[Federal Register Volume 71, Number 187 (Wednesday, September 27, 2006)]
[Rules and Regulations]
[Pages 56830-56848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8185]



[[Page 56829]]

-----------------------------------------------------------------------

Part VIII





Department of Labor





-----------------------------------------------------------------------



Employment and Training Administration



-----------------------------------------------------------------------



20 CFR Part 603



Federal-State Unemployment Compensation Program (UC); Confidentiality 
and Disclosure of State UC Information; Final Rule

  Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / 
Rules and Regulations  

[[Page 56830]]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 603

RIN 1205-AB18


Federal-State Unemployment Compensation Program (UC); 
Confidentiality and Disclosure of State UC Information

AGENCY: Employment and Training Administration, Labor.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Department of Labor (Department) is issuing this 
final rule to set forth the statutory confidentiality and disclosure 
requirements of Title III of the Social Security Act (SSA) and the 
Federal Unemployment Tax Act (FUTA) concerning unemployment 
compensation (UC) information. The final rule also amends the Income 
and Eligibility Verification System (IEVS) regulations, a system of 
required information sharing primarily among State and local agencies 
administering several federally assisted programs.

DATES: Effective Date: This final rule is effective October 27, 2006.
    Applicability Date: States that need to amend their laws, rules, 
procedures, or existing agreements in order to conform and comply with 
the requirements of this rule have two years from the effective date of 
the final rule to do so.

FOR FURTHER INFORMATION CONTACT: Gerard Hildebrand, Chief, Division of 
Legislation, Office of Workforce Security, Employment and Training 
Administration, (202) 693-3038 (this is not a toll-free number) or 1-
877-889-5627 (TTY), or by e-mail at [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    The first Notice of Proposed Rulemaking concerning confidentiality 
and disclosure of State UC information was issued in 1992. (57 FR 10063 
(March 23, 1992).) Given the time that elapsed following this 1992 
NPRM, the Department published a new NPRM on August 12, 2004. (69 FR 
50022.) Comments were invited through October 12, 2004.

General Discussion of Final Rule

    This final rule implements Federal UC laws concerning 
confidentiality and disclosure of UC information and establishes 
uniform minimum requirements for the payment of costs, safeguards, and 
data-sharing agreements to ensure responsible use when UC information 
is disclosed. The confidentiality requirement implemented by this rule 
is derived from the ``methods of administration'' requirement of 
Section 303(a)(1), SSA. The disclosure requirements are from Sections 
303(a)(7), (c)(1), (d), (e), (f), (h), and (i), SSA, and Section 
3304(a)(16), FUTA. This rule revises the regulations at 20 CFR Part 
603, to implement all of these statutory provisions. (The present rule 
at Part 603, which this final rule replaces, addresses only Section 
303(f), SSA (concerning IEVS)). These statutory provisions each address 
disclosure to governmental entities, but they vary with respect to the 
specific information to be disclosed and the terms and conditions of 
disclosure.
    The confidentiality and disclosure requirements in Title III of the 
SSA relating to UC information are conditions for receipt of grants by 
the States for UC administration. The disclosure requirements in the 
FUTA are conditions required of a State in order for employers in that 
State to receive credit against the Federal unemployment tax under 26 
U.S.C. 3302.
    Other Federal laws may require use or disclosure of confidential UC 
information. For example, the Workforce Investment Act (WIA) of 1998, 
Public Law 105-220, requires States to measure their progress in 
providing services funded under Title I of the WIA against State and 
local performance measures using ``quarterly wage records, consistent 
with State law.'' 29 U.S.C. 2871(f)(2); 20 CFR 666.150(a). Because 
these laws do not condition receipt of UC grants under the SSA or 
certification for employer tax credits under the FUTA on such use or 
disclosure, the rule does not implement these laws. However, the 
disclosure of confidential UC information in compliance with the WIA 
and other Federal laws is permitted under the general exceptions to 
confidentiality in Sec.  603.5 of this final rule. (For more 
information on the requirement to use wage records under the WIA, see 
20 CFR 666.150.) The Department stated previously and repeats here that 
it strongly encourages States to amend their laws to permit disclosure 
for WIA purposes if their State laws do not already provide for such 
disclosure.

Comments Received on the NPRM

    The Department received 38 pieces of correspondence commenting on 
the NPRM by the close of the comment period. The majority of the 
comments--24--were from State UC agencies. Eight commenters--all State 
UC agencies--objected to the rule. The remaining 16 State UC agencies 
appeared neutral, or even supported the objectives of the rule, while 
offering technical comments. Other commenters included employer 
interest groups, researchers, the U.S. Census Bureau, and the National 
Association of State Workforce Agencies. All timely comments were 
considered and are included in the rulemaking record. Several comments 
were not germane to this rulemaking and, therefore, are not addressed.

Discussion of Comments--General

    Rule not necessary. Several commenters stated that the rule was not 
necessary because the UC program has functioned for 60 years without 
such a rule and there was no evidence of a problem that would be 
rectified by a Federal rule, which one commenter said was an 
``overreaction'' to any abuses that may have occurred.
    While the Department appreciates that States have long protected 
certain UC information, the rule is necessary to comply with statutory 
mandates in the SSA. The SSA provides that the Department establish 
safeguards ``in regulations'' to insure that information required to be 
disclosed to certain governmental entities is used only for the 
purposes for which it is disclosed. Sections 303(d)(1)(B), (e)(1)(B), 
and (i)(1)(B), SSA. Section 303(h)(1)(C), SSA, also provides that the 
Department establish ``safeguards'' although it does not explicitly 
refer to regulations. Applying the regulation to all disclosed UC 
information will result in more uniform treatment among entities and, 
thereby, a certain degree of simplicity.
    Moreover, absent this regulation, information that is highly 
protected when collected for other Federal purposes (for example, 
Social Security and Federal income tax) would lack explicit protection 
under Federal laws and regulations when it is collected for purposes of 
the Federal-State UC program. Indeed, much of the demand for use of UC 
information for non-UC purposes exists because information collected 
for the UC program is currently subject to less stringent legal 
protections, although it is no less sensitive. That demand has been 
increasing as technology makes data sharing easier and as UC 
information is used for program evaluations. Thus, while the Department 
believes that a considerable degree of State flexibility should exist 
with regard to confidentiality and that data should be shared under 
certain circumstances, we do not believe it is appropriate to be 
passive in this matter, particularly in a

[[Page 56831]]

climate of heightened concern regarding identity theft.
    Requirements of the Rule. Several comments indicated confusion 
concerning the requirements of the rule. For example, some commenters 
viewed the rule as requiring that certain records must be open to the 
public or requiring certain disclosures that are merely optional on the 
part of the States.
    In response, we note that the rule has two distinct aspects. First, 
it sets minimum requirements concerning what UC information must be 
kept confidential and for the payment of costs, safeguards, and data-
sharing agreements. Nothing prohibits States from having more stringent 
confidentiality provisions than those imposed by the rule, except for 
certain required disclosures (discussed in the next paragraph). For 
example, States may keep appellate records confidential even though the 
rule does not require it.
    Second, the rule implements certain provisions of Federal law 
requiring that certain UC information must be disclosed to certain 
governmental entities. For example, Section 303(e)(1), SSA, requires 
States to disclose information to State child support agencies for 
purposes of establishing certain child support obligations. These 
required disclosure provisions address what information must be 
disclosed to the relevant governmental entities. However, we note that 
the rule also permits, at State option, disclosure to public officials 
in the performance of their duties. As a result, the rule does not 
prohibit the State from disclosing more information to a governmental 
entity than is required under Federal UC law, provided such disclosures 
otherwise meet the conditions of the rule (such as payment of costs).
    Also, several State UC agencies requested more specificity 
regarding the regulation's application in certain areas or the meaning 
of certain words. While these comments have resulted in certain 
clarifications (discussed in the Summary of Comments), in other cases 
no change to the rule resulted. In keeping with the principle that the 
rule establishes minimum requirements, the Department has chosen to 
leave many specific details of implementation to the States. For 
example, although the rule requires that penalties be assessed under 
State law for unlawful disclosure of confidential UC information, it 
does not specify what these penalties must be. Similarly, although the 
rule addresses disposition of confidential UC information when it is 
disclosed to governmental agencies or private entities, the Department, 
consistent with its long-established practice, has chosen not to 
regulate State court practices involving the UC program. States are, 
therefore, free to address disposition by their courts as they see fit. 
In addition, the Department does not believe it is necessary to define 
certain commonly used terms (such as ``audit''), as one commenter 
requested.
    Finally, several commenters expressed concerns about the limited 
scope of the mandatory disclosure provisions. For example, one 
commenter noted that the disclosure provision in Sec.  603.6(b)(3) 
required disclosure of certain information to ``officers and employees 
of any State food stamp agency,'' but not to ``county social service 
agencies [that] carry out Food Stamp eligibility determinations under 
the policy direction of the State Food Stamp agency.'' In this case, 
the rule reflects Federal law, which requires disclosure only to ``any 
State food stamp agency.'' (See Section 303(d)(1)(A), SSA.) However, 
nothing prohibits disclosure to public officials employed by a county 
when such disclosure is for use in the performance of a public 
official's duties and is otherwise consistent with the rule. (See Sec.  
603.5(e))
    Effect of Rule. One commenter expressed concern that any rule 
should ``(1) encourage uniform procedures among the States, preferably 
by including a model State law in the rulemaking, and (2) avoid 
unnecessary State legislation.'' That commenter was also concerned 
about why a ``State law'' needed to specifically address disclosure of 
``an individual's information to that individual, or an employer's 
information to that employer.'' In a similar vein, another commenter 
stated that the definition of ``State law'' should be expanded to 
include ``an administrative rule, written policy or administrative 
interpretation,'' thereby avoiding State legislation.
    The Department does not believe model legislation is necessary or 
desirable. All State UC laws currently contain confidentiality 
provisions, which have been interpreted over the years through 
regulations, court cases, and administrative rulings. State UC agencies 
are aware of these interpretations, which will influence their 
implementation of the regulation's requirements, including their 
determination of whether amendments to the State code, rules, or 
procedures are necessary to specifically address the requirements of 
the regulation.
    The Department considers regulations and administrative rulings to 
be part of the ``State UC law'' for purposes of conformity with Federal 
law. Since these regulations and rulings are treated as law, the 
Department does not believe there is need to change the definition of 
``State law.''
    One commenter expressed the concern that the rule would lead to a 
``lack of uniformity'' among States. Other commenters believed that the 
rule would undermine State laws that are currently more restrictive 
than the rule. The Department believes that the rule will result in 
greater, rather than less, uniformity among States because it requires 
some States to raise their confidentiality requirements to meet the 
minimum requirements of this rule. The Department appreciates that 
States have valid reasons for maintaining UC confidentiality laws that 
are stricter than those required by the rule. On balance, we believe 
that the rule will serve to enhance confidentiality requirements by 
making disclosure subject to the minimum requirements of the rule, 
while permitting States to provide additional protections.
    Rule would increase costs and burdens. Several State UC agencies 
objected to the rule on the grounds that it would result in substantial 
new costs, would be excessively burdensome, or would be a distraction 
to program administration.
    The rule is, to the extent possible, written to minimize the burden 
on the States, recognize existing State practices, and permit 
implementation within existing resource levels. Our analysis of the 
objections regarding costs and burdens indicate that most were based on 
misunderstanding of the requirements of the rule. Notably, some 
commenters read the rule to require formal agreements before disclosure 
may be made to an individual's agent, and some commenters objected to 
the requirement that States ``periodically audit'' every entity 
receiving UC information, including the individual's agent. (See 
Sec. Sec.  603.10(b)(2) and 603.9(b)(2), respectively.) However, both 
of these requirements pertained only to ongoing disclosures made to a 
third party (other than an agent), who typically requests many 
individuals to authorize the disclosure of information to them. (For 
example, mortgage lenders once routinely asked applicants to authorize 
disclosure of their confidential UC information.) Also, these types of 
ongoing disclosures are entirely optional on the part of the State.
    Similarly, some commenters read the rule to require States to 
charge for the costs associated with disclosing an individual's 
information to that individual or an agent, and stated that the 
administrative costs of establishing such a collection system would be 
burdensome. However, such a collection system would only be necessary 
where

