Federal-State Unemployment Compensation Program (UC); Confidentiality and Disclosure of State UC Information, 56830-56848 [06-8185]

Agencies

• Employment and Training Administration
• DEPARTMENT OF LABOR

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



[[Page 56829]]

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Part VIII





Department of Labor





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Employment and Training Administration



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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

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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.

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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 hildebrand.gerard@dol.gov.

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

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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

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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

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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.

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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 mot