UC) means cash benefits payable to 
individuals with respect to their unemployment.
    Week of unemployment means a week of total, part-total or partial 
unemployment as defined in the state's UC law.

[[Page 42481]]

Sec.  604.3  Able and available requirement--general principles.

    (a) A state may pay UC only to an individual who is able to work 
and available for work for the week for which UC is claimed.
    (b) Whether an individual is able to work and available for work 
under paragraph (a) of this section shall be tested by determining 
whether the individual is offering services for which a labor market 
exists. This does not mean that job vacancies must exist, only that, at 
a minimum, the type of services the individual is able and available to 
perform are generally performed in the labor market. The state shall 
determine the geographical scope of the labor market for an individual 
under its UC law.
    (c) The requirement that an individual be able to work and 
available for work applies only to the week of unemployment for which 
UC is claimed. It does not apply to the reasons for the individual's 
separation from employment, although the separation may indicate the 
individual was not able to work or available for work during the week 
the separation occurred. This part does not address the authority of 
states to impose disqualifications with respect to separations. This 
part does not limit the states' ability to impose additional able and 
available requirements that are consistent with applicable Federal 
laws.


Sec.  604.4  Application--ability to work.

    (a) A state may consider an individual to be able to work during 
the week of unemployment claimed if the individual is able to work for 
all or a portion of the week claimed, provided that any limitation on 
his or her ability to work does not constitute a withdrawal from the 
labor market.
    (b) If an individual has previously demonstrated his or her ability 
to work and availability for work following the most recent separation 
from employment, the state may consider the individual able to work 
during the week of unemployment claimed despite the individual's 
illness or injury, unless the individual has refused an offer of 
suitable work due to such illness or injury.


Sec.  604.5  Application--availability for work.

    (a) General application. A state may consider an individual to be 
available for work during the week of unemployment claimed under any of 
the following circumstances:
    (1) The individual is available for any work for all or a portion 
of the week claimed, provided that any limitation placed by the 
claimant on his or her availability does not constitute a withdrawal 
from the labor market.
    (2) The individual limits his or her availability to work which is 
suitable for such individual as determined under the state UC law, 
provided such limitation does not constitute a withdrawal from the 
labor market. In determining whether the work is suitable, states may, 
among other factors, take into consideration the education and training 
of the individual, the commuting distance from the individual's home to 
the job, the previous work history of the individual (including salary 
and fringe benefits), and how long the individual has been unemployed.
    (3) The individual is on temporary lay-off and is available to work 
only for the employer that has temporarily laid-off the individual.
    (b) Jury service. If an individual has previously demonstrated his 
or her availability for work following the most recent separation from 
employment and is appearing for duty before any court under a lawfully 
issued summons during the week of unemployment claimed, a state may 
consider the individual to be available for work. For such an 
individual, attendance at jury duty may be taken as evidence of 
continued availability for work. However, if the individual does not 
appear as required by the summons, the state must determine if the 
reason for non-attendance indicates that the individual is not able to 
work or is not available for work.
    (c) Approved training. An individual may not be denied UC for 
failure to be available for work during a week if, during such week, 
the individual is in training with the approval of the state agency. 
However, if the individual fails to attend or otherwise participate in 
such training, the state must determine if the reason for non-
attendance or non-participation indicates that the individual is not 
able to work or is not available for work.
    (d) Self-employment assistance. An individual may not be denied UC 
for failure to be available for work during a week if, during such 
week, the individual is participating in a self-employment assistance 
program and meets all the eligibility requirements of such self-
employment assistance program.
    (e) Short-time compensation. An individual participating in a 
short-time compensation (also known as worksharing) program shall not 
be denied UC under the state UC law for failure to be available for 
work during a week, but such individual shall be required to be 
available for his or her normal workweek.
    (f) Alien status. To be eligible for UC for a week, an alien must 
meet the able to work and available for work requirements of this part. 
To be considered available for work in the United States for a week, 
the alien must be legally authorized to work that week in the United 
States by the appropriate agency of the United States government. In 
determining whether an alien is legally authorized to work in the 
United States, the state shall follow the requirements of Section 
1137(d), SSA, which relate to verification of and determination of an 
alien's status.
    (g) The requirement that an individual be available for work does 
not require an active work search on the part of the individual. States 
may, however, require an individual to be actively seeking work to be 
considered available for work, or states may impose a separate 
requirement that the individual must actively seek work.


Sec.  604.6  Conformity and substantial compliance.

    (a) In general. A state's UC law must conform with, and the 
administration of its law must substantially comply with, the 
requirements of this part for purposes of certification under:
    (1) Section 3304(c), FUTA, with respect to whether employers are 
eligible to receive credit against the federal unemployment tax 
established by Section 3301, FUTA, and
    (2) Section 302, SSA, with respect to whether a state is eligible 
to receive federal grants for the administration of its UC program.
    (b) Resolving issues of conformity and substantial compliance. For 
the purposes of resolving issues of conformity and substantial 
compliance with the requirements of this part, the following provisions 
of 20 CFR 601.5 apply:
    (1) Paragraph (b), pertaining to informal discussions with the 
Department of Labor to resolve conformity and substantial compliance 
issues, and
    (2) Paragraph (d), pertaining to the Secretary of Labor's hearing 
and decision on conformity and substantial compliance.
    (c) Result of Failure to Conform or Substantially Comply.
    (1) FUTA Requirements. Whenever the Secretary of Labor, after 
reasonable notice and opportunity for a hearing to the state UC agency, 
finds that the state UC law fails to conform, or that the state or 
state UC agency fails to comply substantially, with the requirements of 
the FUTA, as implemented in this part,

[[Page 42482]]

then the Secretary of Labor shall make no certification under such act 
to the Secretary of the Treasury for such state as of October 31 of the 
12-month period for which such finding is made. Further, the Secretary 
of Labor shall notify the Governor of the state and such state UC 
agency that further payments for the administration of the state UC law 
will not be made to the state.
    (2) SSA Requirements. Whenever the Secretary of Labor, after 
reasonable notice and opportunity for a hearing to the state UC agency, 
finds that the state UC law fails to conform, or that the state or 
state UC agency fails to comply substantially, with the requirements of 
Title III, SSA, as implemented in this regulation, then the Secretary 
of Labor shall notify the Governor of the state and such state UC 
agency that further payments for the administration of the state UC law 
will not be made to the state until the Secretary of Labor is satisfied 
that there is no longer any such failure. Until the Secretary of Labor 
is so satisfied, the Department of Labor shall make no further payments 
to such state.

[FR Doc. 05-14384 Filed 7-21-05; 8:45 am]
BILLING CODE 4510-30-P