[[Page 56832]]

the disclosure of information is for non-UC purposes and where the 
associated costs for the disclosure are not nominal (as determined on a 
case-by-case basis) and which, therefore, must be reimbursed. (See 
Sec.  603.8(b).) While nominal costs need not be reimbursed under this 
final rule, the State or State UC agency is not precluded from charging 
for the costs of such disclosures.
    Another notable area concerning burden was that some commenters 
read the notification provisions of Sec.  603.11 (pertaining to 
claimants and employers) to require far greater effort than they 
actually require. The content of the notice to claimants and employers 
need not be complex or lengthy, and need not specify all potential uses 
of confidential UC information. The notice may simply state that 
confidential UC information will be used for other governmental 
purposes, including verifying an individual's eligibility for other 
governmental programs. Because the current rule at Sec.  603.4 already 
requires notice to claimants that information will be used for IEVS 
purposes, the Department does not believe that the new notification 
requirements materially increase the burden on States.
    As a result of these comments, the final rule has been edited for 
clarity. Specific clarifications are discussed in the Summary of 
Comments. Also discussed in the Summary of Comments are revisions to 
the provisions requiring a motion to quash subpoenas to recognize that 
States may have more informal, less costly means of prevailing against 
subpoenas without actually filing a motion to quash. (See discussion of 
Sec.  603.7(a).)
    Some commenters were concerned that the rule would be ``an unfunded 
mandate'' on State UC agencies or on requesting entities. One commenter 
disagreed with our determination that the rule was not ``economically 
significant'' because of the costs that recipients of UC data would 
incur under the rule. In response, the Department notes that the final 
rule--like the proposed rule--requires that costs of providing UC 
information for non-UC purposes must be paid by the requesting entity. 
The final rule further provides that such costs may be paid, if 
applicable, by another source paying on behalf of the recipient. Thus, 
with regard to UC agencies, which this rule regulates, it will not 
create an unfunded mandate.
    The sharing of UC information for non-UC purposes has never been a 
permissible cost of administering the State's UC law. (Specifically, 
Section 302(a), SSA, permits the Secretary to certify as payable to 
States only amounts ``necessary for the proper and efficient 
administration of'' the State's UC law. Further, Section 303(a)(8), 
SSA, limits the use of the State's UC grant to the ``proper and 
efficient administration of'' the State's UC law.) State UC agencies 
should already be charging for all costs associated with disclosures 
that incur more than incidental costs. Thus, on this point, the rule 
merely reflects current law. For this reason, we do not believe the 
rule is ``economically significant'' because, based on the information 
available to the Department, almost all States already charge 
recipients for the costs of disclosure.
    Confidentiality Principles. Two commenters raised questions 
concerning the confidentiality principles that were contained in the 
preamble of the proposed rule.
    One commenter noted that, although one fair information principle 
provided that subjects of an information collection ``should have the 
right to access and amend information about them,'' the rule itself did 
not specifically address the right to amend. The commenter expressed 
concern that, if amendment of the wage record were required, this would 
create new costs and questioned whether these costs would be payable 
through UC grant funds.
    This commenter is correct that the right to amend is not explicitly 
addressed in the rule. As a result, States are left to decide when 
allegations of erroneous wage records would be investigated and when 
amendment would occur. Because most wage records are purged without 
ever being used for UC purposes, it is unnecessary to attempt to 
correct every alleged erroneous wage record. Further, correcting wage 
records might impose a substantial, but unnecessary, burden on the 
State. For example, prior to correcting a wage record, an audit may be 
needed to resolve an individual's allegation that an employer failed to 
report wages, or whether the individual was properly classified as an 
independent contractor, in which case no wages would be reportable. 
States may use such assertions in targeting employers for UC audits, 
which may be paid from UC grants. However, if such corrections do not 
in any way serve the administration of the UC program (such as 
correcting a wage record that is no longer in the State's base period 
and that does not affect taxes owed by the employer), the costs of 
these corrections may not be paid from grant funds because they are not 
necessary for the proper and efficient administration of the UC 
program. Therefore, under the rule, the State is not required to make 
such corrections.
    The Department's expectation is that wage records will be corrected 
as necessary in the course of the routine administration of the State's 
UC law. This usually occurs during the claims determination process or 
in the process of determining if the worker's services were performed 
in covered employment.
    Another commenter stated it would be helpful to ``provide further 
illumination of these fair information principles because it would be 
helpful for State agencies in explaining the rationale behind the 
federal rule.'' The Department believes sufficient explanation of these 
principles in terms of the UC program and the rationale for 
promulgating this rule were provided in the preamble to the proposed 
rule.
    Timeframe for Compliance with Rule. Several commenters asked 
questions concerning the effective date of the rule. The rule is 
effective 30 days after publication and States should make reasonable 
efforts to implement its requirements by that date, especially in cases 
where the rule involves only minor changes to State procedures. 
However, the Department recognizes that States may need additional time 
to changes laws, rules, procedures, or existing agreements. As such, 
States will be given two years from the effective date of this rule to 
conform and comply with its requirements, as provided in the 
``Applicability Date'' section of this preamble.
    Use of Social Security Account Numbers for UC Purposes. One 
commenter, representing employer interests, encouraged the Department 
``to require all State UC agencies to use the [social security account 
number] as the sole UC claim record identifier'' or, alternatively, to 
create a ``uniform record identifier, which attaches to an existing 
[social security account number] after the filing of a claim.'' 
Essentially, this comment reflected concerns that employers may not be 
able to identify claimants, and therefore participate in the UC 
eligibility process, if the social security account number is not used.
    The Department appreciates this concern. However, the Department 
believes this comment is beyond the scope of this rulemaking, which 
sets minimum requirements for States in preserving the confidentiality 
of UC information. Instead, the Department is addressing this 
commenter's concern by working with the States to assure that employer 
participation in the UC program is not impinged. The

[[Page 56833]]

Department issued Unemployment Insurance Program Letter (UIPL) 21-05 to 
raise awareness of this concern.
    Comments that are not addressed in the above general discussion are 
discussed below in the Summary of Comments. Also discussed below are 
any substantive changes made to the rule, stemming primarily from the 
comments received. Non-substantive changes are not discussed. The 
following Summary is organized sequentially by section heading.

Summary of Comments

    To efficiently respond to public comments and explain changes to 
the rule resulting, in large part, from those comments, only the 
pertinent portions of the rule are discussed below. The basic format of 
the below summary of comments begins with a review of the proposed rule 
provision, followed by a discussion of the public comments, and 
concludes with what, if any, resulting changes are reflected in the 
final rule.

Section 603.2 What definitions apply to this part?

(c) Public Domain Information
    The proposed rule included appeals records and decisions, and 
precedential determinations on coverage or employers, employment, and 
wages within the definition of public domain. The inclusion of these 
records within this definition was intended to afford States discretion 
in choosing whether to permit the disclosure of such information, since 
the proposed rule would not have required that information in the 
public domain be kept confidential.
    However, several commenters expressed concern about treating 
appeals records and decisions as public domain information. They 
apparently interpreted the treatment of appeals records and decisions 
as being in the ``public domain'' to imply that the public had a right 
to such decisions. To establish that this is not the case, and to 
insure that some appeals information such as social security account 
numbers remain confidential, appeals records and decisions have been 
removed from the definition of public domain information in the final 
rule.
    Appeals records and decisions, as well as precedential 
determinations on coverage of employers, employment, and wages (which 
often are appellate decisions), are now treated in the final rule under 
Sec.  603.5(b) as exceptions to the confidentiality requirement. This 
means that a State may, but need not, disclose this information. These 
matters are addressed more fully in the discussion relating to Sec.  
603.5(b).
(d) Public Official
    The proposed rule limited disclosures for legislators (elected 
officials) to those who need confidential UC information for 
``oversight'' purposes. Commenters expressed concern that this 
standard, as it related to elected officials, was vague and that, as a 
result, it would be difficult to implement and difficult to determine 
whether a particular elected official was performing ``oversight'' 
functions. In response to these comments, the Department has omitted 
the reference to ``oversight'' in the definition of ``public official'' 
in the final rule.
    Some commenters also expressed concern that the proposed rule would 
impinge upon an elected official's need and ability to address 
constituent inquiries concerning a UC matter. However, the proposed 
rule would have permitted an elected official performing constituent 
services to obtain confidential UC information because the elected 
official is acting as the agent of the constituent who requested the 
elected official's assistance. The final rule clarifies this treatment 
of elected officials and this clarification is further discussed in 
Sec.  603.5(d)(1) (pertaining to agents).

Section 603.4 What is the confidentiality requirement of Section 
303(a)(1) of the SSA?

(b) Interpretation
    The proposed rule set forth the Department's interpretation of 
Section 303(a)(1), SSA, as including a basic requirement of 
confidentiality. It explained that States are required to maintain the 
confidentiality of any UC information which reveals the name or any 
identifying particular about any individual or any past or present 
employer or employing unit, or which could foreseeably be combined with 
other publicly available information to reveal any such particulars, 
and to bar the disclosure of such information, except as provided in 
the rule.
    Moreover, the proposed rule explained that the confidentiality 
requirement has its origin in the beginning of the program and is 
derived from Section 303(a)(1), SSA. Section 303(a)(1), SSA, requires 
States to provide in their laws, as a condition of administrative 
grants, for such ``methods of administration'' as the Secretary 
determines are ``reasonably calculated to insure full payment of 
unemployment compensation when due.'' From the early years of the 
program this provision has been interpreted to require the 
confidentiality of information collected from individuals and employers 
for UC program administration. Confidentiality is necessary to avoid 
deterring individuals from claiming benefits or exercising their 
rights, to encourage employers to provide information necessary for 
program operations, to avoid interference with the administration of 
the UC program, and to avoid notoriety for the program if program 
information were misused.
    Two commenters, while generally agreeing that UC information should 
be kept confidential, objected to using the ``methods of 
administration'' requirement of Section 303(a)(1), SSA, as a statutory 
basis for the rule. One noted that this section's language does not 
``lead to the conclusion that confidentiality is required by federal 
law.'' While the Department agrees that this section of the law 
contains no explicit reference to confidentiality, it does give the 
Secretary the authority to determine what ``methods of administration'' 
are necessary. For the reasons explained above, the Department has long 
interpreted Section 303(a)(1), SSA, to require confidentiality of 
certain UC information as a ``method of administration * * * reasonably 
calculated to insure full payment of unemployment compensation when 
due.'' Also, Congress has several times directed the Department to 
establish safeguards ``in regulations'' to insure that certain 
information is used only for the purposes for which it is disclosed. 
Since it makes no sense to require States to assure the continued 
confidentiality of disclosed information if that information is not, in 
the first place, considered confidential, the Department believes 
Congress recognized a longstanding Federal requirement that UC 
information be confidential. Section 303(a)(1), SSA, is the source of 
that requirement. No change to the final rule resulted from the above 
comments.
    Two other commenters asserted that Section 906, SSA, which relates 
to the Secretary establishing a program of research for the UC system, 
should be used as a statutory basis for the rule. While some research 
conducted under Section 906 may result in the Secretary (or her agents) 
obtaining confidential UC information from the States, it does not in 
any way place any requirements on the States. Therefore, the Department 
has not added Section 906 to the statutory authority.

[[Page 56834]]

Section 603.5 What are the exceptions to the confidentiality 
requirement?

    This section of the proposed rule sets forth the permissible 
exceptions to the confidentiality requirement. Only those paragraphs 
for which comments were received are discussed below.
(a) Public Domain Information
    The confidentiality requirement does not apply to information in 
the public domain, as defined in Sec.  603.2(c). This means the 
determination of whether and how much information is open to the public 
or is kept confidential is left to the State.
    Some UC information, such as employer names and addresses, is 
public in the sense that it is available from other public sources like 
telephone directories, but it is not public domain information for the 
purposes of this final rule and, therefore, must be kept confidential 
by the State or State UC agency because it is collected from employers 
expressly for purposes of administering the UC program. Since the scope 
of this final rule applies to State and State UC agencies, it does not 
attempt to restrict access to information that may be available from 
other public resources.
    As noted previously and detailed below, the final rule differs from 
the proposed rule in that ``appeals records and decisions'' are no 
longer listed as being public domain information, although 
``precedential decisions on benefit eligibility'' would be public 
domain information, as are any other precedential decision. Appeals 
records and decisions are now treated under paragraph (b) of Sec.  
603.5.
(b) UC Appeals Records (``Administration of the UC Program'' in the 
Proposed Rule)
    In the proposed rule, paragraph (b) of Sec.  603.5 addressed the 
inapplicability of the confidentiality requirement when disclosure was 
necessary for the proper administration of the UC program. However, 
paragraph (a) of Sec.  603.6 of the proposed rule also required the 
disclosure of confidential UC information necessary for the proper 
administration of the UC program. Because the rule requires this 
disclosure, the Department determined that the exception at paragraph 
(b) of Sec.  603.5 relating to ``administration of the UC program'' was 
repetitive and unnecessary. As a result, proposed paragraph (b) of 
Sec.  603.5 has been deleted from the final rule and replaced with the 
new paragraph on ``UC appeals records''.
    This new paragraph on UC appeals records was developed to minimize 
the confusion on the part of commenters, caused by its original 
placement within the definition of ``public domain.'' In the proposed 
rule, appeals records were treated as being excluded from the 
confidentiality requirements because they were identified as ``public 
domain'' information. Because some commenters took this to mean that 
appeals records must be in the public domain, the Department has placed 
``UC appeals records'' in paragraph (b) as an exception to the 
confidentiality requirement. Thus it should be clear that a State may, 
but need not, disclose these records.
    Two commenters argued that hearing records and appeals decisions 
should be closed to the public. One commenter noted that employers may 
have to disclose ``trade secrets such as customer lists, cost and price 
data, sales forecasts, and financial reports during [the] proceeding.'' 
This commenter noted that parties may also have to ``submit information 
that may be embarrassing, such as drug test results, or inflammatory, 
such as allegations of sexual harassment'' and that ``a critical 
element of a case may require disclosure of information that would be 
protected by law in other contexts, such as personal medical 
information.''
    Although the Department recognizes that these are strong arguments 
for closing appeals hearings and keeping all appeals records 
confidential, there are also arguments for open hearings and records. 
The Department has historically held that the public interest in proper 
administration of the UC program, specifically in payments of benefits 
only to eligible individuals, and in open governmental adjudicatory 
proceedings is served by open hearings and hearing records. Further, 
public access to hearings ensures fair treatment by the appeals 
tribunal. Thus, in recognition of these competing views, the Department 
continues to believe that any determination of whether to close 
appellate hearings and keep records confidential should be left to the 
States. As a result, the final rule maintains the position that appeals 
records and decisions are not subject to the confidentiality 
requirement.
    One commenter addressed the issue of redacting information that may 
identify the individual or claimant. The Department agrees that social 
security account numbers should be redacted from appeals records and 
decisions before they may be made available to the public. Identity 
theft related to misuse of social security account numbers is a growing 
concern, and, as a result, an individual may be reluctant to pursue an 
appeal if it results in his or her social security account number 
becoming publicly available. While the Department does not believe 
redaction of an individual or employer's name is necessary, the final 
rule does not prohibit States from redacting more information than is 
required to be kept confidential. Indeed, we recognize that redaction 
of such information already occurs in some States and may be mandated 
by both the State's UC law and other State confidentiality statutes. 
Recognizing this, the final rule provides that disclosure of appeals 
records and decisions, including precedential decisions, is conditioned 
upon the above redactions as consistent with applicable laws.
    As a result of these comments, the final rule has been revised to 
provide that appeals records and decisions are excluded from the 
confidentiality requirement as are precedential determinations on 
coverage of employers, employment, and wages (which usually are 
appellate decisions). The final rule also conditions disclosure of 
these records upon the redaction of social security account numbers, 
provided that such disclosure is otherwise consistent with Federal and 
State law.
(d) Informed Consent
    The proposed rule provided for disclosure of confidential UC 
information on the basis of informed consent to an ``agent or 
attorney'' of the individual or employer about whom the information 
pertains and to ``third parties.'' Under both informed consent 
provisions, a written release from the individual or employer was 
required; however, additional conditions were placed upon disclosures 
to ``third parties'' because of the greater potential for misuse of the 
information. The ``third parties'' provision was intended to capture 
those requests for confidential UC information that occur on an ongoing 
basis (such as an income verification service for lenders), not 
requests wherein the entity is acting as an agent, that is, someone who 
is working on behalf of the individual or employer (such as an attorney 
representing an individual or employer in the litigation of a UC 
claim). This distinction was not clear to commenters and led to 
confusion as to the intent and actual requirements of each provision.
    As a result of comments, the Department has made several changes in 
paragraph (d) in the final rule. The paragraph has been restructured to 
eliminate confusion regarding the requirements of each provision 
(including the requirements associated with written releases). Further, 
we re-

[[Page 56835]]

titled paragraph (d)(2) and we clarified that it applies to instances 
where an entity is not acting as an agent and to instances where 
disclosure is made on an ongoing basis. Specific changes relating to 
the each provision are addressed below following a discussion of the 
comments that led to those changes.
    As a general note, the Department emphasizes that this provision 
imposes minimum requirements on disclosure. The final rule does not 
require States to disclose information under this exception. Also, if a 
State authorizes disclosure based on informed consent, the final rule 
does not prohibit States from placing additional restrictions on such 
disclosures.
Paragraph (d)(1)--Agent (``Agent or Attorney'' in the Proposed Rule)
    The title of paragraph (d)(1) was changed from ``Agent or 
attorney'' in the proposed rule to ``Agent'' in the final rule with 
explanation provided as to the meaning of ``agent,'' which would 
include an attorney. These changes resulted from confusion expressed by 
commenters and to better distinguish between paragraph (d)(1) and 
paragraph (d)(2) (discussed below) and their differing requirements. It 
was and still is intended that disclosures under paragraph (d)(1) will 
generally be one-time only events in terms of both the individual (or 
employer) requesting the disclosure and the agent receiving the 
information.
    Two commenters requested explanation of the term ``agent.'' Under 
common usage, the term ``agent'' describes one who acts for or in the 
place of an individual or employer by the authority of that individual 
or employer. In response to such comments, paragraph (d)(1) of the 
final rule has been changed to include this description of ``agent.''
    Several commenters expressed concern that the proposed rule did not 
permit disclosure to elected officials performing constituent services. 
(This was discussed above under Sec.  603.2 regarding disclosure to 
public officials.) The Department disagrees. When an elected official 
is acting in response to a constituent's inquiry about a UC matter, 
such as the individual's UC claim, the elected official is acting on 
the individual's behalf and, therefore, is effectively the individual's 
agent in resolving issues related to the claim. This general principle 
of acting on behalf of an individual (or employer) may apply to other 
situations, such as a governor's ombudsman acting on the individual's 
(or employer's) behalf. We do not believe it practical to attempt to 
list all possible applications of this principle in the final rule. 
However, to eliminate the confusion regarding constituent services, the 
final rule now explicitly acknowledges that an elected official 
performing constituent services is acting as an agent of the 
constituent.
    The following discussion pertains to comments on the proposed 
written release requirements associated with disclosures to an agent 
under paragraph (d)(1).
    Some commenters noted that many States have established 
``electronic'' relationships with claimants and employers and 
questioned whether the requirement for ``written releases'' would mean 
that States could not do business electronically. In response to such 
comments, paragraph (d)(1) of the final rule was revised to permit a 
State to disclose confidential UC information based on an 
electronically submitted release, if the State determines that the 
release is authentic. The final rule does not prescribe requirements 
for determining if a written (including electronic) release is 
authentic. Rather, such a determination would depend upon the State's 
own practices and whether the State has established such ``electronic 
relationships''.
    Another commenter pointed out that elected officials may receive 
requests for assistance that do not specifically authorize the 
disclosure of confidential UC information, even though such disclosure 
is necessary for the official to adequately respond to the constituent. 
In response, the final rule has been revised by adding language in 
paragraph (d)(1) that permits the elected official to present 
reasonable evidence of a request for assistance, such as a letter from 
the individual or employer requesting assistance or a written record of 
a telephone request from the individual or employer rather than being 
required to present the ``written release'' described in the proposed 
rule. It is the Department's experience that, in most cases, a U.S. 
Congressman's request for the Department's assistance in reviewing a 
particular claim includes such reasonable evidence and, as a result, it 
is unnecessary to request further evidence from the Congressman.
    One commenter argued that an attorney's legal and ethical 
obligations would sufficiently protect the party about whom information 
is requested without the need for written releases. While the 
Department recognizes these obligations, we are not convinced that an 
attorney should in all cases automatically be given any information 
regarding a client without the client's knowledge, which is evinced 
through a written release. However, the Department agrees that an 
attorney's assertion that he or she has been retained to represent an 
individual or employer on a UC matter is sufficient to authorize the 
disclosure of confidential UC information to the attorney. As in the 
above case of disclosure to an elected official performing constituent 
services, when the individual or employer retains an attorney for UC 
purposes, the expectation is that the attorney will have access to the 
confidential UC information necessary to act on behalf of the 
individual or employer. As a result, paragraph (d)(1) of the final rule 
has been revised to permit disclosure when the attorney asserts that he 
or she has been retained to represent the individual or employer on a 
UC matter.
Paragraph (d)(2)--Third Party (Other Than an Agent) or Disclosures Made 
on an Ongoing Basis (``Third Party'' in the Proposed Rule)
    As mentioned previously, the title of paragraph (d)(2) was changed 
from ``Third party'' in the proposed rule to ``Third party (other than 
an agent) or disclosures made on an ongoing basis'' in the final rule 
in an effort to better distinguish it from paragraph (d)(1).
    The purpose behind this provision is to permit disclosure of 
confidential UC information, under certain conditions, to third parties 
who are not acting as the agent of the individual or employer and to 
third parties who may reasonably be expected to obtain confidential UC 
information on an ongoing basis. These often include situations where 
an entity requests or encourages an individual to permit the disclosure 
of confidential UC information through signing a release form. One such 
example is the disclosure of wage records to a third party for purposes 
of determining if an individual qualifies for a mortgage. Such a 
practice, when routinely followed, may result in the entity compiling 
considerable information pertaining to individuals. (The Department 
notes that, if the third party entity is a governmental entity, then 
the governmental entity may be able to obtain information under 
paragraph (e), permitting disclosure to public officials for use in the 
performance of his or her official duties, without such a written 
release.)
    As explained in the proposed rule, the Department believes that 
additional protections, including additional conditions attached to the 
written release, are necessary for these types of third party 
disclosures because of the greater potential threat to employer or 
individual privacy posed by the entity's collection, storage, 
maintenance, use,

[[Page 56836]]

and possible misuse of confidential UC information. (This question was 
dealt with in Unemployment Insurance Program Letter 23-96 (``Disclosure 
of Confidential Employment information to Private Entities,'' 61 FR 
28236), which is superseded by this final rule.) The purpose specified 
in the release must be limited to providing a service or benefit to the 
individual signing the release that such individual expects to receive 
as a result of signing the release, or carrying out administration or 
evaluation of a public program to which the release pertains. If the 
release does not meet these requirements, the State may not disclose 
confidential UC information. It is expected that the entity requesting 
information on an ongoing basis would create a standard release form, 
approved by the State agency, that would meet all these requirements. 
States are expected to use their judgment in confirming whether a 
release provides a service or benefit to the individual.
    Additional requirements are payment of costs, safeguards, and 
agreements, as provided in Sec. Sec.  603.8 through 603.10. Also, the 
States are required by Sec. Sec.  603.9 and 603.10 to impose certain 
penalties for the misuse of data and to maintain systems sufficient to 
allow an audit of disclosed information, among other things.
    One commenter argued that the rule should permit sharing 
information for purposes of evaluating education and training programs 
established under State law. The commenter stated that ``States should 
also be allowed to share data on an interagency basis where the same 
level of confidentiality protections are in place within the State'' 
without requiring ``informed consent.'' The Department agrees and notes 
that the rule already provides for the type of data-sharing addressed 
in the comment. Where sharing occurs with another governmental entity 
for purposes of administering a law, disclosure of confidential UC 
information is permitted under paragraph (e) (discussed below) without 
any ``informed consent'' on the part of the individual. Further, under 
this rule, administering a law includes conducting research with 
respect to whatever program(s) are administered under the law. This is 
discussed in paragraph (e) (exception pertaining to disclosures to 
``public officials'') since it relates directly to that exception and 
serves to clarify an element of that provision. No change is made in 
paragraph (d)(2) of the final rule as a result of this comment.
    Another commenter stated that the Department should permit a system 
where confidential UC information will automatically be disclosed for 
certain purposes under the Workforce Investment Act unless the 
individual ``opts out'' from disclosing personal information. Under the 
proposed and the final rule, this type of system would be permissible 
when disclosure is solely to public officials in the performance of his 
or her official duties. However, for non-governmental entities, the 
Department believes that any sharing of confidential UC information in 
this regard should be made only following an affirmative release by the 
individual. A passive system, such as an ``opt out'' system, does not 
guarantee that the individual fully understands the purposes of the 
disclosure and may result in the individual feeling coerced to disclose 
data. No change in the final rule is made as a result of this comment.
(e) Public Official
    The proposed rule provided for disclosure of confidential UC 
information to a public official in the performance of his or her 
official duties. Since the 1970s, the Department's guidance to States 
has recognized this exception, which allows for a variety of uses of 
confidential UC information that the Department believes are 
beneficial, such as law enforcement, fraud and benefit accuracy in 
programs not addressed by Federal UC law (for example, Black Lung and 
State workers' compensation programs), program assessment (for example, 
of WIA and Vocational Education programs), and research.
    The proposed rule described ``performance of official duties'' as 
administration or enforcement of law or, in the case of the legislative 
branch, oversight of UC law. It also stated that although research by a 
public official was permitted under this exception, this exception did 
not include research by an individual at a public or private 
university. However, it also stated that, where appropriate, a 
researcher could obtain access to confidential UC information under the 
exceptions provided for in proposed paragraph (f) (agent or contractor 
of a public official) or proposed paragraph (d)(2) (third party). Under 
paragraph (f) of the proposed rule, the public official would maintain 
the responsibility of insuring that the confidential UC information is 
safeguarded by its agent (for example, the researcher). The Department 
continues to believe that there is less risk of unauthorized use or 
disclosure of confidential UC information if responsibility for 
safeguarding confidentiality remains within the executive or 
legislative branches of government.
    As discussed above in Sec.  603.2 (d) (definition of public 
official), commenters expressed concern that limiting disclosure to 
only those legislators with ``oversight'' responsibility for the UC 
program was vague and, as a result, difficult to implement and 
determine as to the performance of ``oversight'' functions. In 
response, this reference to ``oversight'' was removed from the final 
rule. In so doing, paragraph (e) also required revision since it, too, 
included the ``oversight'' limitation as to elected officials (with 
regard to the meaning of ``performance of official duties'').
    As a result, paragraph (e) of the final rule has been revised so 
that ``performance of official duties'' now means ``administration or 
enforcement of law or the execution of the official responsibilities of 
a Federal, State, or local elected official.'' For further 
clarification, it also now provides that ``administration of law'' 
includes research related to the law administered by the public 
official. This sentence has been added to the final rule to eliminate 
any confusion regarding whether research conducted by a public official 
is part of the administration of its law.
    In addition, new language has been added to the final rule to 
explain that ``execution of official responsibilities'' does not 
include solicitation of contributions or expenditures to or on behalf 
of a candidate for public or political office or a political party. 
This language has been added to make it clear that UC records are not 
to be used to identify subjects for campaign solicitations.
(f) Agent or Contractor of Public Official
    The proposed rule provided for disclosure of confidential UC 
information to an agent or contractor of a public official to whom 
disclosure is permissible under paragraph (e) (public official). This 
provision took into account that certain functions, including research, 
are often contracted out by public agencies. If confidential UC 
information could not be disclosed to agents or contractors of public 
officials, valuable research might be forgone or become more expensive, 
as agencies would have to undertake interviews of program participants 
in order to gather program evaluation information. A public official, 
ideally one with responsibility for the program or initiative on which 
research is being conducted, would be required to enter into the 
written agreement required by Sec.  603.10 and be held responsible for 
use of the information by the contractor or

[[Page 56837]]

agent. Redisclosure of such information by a public official to an 
agent or contractor would be permitted only as provided in Sec.  
603.9(c).
    One commenter suggested that the regulation be expanded ``to allow 
State agencies to disclose [confidential] UC information to researchers 
if the State agencies believe that the results of such research would 
be beneficial to the agency for the administration of agency 
programs,'' in light of the fact ``States do not have to pay'' for 
research from which they benefit. Another commenter, from a university, 
indicated concern that the public official must actually pay for the 
research as opposed to private foundations. The same commenter 
expressed concern that a university could not be viewed as an ``agent'' 
of the public official if the university was performing research of 
privately funded programs, such as employer-funded training or those 
supported by entities such as the United Way. The commenter stated that 
this ``significantly narrowed'' allowable uses of data.
    In response, the Department notes that neither the proposed nor 
this final rule prohibits the sharing of information with researchers 
when an official of a public agency believes the research would be 
beneficial to the public agency. In such case, the researcher functions 
as the public agency's ``agent,'' even if the research was not 
initiated or funded by the agency, or even if the research may have 
applicability beyond the agency itself. To address the commenter's 
example of private training programs, the Department believes that 
allowing a public agency to correlate results of private research 
initiatives with its own programs would be beneficial to the public 
agency and, thus, the public agency could be persuaded to accept 
responsibility for the disclosure and use of confidential UC 
information. The Department believes this properly balances the need to 
protect confidential UC information with the desire to not restrict 
research. Therefore, no change is made in the final rule.
    The Department emphasizes (as it stated in the preamble to the 
proposed rule) that States should provide non-confidential UC 
information to researchers in lieu of confidential UC information. 
Indeed, the expectation is that State agencies would explore this 
approach prior to providing confidential UC information. State agencies 
may, for example, encrypt identifiers before providing data to a 
researcher so that the researcher cannot identify individuals or 
employers. The agency could add subsequent years of data for the 
researcher using the same encryption so that the researcher can conduct 
longitudinal studies.
(g) Bureau of Labor Statistics
    The proposed rule provided that the confidentiality requirement did 
not apply to information collected exclusively for statistical purposes 
under a cooperative agreement with the Bureau of Labor Statistics (BLS) 
and that Part 603 did not restrict or impose any condition on the 
transfer of any other information to the BLS under an agreement, or the 
BLS's disclosure or use of such information.
    Under the proposed rule, transfers of information to the BLS were 
excepted from the confidentiality requirement because the conditions 
under which they occur already satisfied the requirements of the 
confidentiality rule, and the Department did not wish to interfere with 
the BLS' existing agreements or the ability of the BLS to carry out its 
statistical programs. Specifically, safeguards, agreements, and payment 
of costs are already in place. The BLS funds States for collection and 
disclosure of information. The BLS applies strict safeguards to protect 
the confidentiality of information it receives. Transfers of 
information to the BLS are governed by agreements that provide 
assurance that these safeguards will be followed. Moreover, the 
exemption for BLS is also based on the fact that its data is integrally 
related to the administration of the UC program. The collection and 
reporting authority of BLS is based on existing Federal law (29 U.S.C. 
2) and subject to the confidentiality protections outlined in the 
Secretary of Labor's Order No. 9-75.
    The U.S. Census Bureau commented on the proposed rule and expressed 
concern that ``several components of the proposed rule, if enacted, 
would be problematic for the Census Bureau's need to continue accessing 
[UC information].'' Further, the Census Bureau wanted to ensure that 
its activities would not be hampered by implementation of the 
confidentiality rule. As such, the Census Bureau requested it be 
afforded the same exemption as BLS from the confidentiality 
requirement. Another commenter also expressed support for exempting the 
Census Bureau from the confidentiality requirement.
    The Department fully supports the Census Bureau's analytical 
efforts and its policy-relevant research. However, based on the Census 
Bureau's description of its current processes for securing and 
protecting confidential UC information and the fact that it is a public 
agency (to whose officials States are permitted to disclose 
confidential UC information), it appears that the rule would not 
inhibit its ability to obtain this information. Indeed, the rule merely 
sets forth the Department's long-standing guidance to States regarding 
disclosure to public officials and the terms and conditions which 
apply. States should already be following this guidance when disclosing 
to the Census Bureau. Therefore, no change to the rule is made as a 
result of these comments.
(i) UC Program Oversight and Audits (``As Required by Federal Law'' in 
the Proposed Rule)
    This paragraph of the proposed rule provided for the disclosure of 
confidential UC information as required by ``Federal Law.'' However, 
other Federal agencies would already be covered under Sec.  603.5(e) 
(disclosure to public officials, including disclosure to the IRS for 
Health Coverage Tax Credit (HCTC) purposes), Sec.  603.5 (h) 
(disclosure in response to a court order or to an official with 
subpoena authority), or Sec.  603.6(a) (disclosure necessary for the 
proper administration of the UC program, including disclosures to the 
Internal Revenue Service for purposes of UC tax administration). Given 
the unnecessary duplication it presented, proposed paragraph (i) (as 
required by Federal law) has been revised in the final rule (as 
discussed below).
    To be more specific regarding its scope, paragraph (i) of the final 
rule is now limited to UC program oversight and audits. The proposed 
rule lacked such a provision (unlike the 1992 proposed rule) and the 
Department believes it is necessary to explicitly address the 
inapplicability of the confidentiality requirement to any disclosure to 
the Federal Government for purposes of UC program oversight and audits. 
As a result, paragraph (i) of the final rule provides that the 
confidentiality requirement does not apply to any disclosures to a 
Federal official for purposes of UC program oversight and audits, 
including disclosures necessary under the Department's rules at 20 CFR 
part 601 and 29 CFR parts 96 and 97.
    The Department notes that the final rule does not implement the 
Secretary of Labor's authority under Section 303(a)(6), SSA. Section 
303(a)(6) requires that State UC laws include provision for ``[t]he 
making of such reports, in such form and containing such information, 
as the Secretary of Labor may from time to time require * * * Section 
303(a)(6) stands as a basis for requiring disclosure to the Department.

[[Page 56838]]

Section 603.6 What disclosures are required by this subpart?

    (``What disclosures are required by Federal UC law'' in the 
proposed rule.)
    In the proposed rule, this section was entitled, ``What disclosures 
are required by Federal UC law?'' The Department determined, upon 
further review, that a more appropriate characterization of this 
section is ``disclosures required by this subpart'' since the 
regulation is the mechanism that effectively implements the provisions 
of Federal UC law.
    Paragraph (a) of the proposed rule set forth the Department's 
interpretation of Section 303(a)(1), SSA, as requiring disclosure of 
all information necessary for the proper administration of the UC 
program. This included disclosure to the Internal Revenue Service for 
purposes of UC tax administration or to the U.S. Citizenship and 
Immigration Services for purposes of verifying a claimant's immigration 
status. It also required disclosure for purposes of interstate and 
cross-program offsets under Section 303(g), SSA.
    The Department believes it is necessary to clarify that the 
disclosures required under paragraph (a) are not subject to the 
confidentiality requirement. As a result, the final rule explicitly 
provides that the confidentiality requirement of 303(a)(1), SSA, and 
Sec.  603.4 are not applicable to the disclosures required under 
paragraph (a). This paragraph continues to provide that 
``administration of the UC program'' includes disclosures to claimants, 
employers, the Internal Revenue Service (for purposes of UC tax 
administration), and the U.S. Citizenship and Immigration Services (for 
purposes of verifying a claimant's immigration status).

Section 603.7 What requirements apply to subpoenas, other compulsory 
process, and disclosure to officials with subpoena authority?

(a) In General
    In the proposed rule, this section set forth the Department's long-
standing position on State responses to subpoenas and other compulsory 
processes attempting to obtain confidential UC information. Under 
certain conditions, it required the State or State UC agency to file 
and pursue a motion to quash, in the appropriate forum, when a subpoena 
or other compulsory process of a lawful authority, which required the 
production of or appearance for testimony about such information, is 
served upon the State UC agency or the State. If such a motion were 
denied, after a hearing in the appropriate forum, confidential UC 
information may be disclosed, but only upon such terms as the court or 
other forum may order, including that the recipient protect the 
disclosed information and pay the State's or State UC agency's costs of 
disclosure.
    Several State UC agencies noted that the proposed rule appeared to 
require a motion to quash a subpoena even though most subpoenas can be 
avoided or resolved through other means that are far more efficient and 
economical. These commenters recommended that the rule recognize these 
other means. Another commenter noted that the court may order the 
disclosure of information through ``a true court order, and not merely 
a subpoena,'' and questioned the application of the rule in such cases. 
The Department agrees with these comments. As a result, this provision 
of the final rule has been revised to recognize that other means of 
avoiding disclosure of confidential UC information may be pursued 
before the need to file a motion to quash. Also, the final rule now 
recognizes that a motion to quash is necessary only if the court has 
not already ruled on the disclosure.
(b) Exceptions
    The proposed rule provided two exceptions to the requirement to 
quash a subpoena: First, where a court has previously issued a binding 
precedential decision that requires such disclosures and, second, when 
confidential UC information is requested by an official of State or 
Federal government, other than a clerk of court on behalf of a 
litigant, with authority to obtain the information by subpoena under 
State or Federal law. These proposed exceptions recognized that filing 
a motion to quash in these circumstances may indeed be futile and a 
waste of administrative resources. They would also facilitate State 
cooperation with law enforcement.
    Commenters requested clarification of the reference to ``binding 
legal precedent,'' noting that courts routinely deny motions to quash 
or otherwise order disclosure of confidential UC information without 
ever publishing a decision that may be considered precedential. In the 
same vein, another commenter objected to ``futile'' motions to quash, 
while another addressed this situation by urging an exception for 
situations ``where the obligation to disclose such data has been well 
established by a pattern of prior judicial decisions.'' The Department 
agrees that well-established patterns of judicial decisions may be 
treated as precedent. As a result, the final rule has been revised to 
permit disclosure where a well-established pattern of prior court 
decisions have required the same type of disclosure. Nonetheless, the 
Department encourages those States within which courts routinely deny 
motions to quash, to examine their laws and regulations to determine if 
an amendment may result in such motions being upheld.
    Two State UC agencies noted the proposed rule's exception from 
filing a motion to quash applied to State or Federal governmental 
officials with subpoena authority, but did not apply to county or 
metropolitan governmental officials with the authority to subpoena 
records, such as prosecutors. The Department notes that, generally, a 
governmental official will need to exercise subpoena authority only 
when State UC law does not specifically allow the disclosure to such 
official. However, the Department did not intend to prohibit these 
officials from obtaining information for administration of their 
official duties. As a result, the final rule has been revised to 
include ``local'' governmental officials within this exception.
    One commenter noted that Sec.  603.7(b) of the proposed rule was 
``confusing'' because it stated that the exceptions to filing a motion 
to quash a subpoena applied ``regardless of whether a subpoena was 
issued.'' The quoted language was included to permit the State UC 
agency, if it so chose, to disclose information that was requested by a 
public official with subpoena authority without forcing the public 
official to actually issue the subpoena. To more accurately reflect 
this option, the Department has changed the final rule to clarify that 
the State or State UC agency may disclose the requested confidential UC 
information to a public official with subpoena authority without the 
actual issuance of a subpoena.
    The Department believes that filing motions to quash subpoenas 
involving the disclosure of confidential UC information is an important 
means of avoiding unnecessary or unlawful disclosures, which might 
deter claimants from exercising their rights or employers from 
providing information. Where the exceptions apply, a State may still 
file such a motion if warranted, or may file a motion to require that 
the recipient protect the disclosed information or for reimbursement of 
costs. (As described in Sec.  603.8(b), seeking reimbursement in some 
manner is required if grant funds are used to cover the costs of the 
disclosure.) If the State law is sufficiently rigorous concerning the 
disclosure of confidential UC information, the courts may be less 
inclined to enforce

[[Page 56839]]

subpoenas; so, States may wish to review their State laws in this 
regard. To conserve time and funds, States may wish to pursue a motion 
to quash by mail or by telephone if permitted by State law.
    Finally, some commenters questioned the need for the proposed rule 
to address disclosing confidential UC information to public officials 
with subpoena authority given that Sec.  603.5(e) permits disclosure to 
public officials. The Department's answer is that disclosures under 
Sec.  603.5(e) must be made under the agreements described in Sec.  
603.10, which require, among other things, the payment of costs and the 
safeguarding of information, before any information may be disclosed. 
Thus, that provision is limited to cases where disclosure is explicitly 
authorized or required under the State UC law. The subpoena exception, 
however, pertains to situations where governmental officials have the 
authority to demand information under their laws, but where State UC 
law may not permit such disclosure or where an agreement may not have 
been entered into, thus necessitating the public official to obtain the 
confidential UC information through a subpoena. Therefore, no change is 
made in the final rule.

Section 603.8 What are the requirements for the payment of costs and 
program income?

(a) In General
    This paragraph of the proposed rule explained, in general, that 
grant funds could not be used to pay any of the costs of making any 
disclosure (except as provided in paragraph (b) of this section). Upon 
review, clarifications to proposed paragraph (a) became necessary.
    First, ``disclosure to the IRS for HCTC purposes'' was 
misidentified in proposed paragraph (a) as a reference to Sec.  
603.5(h) when it should have referenced Sec.  603.5(i). However, as 
discussed previously, proposed paragraph (i) of Sec.  603.5 was 
replaced with a new provision in the final rule concerning UC program 
oversight and audits. In the discussion concerning the changes to 
proposed paragraph (i), it was explained that ``disclosure to the IRS 
for HCTC purposes,'' like disclosures to other Federal agencies, would 
already be covered under the provision relating to disclosure to public 
officials (Sec.  603.5(e)). As a result, rather than correct the 
misidentification in proposed paragraph (a) of Sec.  603.8, we have 
deleted the reference to ``disclosure to the IRS for HCTC purposes.''
    Second, revision to the final rule became necessary because the 
rule did not distinguish between the two types of informed consent 
disclosures (addressed in Sec.  603.5(d)) as they related to the use of 
grant funds for the costs of such disclosures. Thus, revision to 
paragraph (a) (and to paragraph (b) of this section, as discussed 
below) became necessary to make explicit the fact that grant funds have 
never been allowed to be used for the costs of making disclosures to 
third parties (other than agents) on the basis of informed consent. 
Accordingly, the final rule was revised to explicitly state that grant 
funds may not be used to pay for the costs of disclosures under Sec.  
603.5(d)(2) (third party (other than an agent) or disclosures made on 
an ongoing basis).
(b) Use of Grant Funds Permitted
    This paragraph of the proposed rule set forth the circumstances 
under which grant funds may be used to pay for the costs of disclosing 
confidential UC information. As discussed above, revision to this 
paragraph became necessary to clarify that grant funds may be used to 
pay for costs associated with disclosures to an agent on the basis of 
informed consent. Therefore, paragraph (b) of the final rule has been 
revised to make this permitted use of grant funds explicit.
    As discussed previously, Sec.  603.5(i) of the proposed rule was 
changed to explicitly address the inapplicability of the 
confidentiality requirement to any disclosure for purposes of UC 
program oversight and audits. In so doing, revision to Sec.  603.8(b) 
of the proposed rule was also required in order to properly address 
those costs relating to disclosures for UC program oversight and audits 
under Sec.  603.5(i) of the final rule. Accordingly, Sec.  603.8 (b) of 
the final rule has been revised to specifically provide that grant 
funds may be used to pay the costs associated with disclosures to the 
Department for oversight and audits.
(d) Payment of Costs
    The proposed rule required the payment of costs, calculated in 
accordance with paragraph (c), to be paid by the recipient of the 
information either in advance or by way of reimbursement. If the 
recipient is not a public official, such costs, except for good reason, 
would be required to be paid in advance. Payment in advance means full 
payment of costs before or at the time the disclosed information is 
given in hand or sent to the recipient.
    The proposed rule further provided that the requirement for payment 
of costs is met when a State UC agency has in place a reciprocal data-
sharing agreement or arrangement with another agency or entity. 
``Reciprocal'' means that the relative benefits received by each party 
to the agreement or arrangement are approximately equal.
    Two commenters observed that the proposed rule appeared to prohibit 
another entity from paying costs on behalf of the recipient and 
suggested that the rule be amended to permit such payments. The purpose 
of requiring payment of costs is to assure that UC grant funds are not 
used for purposes unrelated to the administration of the UC program. 
Receiving payment from an entity other than the recipient accomplishes 
this. As a result of these comments, the final rule has been revised to 
recognize that costs may be paid by another source on behalf of the 
recipient.
    Two other commenters requested clarification regarding the proposed 
rule's statement that, if the recipient is not a public official, 
``costs, except for good reasons (such as when the disclosure involves 
minimal cost) must be paid'' in advance. These commenters questioned 
whether the reference to ``minimal costs'' meant that the recipient 
need not pay any costs. As noted elsewhere in the rule, all costs 
incurred by a recipient must be paid except when there ``is not more 
than an incidental amount of [UC agency] staff time and no more than 
nominal processing costs'' are involved. (Sec.  603.8(b).) Thus, the 
reference to minimal costs only relates to the advance payment of 
costs. To avoid confusion, the Department has deleted the reference to 
minimal costs from the final rule.
(e) Program Income
    The proposed rule provided that reimbursed costs and any funds 
generated by the disclosure of information are program income and may 
be used only as permitted by 29 CFR 97.25(g) (on program income). It 
also provided that program income may not be used to benefit a State's 
general fund or another program.
    One commenter expressed concern about how the cost requirements 
would impact the Wage Record Interchange System (WRIS), which is an 
interstate data exchange system that facilitates the exchange of UC 
wage records for assessing program performance under the WIA. Noting 
that the proposed rule provided that UC grant funds may be used to pay 
if disclosure does not result in ``more than an incidental amount of 
staff time and no more than nominal processing costs are involved,'' 
the commenter stated a belief that WRIS

[[Page 56840]]

costs are ``relatively minor'' and therefore should be considered 
incidental or nominal. The Department does not agree. By permitting the 
use of UC grants where costs of disclosure are incidental or nominal, 
we merely recognize that some costs are so small that there may be no 
practical purpose served by attempting to recover these costs. 
Generally, these will be one-time only, ad hoc requests from 
individuals or their agents. The Department does not believe that the 
costs of setting up agreements, establishing data exchange protocols, 
and exchanging data on an ongoing basis can be said to be incidental or 
nominal. No change in the final rule is made as a result of this 
comment.

Section 603.9 What safeguards and security requirements apply to 
disclosed information?

(b) Safeguards To Be Required of Recipients
    Paragraph (b) of the proposed rule set forth the safeguards that 
the State or State UC agency had to require of recipients.
    Paragraph (b)(1)(vii) of the proposed rule required States to 
maintain a tracking system sufficient to allow an audit of compliance 
with the requirements of this subpart. The purpose of maintaining this 
system was to ensure that recipients of disclosed information were 
complying with the required safeguards. The proposed rule provided that 
this responsibility could not be handed over to the recipient. It also 
provided that where recipients were required to pay for the costs of 
making a disclosure, the costs of maintaining this system should be 
reflected in the amount charged to the recipient. Thus, the maintenance 
of this system would not increase costs for State UC agencies.
    Several commenters stated that it was impractical or expensive to 
maintain a ``tracking system'' that is ``sufficient to allow an audit 
of compliance.'' As a result of these comments, the requirement for a 
``tracking system'' has been deleted from Sec.  603.9(b)(1)(vii) of the 
final rule. However, the Department continues to believe that some 
system must exist for allowing an audit if there is to be any guarantee 
that confidential UC information received from a UC agency is not 
misused. Therefore, the final rule requires a system ``sufficient to 
allow an audit of compliance.'' While tracking individual transactions 
may be the most efficient means of monitoring certain disclosures, 
other methods may be equally effective. For example, in the case of 
wage records that are routinely transmitted to another governmental 
agency, it is sufficient that, prior to any audit, the UC agency be 
able to re-run the computer program that generated the wage records 
that were transmitted and use that output for the basis of its audit. 
The Department also notes that not all disclosures must be subject to 
this system. For example, the safeguards required by Sec.  603.9 do not 
apply to disclosures made to an individual (Sec.  603.5(c)) or the 
individual's agent (Sec.  603.5(d)(1)).
    Paragraph (b)(2) of the proposed rule specifically required the 
State to conduct, in the case of optional disclosures to entities on 
the basis of informed consent (Sec.  603.5(d)(2)), a periodic audit of 
sample transactions to assure that the entity receiving information has 
on file a written release authorizing each access. The audit was 
required to ensure that the information was not being used for any 
unauthorized purpose.
    Several commenters expressed concern regarding this requirement, 
stating that such audits are costly and burdensome. As the Department 
noted in the general comments regarding increased costs and burden, 
this audit requirement is applicable only to disclosure made under 
Sec.  603.5(d)(2) pertaining to a third party (other than an agent) or 
disclosures made on an ongoing basis. (The Department notes that, in 
cases involving governmental entities receiving information under 
Sec. Sec.  603.5(e) or 603.6, the recipient is merely required to 
provide for ``on-site inspections.'' The final rule does not mandate 
audits in these cases given the nature of the governmental entities, 
which are also subject to their own confidentiality laws; however, the 
Department believes it is important to maintain the right to perform 
``on-site inspections'' in the event any allegation of misuse arises.)
    The Department believes States must take reasonable actions to 
periodically audit these third parties. As discussed previously, the 
Department is concerned that such disclosures have a greater potential 
threat to employer or individual privacy. As such, we do not believe it 
is responsible to provide confidential UC information to such third 
parties without some requirement for auditing. Therefore, no change is 
made to the final rule.
    The proposed rule did not, as commenters appeared to assume, 
dictate when audits must occur, nor did it dictate the nature and the 
extent of the audit. The Department believes these matters are best 
left to the States, which are in the best position to determine how 
often a particular recipient should be audited, taking into account 
volume, any past audit exceptions, and the nature of the recipient, 
such as whether the recipient is in the business of disclosing 
information for profit. What is important is that any audit process be 
sufficient to assure that no misuse of confidential UC information is 
taking place. The Department also notes that the costs of performing 
any such audits must be built into the agreement that authorizes 
disclosure of confidential UC information to the recipient. Thus, for 
example, the costs of auditing a private business that receives 
confidential UC information under an informed consent agreement are to 
be built into the disclosure agreement. No change is made in the final 
rule as a result of these comments.
    Paragraph (b)(2) of the proposed rule also required that all 
employees of entities receiving access to information under Sec.  
603.5(d)(2) be subject to the same confidentiality requirements, and 
State criminal penalties for violation of those requirements, as are 
employees of the State UC agency.
    The National Association of State Workforce Agencies questioned how 
penalties would be assessed for information that is sent from one State 
to another State, particularly in regard to the WRIS. The specific 
question was whether the law of the sending or receiving State would 
apply in the case of unauthorized disclosures. The Department believes 
that no State should disclose confidential UC information to another 
entity--including another State--unless it retains the authority to 
apply its legal sanctions for unauthorized uses. This is reflected in 
Sec.  603.9(b)(1), regarding safeguards to be required of recipients, 
which provides that ``The State or State UC agency must * * * (v) 
Require each recipient agency or entity to (A) Instruct all personnel 
having access to the disclosed information about * * * the sanctions 
specified in the State law for unauthorized disclosure of information * 
* * ''.
    As a practical matter, the Department recognizes that a receiving 
State is in a better position to apply sanctions on violators who 
reside in that State, provided its confidentiality law is applicable to 
such violation. As such, in the case of interstate data sharing 
arrangements such as WRIS, a wise additional step is to require the 
receiving State to take the lead in applying legal sanctions. Although 
no change to the rule is made as a result of this comment, a State must 
make certain that prior to the release of confidential UC information 
to an entity outside the State, some provision exists to protect

[[Page 56841]]

such information, either by the disclosing State or by the law of the 
receiving State within which the entity exists.

Section 603.11 How do States notify claimants and employers about the 
uses of their information?

(a) Claimants
    This section of the proposed rule required State UC agencies to 
notify claimants and employers how confidential UC information about 
them may be requested and utilized. This section was derived from the 
current 20 CFR 603.4 (revised by this rule) but, unlike the current 20 
CFR 603.4, it applied to employers as well as claimants. State privacy 
law may require more detailed notification.
(b) Employers
    The proposed rule provided that current Part 603 (specifically, 
Sec.  603.4 of that Part) implemented the notification requirement 
applicable to the IEVS of Section 1137(a)(6), SSA. The proposed rule 
restated the notification requirement of Section 1137(a)(6), SSA, as a 
general requirement of Section 303(a)(1), SSA. It further explained 
that notifying claimants and employers what use may be made of UC 
information is necessary to maintaining their confidence in the 
Federal-State UC system, which is critical to its proper and efficient 
administration.
    With regard to claimant notification, several State UC agencies 
questioned the proposed requirement that claimants be notified ``at the 
time of application, and periodically thereafter, in what situations 
confidential UC information pertaining to the claimant may be requested 
and utilized'' and the similar requirement for employers. Some 
requested more detail about when the notification is provided, what is 
meant by ``periodically thereafter,'' and the contents of the notice, 
specifically with respect to the details of the ``situations'' the 
notice must cover. One commenter objected to orally informing claimants 
at the time of ``initial claim intake'' because of the costs involved. 
Others suggested that notification ``at the time an initial claim is 
filed by an individual'' would be adequate.
    The requirement that claimants be notified ``at the time of filing 
[a claim] and periodically thereafter'' has been a requirement of 
Section 1137(a)(6), SSA, pertaining to the IEVS program, since 1984. As 
such, it became a part of the Department's implementation of the IEVS 
program, currently found at 20 CFR 603.4 (revised by this rule). Thus, 
State UC agencies should already be notifying claimants concerning 
sharing of confidential UC information under IEVS. This final rule 
merely expands this claimant notification requirement so that the 
notice refers to uses beyond the IEVS program. It also extends 
notification to employers as well as claimants.
    Since the requirement that claimants be notified ``periodically 
thereafter'' is a statutory requirement, States must periodically 
notify claimants. The Department recognizes that ``periodic'' notice to 
UC claimants is not always necessary due to the relatively short 
duration of UC claims. Although some commenters asked for clarification 
as to how this ``periodic'' requirement could be met, we believe that 
the rule is clear that ``notice on or attached to subsequent additional 
claims will satisfy the requirements for periodic notice thereafter.'' 
States are not required to offer other forms of periodic notice to 
claimants if they offer such notice as part of taking an additional 
claim.
    The content of the notice to claimants need not be complex or 
lengthy. It could, for example, simply state that confidential UC 
information will be used for other governmental purposes, including 
verifying an individual's eligibility for other governmental programs. 
Although the statutory requirement appears to permit oral notice, the 
Department prefers, but does not require, that notice be written. Such 
written notification may be, for example, in the form of a benefit 
rights pamphlet or a special enclosure in a routine mailing to the 
claimant that is associated with the initial application. In the case 
of Internet claims, a special screen may advise the claimant of the 
uses of confidential UC information. The notice need not say that UC 
information will be used for UC purposes, or address any releases that 
may be authorized by the claimant. At the same time, this rule does not 
prohibit States from providing such information.
    Concerns relating to the content of the notification may have been 
a result of the language in the proposed rule referring to identifying 
the ``situations'' within which confidential UC information may be 
requested and utilized. The use of the word ``situations'' was not 
intended to require that the notice contain an exhaustive listing of 
all potential recipients of confidential UC information. In response to 
any misperception and to provide more guidance on the actual contents 
of the notice (including assuring any notice meets the IEVS 
requirement), Sec.  603.11(a) is revised to provide that claimants must 
be notified ``at the time of application, and periodically thereafter, 
that confidential UC information pertaining to the claimant may be 
requested and utilized for other governmental purposes, including, but 
not limited to, verification of eligibility under other government 
programs.''
    With regard to employer notification, the content of such notice 
may be as simple as that which is given to the claimant. It is 
sufficient that employers be notified annually with their yearly 
contribution rate notices (although special provision would need to be 
made for reimbursing employers since they do not receive annual rate 
notices), through any agency UC letter sent to all employers, or a 
statement on the quarterly wage report form. To parallel the revision 
to Sec.  603.11(a) (concerning claimant notification), Sec.  603.11(b) 
is revised to provide that employers must be notified ``that wage 
information and other confidential UC information may be requested and 
utilized for other governmental purposes, including, but not limited 
to, verification of an individual's eligibility for other government 
programs.''

Executive Order 12866

    This final 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 final 
rule has been submitted to, and reviewed by, the Office of Management 
and Budget (OMB).
    However, the final rule is not ``economically significant'' because 
it does not have an annual effect on the economy of $100 million or 
more. The Department has also determined that the final rule has no 
adverse material impact upon the economy and that it does not 
materially alter the budgeting impact of entitlement, grants, user fees 
or loan programs, or the rights and obligations of recipients thereof.
    Further, the Department has evaluated the final rule and found it 
consistent with the regulatory philosophy and principles set forth in 
Executive Order 12866, which governs agency rulemaking. Although it 
impacts States and State UC agencies, it does not adversely affect them 
in a material way. The final rule protects State UC agencies from 
becoming clearinghouses of confidential UC information and preserves UC 
grant funds for program purposes. In addition, the final rule

[[Page 56842]]

maintains State flexibility in deciding whether to permit certain 
disclosures of confidential UC information for purposes other than the 
administration of the UC program so long as certain safeguards are 
followed.

Executive Order 13132

    This rule was reviewed in accordance with Executive Order 13132. It 
was determined that the rule may have federalism implications. During 
an earlier stage in this rulemaking process, a federalism consultation 
with organizations representing State elected officials was held at the 
Department on October 19, 2000. These organizations expressed no 
concerns at that time or in the following months. Twenty-five States 
submitted comments on the 1992 proposed regulation, and these comments 
were considered in the development of the most recent proposed rule 
published in the Federal Register on August 12, 2004 (69 FR 50022).
    In connection with the most recent proposed rule, federalism 
consultations with organizations representing State elected officials 
occurred on October 4 and 5, 2004. Again, these organizations expressed 
no concerns during the consultation process. The majority of comments 
received were from individual State agencies. The Department believes 
this final rule adequately addresses the concerns expressed in those 
comments.

Executive Order 12988

    The Department drafted and reviewed this final regulation in 
accordance with Executive Order 12988, Civil Justice Reform, and it 
does not unduly burden the Federal court system. The final 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 final 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. The Department has determined that this final 
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

    The following sections of this final rule contain information 
collection requirements or revises information collection requirements 
in current 20 CFR part 603: Sec. Sec.  603.5, 603.6, 603.7, 603.8, 
603.9, 603.10, 603.11, 603.22, and 603.23. As required by the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), the information collection 
requirements in this final rule were submitted to the OMB for approval 
during the NPRM stage. This collection of information was approved 
under OMB control number 1205-0238 through August 31, 2007.
    The annual burden associated with this final rule for all States 
combined is approximately 25,810 hours.

Regulatory Flexibility Act

    This final rule does not have a ``significant economic impact on a 
substantial number of small entities.'' The final 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 final rule is not a ``major rule'' as defined by Section 804 
of the Small Business Regulatory Enforcement Fairness Act of 1996. This 
final rule does 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

    The Department certifies that this final rule was assessed in 
accordance with Pub. L. 105-277, 112 Stat. 2681, and that the final 
rule does not adversely affect the well-being of the nation's families.

List of Subjects in 20 CFR Part 603

    Employment and Training Administration, Labor, and Unemployment 
Compensation.

Catalogue of Federal Domestic Assistance Number

    This program is listed in the Catalogue of Federal Domestic 
Assistance at No. 17.225, Unemployment Insurance.

    Signed at Washington, DC on September 18, 2006.
Emily Stover DeRocco,
Assistant Secretary of Labor, Employment and Training Administration.

Words of Issuance

0
For the reasons set forth in the preamble, part 603 of Title 20, Code 
of Federal Regulations is revised as set forth below:

PART 603--FEDERAL-STATE UNEMPLOYMENT COMPENSATION (UC) PROGRAM; 
CONFIDENTIALITY AND DISCLOSURE OF STATE UC INFORMATION

Subpart A--In General
Sec.
603.1 What are the purpose and scope of this part?
603.2 What definitions apply to this part?
Subpart B--Confidentiality and Disclosure Requirements
603.3 What is the purpose and scope of this subpart?
603.4 What is the confidentiality requirement of Federal UC law?
603.5 What are the exceptions to the confidentiality requirement?
603.6 What disclosures are required by this subpart?
603.7 What requirements apply to subpoenas, other compulsory 
processes, and disclosure to officials with subpoena authority?
603.8 What are the requirements for payment of costs and program 
income?
603.9 What safeguards and security requirements apply to disclosed 
information?
603.10 What are the requirements for agreements?
603.11 How do States notify claimants and employers about the uses 
of their information?
603.12 How are the requirements of this part enforced?
Subpart C--Mandatory Disclosure for Income and Eligibility Verification 
System (IEVS)
603.20 What is the purpose and scope of this subpart?
603.21 What is a requesting agency?
603.22 What information must State UC agencies disclose for purposes 
of an IEVS?
603.23 What information must State UC agencies obtain from other 
agencies, and crossmatch with wage information, for purposes of an 
IEVS?

    Authority: 42 U.S.C. 1302(a); Secretary's Order No. 4-75 (40 FR 
18515) and Secretary's Order No. 14-75 (November 12, 1975).

Subpart A--In General


Sec.  603.1  What are the purpose and scope of this part?

    The purpose of this part is to implement the requirements of 
Federal

[[Page 56843]]

UC law concerning confidentiality and disclosure of UC information. 
This part applies to States and State UC agencies, as defined in Sec.  
603.2(f) and (g).


Sec.  603.2  What definitions apply to this part?

    For the purposes of this part:
    (a)(1) Claim information means information about:
    (i) Whether an individual is receiving, has received, or has 
applied for UC;
    (ii) The amount of compensation the individual is receiving or is 
entitled to receive; and
    (iii) The individual's current (or most recent) home address.
    (2) For purposes of subpart C (IEVS), claim information also 
includes:
    (i) Whether the individual has refused an offer of work and, if so, 
a description of the job offered including the terms, conditions, and 
rate of pay; and
    (ii) Any other information contained in the records of the State UC 
agency that is needed by the requesting agency to verify eligibility 
for, and the amount of, benefits.
    (b) Confidential UC information and confidential information mean 
any UC information, as defined in paragraph (j) of this section, 
required to be kept confidential under Sec.  603.4.
    (c) Public domain information means--
    (1) Information about the organization of the State and the State 
UC agency and appellate authorities, including the names and positions 
of officials and employees thereof;
    (2) Information about the State UC law (and applicable Federal law) 
provisions, rules, regulations, and interpretations thereof, including 
statements of general policy and interpretations of general 
applicability; and
    (3) Any agreement of whatever kind or nature, including interstate 
arrangements and reciprocal agreements and any agreement with the 
Department of Labor or the Secretary, relating to the administration of 
the State UC law.
    (d) Public official means an official, agency, or public entity 
within the executive branch of Federal, State, or local government who 
(or which) has responsibility for administering or enforcing a law, or 
an elected official in the Federal, State, or local government.
    (e) Secretary and Secretary of Labor mean the cabinet officer 
heading the United States Department of Labor, or his or her designee.
    (f) 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.
    (g) State UC agency means an agency charged with the administration 
of the State UC law.
    (h) State UC law means the law of a State approved under Section 
3304(a) of the Internal Revenue Code of 1986 (26 U.S.C. 3304(a)).
    (i) Unemployment compensation (UC) means cash benefits payable to 
individuals with respect to their unemployment.
    (j) UC information and State UC information means information in 
the records of a State or State UC agency that pertains to the 
administration of the State UC law. This term includes those State wage 
reports collected under the IEVS (Section 1137 of the Social Security 
Act (SSA)) that are obtained by the State UC agency for determining UC 
monetary eligibility or are downloaded to the State UC agency's files 
as a result of a crossmatch but does not otherwise include those wage 
reports. It does not include information in a State's Directory of New 
Hires, but does include any such information that has been disclosed to 
the State UC agency for use in the UC program. It also does not include 
the personnel or fiscal information of a State UC agency.
    (k) Wage information means information in the records of a State UC 
agency (and, for purposes of Sec.  603.23 (IEVS)), information reported 
under provisions of State law which fulfill the requirements of Section 
1137, SSA) about the--
    (1) Wages paid to an individual,
    (2) Social security account number (or numbers, if more than one) 
of such individual, and
    (3) Name, address, State, and the Federal employer identification 
number of the employer who paid such wages to such individual.

Subpart B--Confidentiality and Disclosure Requirements


Sec.  603.3  What is the purpose and scope of this subpart?

    This subpart implements the basic confidentiality requirement 
derived from Section 303(a)(1), SSA, and the disclosure requirements of 
Sections 303(a)(7), (c)(1), (d), (e), (h), and (i), SSA, and Section 
3304(a)(16), Federal Unemployment Tax Act (FUTA). This subpart also 
establishes uniform minimum requirements for the payment of costs, 
safeguards, and data-sharing agreements when UC information is 
disclosed, and for conformity and substantial compliance with this 
proposed rule. This subpart applies to States and State UC agencies, as 
defined in Sec.  603.2(f) and (g), respectively.


Sec.  603.4  What is the confidentiality requirement of Federal UC law?

    (a) Statute. Section 303(a)(1) of the SSA (42 U.S.C. 503(a)(1)) 
provides that, for the purposes of certification of payment of granted 
funds to a State under Section 302(a) (42 U.S.C. 502(a)), State law 
must include provision for such methods of administration as are found 
by the Secretary of Labor to be reasonably calculated to insure full 
payment of unemployment compensation when due.
    (b) Interpretation. The Department of Labor interprets Section 
303(a)(1), SSA, to mean that ``methods of administration'' that are 
reasonably calculated to insure the full payment of UC when due must 
include provision for maintaining the confidentiality of any UC 
information which reveals the name or any identifying particular about 
any individual or any past or present employer or employing unit, or 
which could foreseeably be combined with other publicly available 
information to reveal any such particulars, and must include provision 
for barring the disclosure of any such information, except as provided 
in this part.
    (c) Application. Each State law must contain provisions that are 
interpreted and applied consistently with the interpretation in 
paragraph (b) of this section and with this subpart, and must provide 
penalties for any disclosure of confidential UC information that is 
inconsistent with any provision of this subpart.


Sec.  603.5  What are the exceptions to the confidentiality 
requirement?

    The following are exceptions to the confidentiality requirement. 
Disclosure of confidential UC information is permissible under the 
exceptions in paragraphs (a) through (g) of this section only if 
authorized by State law and if such disclosure does not interfere with 
the efficient administration of the State UC law. Disclosure of 
confidential UC information is permissible under the exceptions in 
paragraphs (h) and (i) of this section without such restrictions.
    (a) Public domain information. The confidentiality requirement of 
Sec.  603.4 does not apply to public domain information, as defined at 
Sec.  603.2(c).
    (b) UC appeals records. Disclosure of appeals records and 
decisions, and precedential determinations on coverage of employers, 
employment, and wages, is permissible provided all social security 
account numbers have been removed and such disclosure is otherwise 
consistent with Federal and State law.
    (c) Individual or employer. Disclosure for non-UC purposes, of 
confidential UC

[[Page 56844]]

information about an individual to that individual, or of confidential 
UC information about an employer to that employer, is permissible.
    (d) Informed consent. Disclosure of confidential UC information on 
the basis of informed consent is permissible in the following 
circumstances--
    (1) Agent--to one who acts for or in the place of an individual or 
an employer by the authority of that individual or employer if--
    (i) In general--
    (A) The agent presents a written release (which may include an 
electronically submitted release that the State determines is 
authentic) from the individual or employer being represented;
    (B) When a written release is impossible or impracticable to 
obtain, the agent presents such other form of consent as is permitted 
by the State UC agency in accordance with State law;
    (ii) In the case of an elected official performing constituent 
services, the official presents reasonable evidence (such as a letter 
from the individual or employer requesting assistance or a written 
record of a telephone request from the individual or employer) that the 
individual or employer has authorized such disclosure; or
    (iii) In the case of an attorney retained for purposes related to 
the State's UC law, the attorney asserts that he or she is representing 
the individual or employer.
    (2) Third party (other than an agent) or disclosure made on an 
ongoing basis--to a third party that is not acting as an agent or that 
receives confidential information following an informed consent 
disclosure on an ongoing basis (even if such entity is an agent), but 
only if that entity obtains a written release from the individual or 
employer to whom the information pertains.
    (i) The release must be signed and must include a statement--
    (A) Specifically identifying the information that is to be 
disclosed;
    (B) That State government files will be accessed to obtain that 
information;
    (C) Of the specific purpose or purposes for which the information 
is sought and a statement that information obtained under the release 
will only be used for that purpose or purposes; and
    (D) Indicating all the parties who may receive the information 
disclosed.
    (ii) The purpose specified in the release must be limited to--
    (A) Providing a service or benefit to the individual signing the 
release that such individual expects to receive as a result of signing 
the release; or
    (B) Carrying out administration or evaluation of a public program 
to which the release pertains.

    Note to paragraph (d): The Electronic Signatures in Global and 
National Commerce Act of 2000 (E-Sign), Pub. L. 106-229, may apply 
where a party wishes to effectuate electronically an informed 
consent release (Sec.  603.5(d)(2)) or a disclosure agreement (Sec.  
603.10(a)) with an entity that uses informed consent releases. E-
Sign, among other things, sets forth the circumstances under which 
electronic signatures, contracts, and other records relating to such 
transactions (in lieu of paper documents) are legally binding. Thus, 
an electronic communication may suffice under E-Sign to establish a 
legally binding contract. The States will need to consider E-Sign's 
application to these informed consent releases and disclosure 
agreements. In particular, a State must, to conform and 
substantially comply with this regulation, assure that these 
informed consent releases and disclosure agreements are legally 
enforceable. If an informed consent release or disclosure agreement 
is to be effectuated electronically, the State must determine 
whether E-Sign applies to that transaction, and, if so, make certain 
that the transaction satisfies the conditions imposed by E-Sign. The 
State must also make certain that the electronic transaction 
complies with every other condition necessary to make it legally 
enforceable.


    (e) Public official. Disclosure of confidential UC information to a 
public official for use in the performance of his or her official 
duties is permissible. ``Performance of official duties'' means 
administration or enforcement of law or the execution of the official 
responsibilities of a Federal, State, or local elected official. 
Administration of law includes research related to the law administered 
by the public official. Execution of official responsibilities does not 
include solicitation of contributions or expenditures to or on behalf 
of a candidate for public or political office or a political party.
    (f) Agent or contractor of public official. Disclosure of 
confidential UC information to an agent or contractor of a public 
official to whom disclosure is permissible under paragraph (e) of this 
section.
    (g) Bureau of Labor Statistics. The confidentiality requirement 
does not apply to information collected exclusively for statistical 
purposes under a cooperative agreement with the Bureau of Labor 
Statistics (BLS). Further, this part does not restrict or impose any 
condition on the transfer of any other information to the BLS under an 
agreement, or the BLS's disclosure or use of such information.
    (h) Court order; official with subpoena authority. Disclosure of 
confidential UC information in response to a court order or to an 
official with subpoena authority is permissible as specified in Sec.  
603.7(b).
    (i) UC Program Oversight and Audits. The confidentiality 
requirement does not apply to any disclosure to a Federal official for 
purposes of UC program oversight and audits, including disclosures 
under 20 CFR part 601 and 29 CFR parts 96 and 97.


Sec.  603.6  What disclosures are required by this subpart?

    (a) The confidentiality requirement of 303(a)(1), SSA, and Sec.  
603.4 are not applicable to this paragraph (a) and the Department of 
Labor interprets Section 303(a)(1), SSA, as requiring disclosure of all 
information necessary for the proper administration of the UC program. 
This includes disclosures to claimants, employers, the Internal Revenue 
Service (for purposes of UC tax administration), and the U.S. 
Citizenship and Immigration Services (for purposes of verifying a 
claimant's immigration status).
    (b) In addition to Section 303(f), SSA (concerning an IEVS), which 
is addressed in subpart C, the following provisions of Federal UC law 
also specifically require disclosure of State UC information and State-
held information pertaining to the Federal UC and benefit programs of 
Unemployment Compensation for Federal Employees (UCFE), Unemployment 
Compensation for Ex-Servicemembers (UCX), Trade Adjustment Assistance 
(TAA) (except for confidential business information collected by 
States), Disaster Unemployment Assistance (DUA), and any Federal UC 
benefit extension program:
    (1) Section 303(a)(7), SSA, requires State law to provide for 
making available, upon request, to any agency of the United States 
charged with the administration of public works or assistance through 
public employment, disclosure of the following information with respect 
to each recipient of UC--
    (i) Name;
    (ii) Address;
    (iii) Ordinary occupation;
    (iv) Employment status; and
    (v) A statement of such recipient's rights to further compensation 
under the State law.
    (2) Section 303(c)(1), SSA, requires each State to make its UC 
records available to the Railroad Retirement Board, and to furnish such 
copies of its UC records to the Railroad Retirement Board as the Board 
deems necessary for its purposes.
    (3) Section 303(d)(1), SSA, requires each State UC agency, for 
purposes of determining an individual's eligibility benefits, or the 
amount of benefits, under a food stamp program established under the 
Food Stamp Act of 1977, to disclose, upon request, to officers and

[[Page 56845]]

employees of the Department of Agriculture, and to officers or 
employees of any State food stamp agency, any of the following 
information contained in the records of the State UC agency--
    (i) Wage information,
    (ii) Whether an individual is receiving, has received, or has made 
application for, UC, and the amount of any such compensation being 
received, or to be received, by such individual,
    (iii) The current (or most recent) home address of such individual, 
and
    (iv) Whether an individual has refused an offer of employment and, 
if so, a description of the employment so offered and the terms, 
conditions, and rate of pay therefore.
    (4) Section 303(e)(1), SSA, requires each State UC agency to 
disclose, upon request, directly to officers or employees of any State 
or local child support enforcement agency, any wage information 
contained in the records of the State UC agency for purposes of 
establishing and collecting child support obligations (not to include 
custodial parent support obligations) from, and locating, individuals 
owing such obligations.
    (5) Section 303(h), SSA, requires each State UC agency to disclose 
quarterly, to the Secretary of Health and Human Services (HHS), wage 
information and claim information as required under Section 453(i)(1) 
of the SSA (establishing the National Directory of New Hires), 
contained in the records of such agency, for purposes of Subsections 
(i)(1), (i)(3), and (j) of Section 453, SSA (establishing the National 
Directory of New Hires and its uses for purposes of child support 
enforcement, Temporary Assistance to Needy Families (TANF), TANF 
research, administration of the earned income tax credit, and use by 
the Social Security Administration).
    (6) Section 303(i), SSA, requires each State UC agency to disclose, 
upon request, to officers or employees of the Department of Housing and 
Urban Development (HUD) and to representatives of a public housing 
agency, for purposes of determining an individual's eligibility for 
benefits, or the amount of benefits, under a housing assistance program 
of HUD, any of the following information contained in the records of 
such State agency about any individual applying for or participating in 
any housing assistance program administered by HUD who has signed a 
consent form approved by the Secretary of HUD--
    (i) Wage information, and
    (ii) Whether the individual is receiving, has received, or has made 
application for, UC, and the amount of any such compensation being 
received (or to be received) by such individual.
    (7) Section 3304(a)(16), FUTA requires each State UC agency--
    (i) To disclose, upon request, to any State or political 
subdivision thereof administering a Temporary Assistance to Needy 
Families Agency (TANF) program funded under part A of Title IV of the 
SSA, wage information contained in the records of the State UC agency 
which is necessary (as determined by the Secretary of HHS in 
regulations) for purposes of determining an individual's eligibility 
for TANF assistance or the amount of TANF assistance; and
    (ii) To furnish to the Secretary of HHS, in accordance with that 
Secretary's regulations at 45 CFR 303.108, wage information (as defined 
at 45 CFR 303.108(a)(2)) and UC information (as defined at 45 CFR 
303.108(a)(3)) contained in the records of such agency for the purposes 
of the National Directory of New Hires established under Section 453(i) 
of the SSA.
    (c) Each State law must contain provisions that are interpreted and 
applied consistently with the requirements listed in this section.


Sec.  603.7  What requirements apply to subpoenas, other compulsory 
processes, and disclosure to officials with subpoena authority?

    (a) In general. Except as provided in paragraph (b) of this 
section, when a subpoena or other compulsory process is served upon a 
State UC agency or the State, any official or employee thereof, or any 
recipient of confidential UC information, which requires the production 
of confidential UC information or appearance for testimony upon any 
matter concerning such information, the State or State UC agency or 
recipient must file and diligently pursue a motion to quash the 
subpoena or other compulsory process if other means of avoiding the 
disclosure of confidential UC information are not successful or if the 
court has not already ruled on the disclosure. Only if such motion is 
denied by the court or other forum may the requested confidential UC 
information be disclosed, and only upon such terms as the court or 
forum may order, such as that the recipient protect the disclosed 
information and pay the State's or State UC agency's costs of 
disclosure.
    (b) Exceptions. The requirement of paragraph (a) of this section to 
move to quash subpoenas shall not be applicable, so that disclosure is 
permissible, where--
    (1) Court Decision--a subpoena or other compulsory legal process 
has been served and a court has previously issued a binding 
precedential decision that requires disclosures of this type, or a 
well-established pattern of prior court decisions have required 
disclosures of this type, or
    (2) Official with Subpoena Authority--Confidential UC information 
has been subpoenaed, by a local, State or Federal governmental 
official, other than a clerk of court on behalf of a litigant, with 
authority to obtain such information by subpoena under State or Federal 
law. The State or State UC agency may choose to disclose such 
confidential UC information to these officials without the actual 
issuance of a subpoena.


Sec.  603.8  What are the requirements for payment of costs and program 
income?

    (a) In general. Except as provided in paragraph (b) of this 
section, grant funds must not be used to pay any of the costs of making 
any disclosure of UC information. Grant funds may not be used to pay 
any of the costs of making any disclosures under Sec.  603.5(d)(2) 
(third party (other than an agent) or disclosure made on an ongoing 
basis), Sec.  603.5(e) (optional disclosure to a public official), 
Sec.  603.5(f) (optional disclosure to an agent or contractor of a 
public official), and Sec.  603.5(g) (optional disclosure to BLS), 
Sec.  603.6(b) (mandatory disclosures for non-UC purposes), or Sec.  
603.22 (mandatory disclosure for purposes of an IEVS).
    (b) Use of grant funds permitted. Grant funds paid to a State under 
Section 302(a), SSA, may be used to pay the costs of only those 
disclosures necessary for proper administration of the UC program. 
(This may include some disclosures under Sec.  603.5(a) (concerning 
public domain information), Sec.  603.5(c) (to an individual or 
employer), and Sec.  603.5(d)(1) (to an agent).) In addition, grant 
funds may be used to pay costs of disclosures under Sec.  603.5(i) (for 
UC Program Oversight and Audits) and Sec.  603.6(a) (for the proper 
administration of the UC program). Grant funds may also be used to pay 
costs associated with disclosures under Sec.  603.7(b)(1) (concerning 
court-ordered compliance with subpoenas) if a court has denied recovery 
of costs, or to pay costs associated with disclosures under Sec.  
603.7(b)(2) (to officials with subpoena authority) if the State UC 
agency has attempted but not been successful in obtaining reimbursement 
of costs. Finally, grant funds may be used to pay costs associated with 
any disclosure of UC information if not more than an

[[Page 56846]]

incidental amount of staff time and no more than nominal processing 
costs are involved in making the disclosure.
    (c) Calculation of costs. The costs to a State or State UC agency 
of processing and handling a request for disclosure of information must 
be calculated in accordance with the cost principles and administrative 
requirements of 29 CFR part 97 and Office of Management and Budget 
Circular No. A-87 (Revised). For the purpose of calculating such costs, 
any initial start-up costs incurred by the State UC agency in 
preparation for making the requested disclosure(s), such as computer 
reprogramming necessary to respond to the request, and the costs of 
implementing safeguards and agreements required by Sec. Sec.  603.9 and 
603.10, must be charged to and paid by the recipient. (Start-up costs 
do not include the costs to the State UC agency of obtaining, 
compiling, or maintaining information for its own purposes.) Postage or 
other delivery costs incurred in making any disclosure are part of the 
costs of making the disclosure. Penalty mail, as defined in 39 U.S.C. 
3201(1), must not be used to transmit information being disclosed, 
except information disclosed for purposes of administration of State UC 
law. As provided in Sections 453(e)(2) and 453(g) of the SSA, the 
Secretary of HHS has the authority to determine what constitutes a 
reasonable amount for the reimbursement for disclosures under Section 
303(h), SSA, and Section 3304(a)(16)(B), FUTA.
    (d) Payment of costs. The costs to a State or State UC agency of 
making a disclosure of UC information, calculated in accordance with 
paragraph (c) of this section, must be paid by the recipient of the 
information or another source paying on behalf of the recipient, either 
in advance or by way of reimbursement. If the recipient is not a public 
official, such costs, except for good reason must be paid in advance. 
For the purposes of this paragraph (d), payment in advance means full 
payment of all costs before or at the time the disclosed information is 
given in hand or sent to the recipient. The requirement of payment of 
costs in this paragraph is met when a State UC agency has in place a 
reciprocal cost agreement or arrangement with the recipient. As used in 
this section, reciprocal means that the relative benefits received by 
each are approximately equal. Payment or reimbursement of costs must 
include any initial start-up costs associated with making the 
disclosure.
    (e) Program income. Costs paid as required by this section, and any 
funds generated by the disclosure of UC information under this part, 
are program income and may be used only as permitted by 29 CFR 97.25(g) 
(on program income). Such income may not be used to benefit a State's 
general fund or other program.


Sec.  603.9  What safeguards and security requirements apply to 
disclosed information?

    (a) In general. For disclosures of confidential UC information 
under Sec.  603.5(d)(2) (to a third party (other than an agent) or 
disclosures made on an ongoing basis); Sec.  603.5(e) (to a public 
official), except as provided in paragraph (d) of this section; Sec.  
603.5(f) (to an agent or contractor of a public official); Sec.  
603.6(b)(1) through (4), (6), and (7)(i) (as required by Federal UC 
law); and Sec.  603.22 (to a requesting agency for purposes of an 
IEVS), a State or State UC agency must require the recipient to 
safeguard the information disclosed against unauthorized access or 
redisclosure, as provided in paragraphs (b) and (c) of this section, 
and must subject the recipient to penalties provided by the State law 
for unauthorized disclosure of confidential UC information.
    (b) Safeguards to be required of recipients. (1) The State or State 
UC agency must:
    (i) Require the recipient to use the disclosed information only for 
purposes authorized by law and consistent with an agreement that meets 
the requirements of Sec.  603.10;
    (ii) Require the recipient to store the disclosed information in a 
place physically secure from access by unauthorized persons;
    (iii) Require the recipient to store and process disclosed 
information maintained in electronic format, such as magnetic tapes or 
discs, in such a way that unauthorized persons cannot obtain the 
information by any means;
    (iv) Require the recipient to undertake precautions to ensure that 
only authorized personnel are given access to disclosed information 
stored in computer systems;
    (v) Require each recipient agency or entity to:
    (A) Instruct all personnel having access to the disclosed 
information about confidentiality requirements, the requirements of 
this subpart B, and the sanctions specified in the State law for 
unauthorized disclosure of information, and
    (B) Sign an acknowledgment that all personnel having access to the 
disclosed information have been instructed in accordance with paragraph 
(b)(1)(v)(A) of this section and will adhere to the State's or State UC 
agency's confidentiality requirements and procedures which are 
consistent with this subpart B and the agreement required by Sec.  
603.10, and agreeing to report any infraction of these rules to the 
State UC agency fully and promptly,
    (vi) Require the recipient to dispose of information disclosed or 
obtained, and any copies thereof made by the recipient agency, entity, 
or contractor, after the purpose for which the information is disclosed 
is served, except for disclosed information possessed by any court. 
Disposal means return of the information to the disclosing State or 
State UC agency or destruction of the information, as directed by the 
State or State UC agency. Disposal includes deletion of personal 
identifiers by the State or State UC agency in lieu of destruction. In 
any case, the information disclosed must not be retained with personal 
identifiers for longer than such period of time as the State or State 
UC agency deems appropriate on a case-by-case basis; and
    (vii) Maintain a system sufficient to allow an audit of compliance 
with the requirements of this part.
    (2) In the case of disclosures made under Sec.  603.5(d)(2) (to a 
third party (other than an agent) or disclosures made on an ongoing 
basis), the State or State UC agency must also--
    (i) Periodically audit a sample of transactions accessing 
information disclosed under that section to assure that the entity 
receiving disclosed information has on file a written release 
authorizing each access. The audit must ensure that the information is 
not being used for any unauthorized purpose;
    (ii) Ensure that all employees of entities receiving access to 
information disclosed under Sec.  603.5(d)(2) are subject to the same 
confidentiality requirements, and State criminal penalties for 
violation of those requirements, as are employees of the State UC 
agency.
    (c) Redisclosure of confidential UC information. (1) A State or 
State UC agency may authorize any recipient of confidential UC 
information under paragraph (a) of this section to redisclose 
information only as follows:
    (i) To the individual or employer who is the subject of the 
information;
    (ii) To an attorney or other duly authorized agent representing the 
individual or employer;
    (iii) In any civil or criminal proceedings for or on behalf of a 
recipient agency or entity;
    (iv) In response to a subpoena only as provided in Sec.  603.7;
    (v) To an agent or contractor of a public official only if the 
person redisclosing is a public official, if the redisclosure is 
authorized by the State

[[Page 56847]]

law, and if the public official retains responsibility for the uses of 
the confidential UC information by the agent or contractor;
    (vi) From one public official to another if the redisclosure is 
authorized by the State law;
    (vii) When so authorized by Section 303(e)(5), SSA, (redisclosure 
of wage information by a State or local child support enforcement 
agency to an agent under contract with such agency for purposes of 
carrying out child support enforcement) and by State law; or
    (viii) When specifically authorized by a written release that meets 
the requirements of Sec.  603.5(d) (to a third party with informed 
consent).
    (2) Information redisclosed under paragraphs (c)(1)(v) and (vi) of 
this section must be subject to the safeguards in paragraph (b) of this 
section.
    (d) The requirements of this section do not apply to disclosures of 
UC information to a Federal agency which the Department has determined, 
by notice published in the Federal Register, to have in place 
safeguards adequate to satisfy the confidentiality requirement of 
Section 303(a)(1), SSA.


Sec.  603.10  What are the requirements for agreements?

    (a) Requirements. (1) For disclosures of confidential UC 
information under Sec.  603.5(d)(2) (to a third party (other than an 
agent) or disclosures made on an ongoing basis); Sec.  603.5(e) (to a 
public official), except as provided in paragraph (d) of this section; 
Sec.  603.5(f) (to an agent or contractor of a public official); Sec.  
603.6(b)(1) through (4), (6), and (7)(i) (as required by Federal UC 
law); and Sec.  603.22 (to a requesting agency for purposes of an 
IEVS), a State or State UC agency must enter into a written, 
enforceable agreement with any agency or entity requesting 
disclosure(s) of such information. The agreement must be terminable if 
the State or State UC agency determines that the safeguards in the 
agreement are not adhered to.
    (2) For disclosures referred to in Sec.  603.5(f) (to an agent or 
contractor of a public official), the State or State UC agency must 
enter into a written, enforceable agreement with the public official on 
whose behalf the agent or contractor will obtain information. The 
agreement must hold the public official responsible for ensuring that 
the agent or contractor complies with the safeguards of Sec.  603.9. 
The agreement must be terminable if the State or State UC agency 
determines that the safeguards in the agreement are not adhered to.
    (b) Contents of agreement. (1) In general. Any agreement required 
by paragraph (a) of this section must include, but need not be limited 
to, the following terms and conditions:
    (i) A description of the specific information to be furnished and 
the purposes for which the information is sought;
    (ii) A statement that those who request or receive information 
under the agreement will be limited to those with a need to access it 
for purposes listed in the agreement;
    (iii) The methods and timing of requests for information and 
responses to those requests, including the format to be used;
    (iv) Provision for paying the State or State UC agency for any 
costs of furnishing information, as required by Sec.  603.8 (on costs);
    (v) Provision for safeguarding the information disclosed, as 
required by Sec.  603.9 (on safeguards); and
    (vi) Provision for on-site inspections of the agency, entity, or 
contractor, to assure that the requirements of the State's law and the 
agreement or contract required by this section are being met.
    (2) In the case of disclosures under Sec.  603.5(d)(2) (to a third 
party (other than an agent) or disclosures made on an ongoing basis), 
the agreement required by paragraph (a) of this section must assure 
that the information will be accessed by only those entities with 
authorization under the individual's or employer's release, and that it 
may be used only for the specific purposes authorized in that release.
    (c) Breach of agreement. (1) In general. If an agency, entity, or 
contractor, or any official, employee, or agent thereof, fails to 
comply with any provision of an agreement required by this section, 
including timely payment of the state's or state UC agency's costs 
billed to the agency, entity, or contractor, the agreement must be 
suspended, and further disclosure of information (including any 
disclosure being processed) to such agency, entity, or contractor is 
prohibited, until the State or State UC agency is satisfied that 
corrective action has been taken and there will be no further breach. 
In the absence of prompt and satisfactory corrective action, the 
agreement must be canceled, and the agency, entity, or contractor must 
be required to surrender to the state or state UC agency all 
confidential UC information (and copies thereof) obtained under the 
agreement which has not previously been returned to the state or state 
UC agency, and any other information relevant to the agreement.
    (2) Enforcement. In addition to the actions required to be taken by 
paragraph (c)(1) of this section, the state or state UC agency must 
undertake any other action under the agreement, or under any law of the 
State or of the United States, to enforce the agreement and secure 
satisfactory corrective action or surrender of the information, and 
must take other remedial actions permitted under State or Federal law 
to effect adherence to the requirements of this subpart B, including 
seeking damages, penalties, and restitution as permitted under such law 
for any charges to granted funds and all costs incurred by the state or 
the state UC agency in pursuing the breach of the agreement and 
enforcement as required by this paragraph (c).
    (d) The requirements of this section do not apply to disclosures of 
UC information to a Federal agency which the Department has determined, 
by notice published in the Federal Register, to have in place 
safeguards adequate to satisfy the confidentiality requirement of 
Section 303(a)(1), SSA, and an appropriate method of paying or 
reimbursing the State UC agency (which may involve a reciprocal cost 
arrangement) for costs involved in such disclosures. These 
determinations will be published in the Federal Register.


Sec.  603.11  How do States notify claimants and employers about the 
uses of their information?

    (a) Claimants. Every claimant for compensation must be notified, at 
the time of application, and periodically thereafter, that confidential 
UC information pertaining to the claimant may be requested and utilized 
for other governmental purposes, including, but not limited to, 
verification of eligibility under other government programs. Notice on 
or attached to subsequent additional claims will satisfy the 
requirement for periodic notice thereafter.
    (b) Employers. Every employer subject to a State's law must be 
notified that wage information and other confidential UC information 
may be requested and utilized for other governmental purposes, 
including, but not limited to, verification of an individual's 
eligibility for other government programs.


Sec.  603.12  How are the requirements of this part enforced?

    (a) Resolving conformity and compliance issues. For the purposes of 
resolving issues of conformity and substantial compliance with the 
requirements set forth in subparts B and C, the provisions of 20 CFR 
601.5(b) (informal discussions with the

[[Page 56848]]

Department of Labor to resolve conformity and substantial compliance 
issues), and 20 CFR 601.5(d) (Secretary of Labor's hearing and decision 
on conformity and substantial compliance) apply.
    (b) Conformity and substantial compliance. Whenever the Secretary 
of Labor, after reasonable notice and opportunity for a hearing to the 
State UC agency of a State, finds that the State law fails to conform, 
or that the State or State UC agency fails to comply substantially, 
with:
    (1) The requirements of Title III, SSA, implemented in subparts B 
and C of this part, 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.
    (2) The FUTA requirements implemented in this subpart B, the 
Secretary of Labor shall make no certification under that section to 
the Secretary of the Treasury for such State as of October 31 of the 
12-month period for which such finding is made.

Subpart C--Mandatory Disclosure for Income and Eligibility 
Verification System (IEVS)


Sec.  603.20  What is the purpose and scope of this subpart?

    (a) Purpose. Subpart C implements Section 303(f), SSA. Section 
303(f) requires States to have in effect an income and eligibility 
verification system, which meets the requirements of Section 1137, SSA, 
under which information is requested and exchanged for the purpose of 
verifying eligibility for, and the amount of, benefits available under 
several federally assisted programs, including the Federal-State UC 
program.
    (b) Scope. This subpart C applies only to a State UC agency.


    Note to paragraph (b): Although not implemented in this part 
603, Section 1137(a)(1), SSA, provides that each State must require 
claimants for compensation to furnish to the State UC agency their 
social security account numbers, as a condition of eligibility for 
compensation, and further requires States to utilize such account 
numbers in the administration of the State UC laws. Section 
1137(a)(3), SSA, further provides that employers must make quarterly 
wage reports to a State UC agency, or an alternative agency, for use 
in verifying eligibility for, and the amount of, benefits. Section 
1137(d)(1), SSA, provides that each State must require claimants for 
compensation, as a condition of eligibility, to declare in writing, 
under penalty of perjury, whether the individual is a citizen or 
national of the United States, and, if not, that the individual is 
in a satisfactory immigration status. Other provisions of Section 
1137(d), SSA, not implemented in this regulation require the States 
to obtain, and individuals to furnish, information which shows 
immigration status, and require the States to verify immigration 
status with the Bureau of Citizenship and Immigration Services.

Sec.  603.21  What is a requesting agency?

    For the purposes of this subpart C, requesting agency means:
    (a) Temporary Assistance to Needy Families Agency--Any State or 
local agency charged with the responsibility of administering a program 
funded under part A of Title IV of the SSA.
    (b) Medicaid Agency--Any State or local agency charged with the 
responsibility of administering the provisions of the Medicaid program 
under a State plan approved under Title XIX of the SSA.
    (c) Food Stamp Agency--Any State or local agency charged with the 
responsibility of administering the provisions of the Food Stamp 
Program under the Food Stamp Act of 1977.
    (d) Other SSA Programs Agency--Any State or local agency charged 
with the responsibility of administering a program under a State plan 
approved under Title I, X, XIV, or XVI (Supplemental Security Income 
for the Aged, Blind, and Disabled) of the SSA.
    (e) Child Support Enforcement Agency--Any State or local child 
support enforcement agency charged with the responsibility of enforcing 
child support obligations under a plan approved under part D of Title 
IV of the SSA.
    (f) Social Security Administration--Commissioner of the Social 
Security Administration in establishing or verifying eligibility or 
benefit amounts under Titles II (Old-Age, Survivors, and Disability 
Insurance Benefits) and XVI (Supplemental Security Income for the Aged, 
Blind, and Disabled) of the SSA.


Sec.  603.22  What information must State UC agencies disclose for 
purposes of an IEVS?

    (a) Disclosure of information. Each State UC agency must disclose, 
upon request, to any requesting agency, as defined in Sec.  603.21, 
that has entered into an agreement required by Sec.  603.10, wage 
information (as defined at Sec.  603.2(k)) and claim information (as 
defined at Sec.  603.2(a)) contained in the records of such State UC 
agency.
    (b) Format. The State UC agency must adhere to standardized formats 
established by the Secretary of HHS (in consultation with the Secretary 
of Agriculture) and set forth in 42 CFR 435.960 (concerning 
standardized formats for furnishing and obtaining information to verify 
income and eligibility).


Sec.  603.23  What information must State UC agencies obtain from other 
agencies, and crossmatch with wage information, for purposes of an 
IEVS?

    (a) Crossmatch with information from requesting agencies. Each 
State UC agency must obtain such information from the Social Security 
Administration and any requesting agency as may be needed in verifying 
eligibility for, and the amount of, compensation payable under the 
State UC law.
    (b) Crossmatch of wage and benefit information. The State UC agency 
must crossmatch quarterly wage information with UC payment information 
to the extent that such information is likely, as determined by the 
Secretary of Labor, to be productive in identifying ineligibility for 
benefits and preventing or discovering incorrect payments.

[FR Doc. 06-8185 Filed 9-26-06; 8:45 am]
BILLING CODE 4510-30-P