Federal-State Unemployment Compensation (UC) Program; Interstate Arrangement for Combining Employment and Wages; Final Rule, 63068-63072 [E8-25097]

Agencies

• Employment and Training Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 73, Number 206 (Thursday, October 23, 2008)]
[Rules and Regulations]
[Pages 63068-63072]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-25097]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 616

RIN 1205-AB51


Federal-State Unemployment Compensation (UC) Program; Interstate 
Arrangement for Combining Employment and Wages; Final Rule

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 amend its regulations governing combined-wage claims 
filed under the Federal-State Unemployment Compensation (UC) program. 
Most significantly, this final rule amends the definition of ``paying 
State.''

[[Page 63069]]


DATES: Effective Date: This final rule is effective January 6, 2009.

FOR FURTHER INFORMATION, CONTACT: Stephanie Garcia, Team Leader, State 
and Federal Programs Team, Division of UI Operations, Employment and 
Training Administration, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Room S-4231, Washington, DC 20210; (202) 693-3207 (this is 
not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On November 2, 2007, the Department published a notice of proposed 
rulemaking (NPRM) to amend the definition of ``paying State'' for 
purposes of combined-wage claims (CWCs) filed under the Federal-State 
UC program. (72 FR 62145, Nov. 2, 2007) The Department invited comments 
through January 2, 2008.

II. General Discussion of the Rulemaking

    Section 3304(a)(9)(B) of the Federal Unemployment Tax Act (FUTA) 
(26 U.S.C. 3304(a)(9)(B)) requires each State, as a condition of 
participation in the Federal-State UC program, to participate in any 
arrangement specified by the Secretary of Labor (Secretary) for payment 
of UC on the basis of combining an individual's employment and wages in 
two or more States. A claim filed under this arrangement is a CWC. 
Rules implementing this arrangement are found at 20 CFR part 616.
    As explained in Sec.  616.1, the purpose of the arrangement is to 
permit an unemployed worker with covered employment or wages in more 
than one State to combine all such employment and wages in one State, 
in order to qualify for benefits or to receive more benefits. Section 
616.2 explains that, in accordance with section 3304(a)(9)(B), the 
arrangement was developed in consultation with the representative of 
the State UC agencies, currently known as the National Association of 
State Workforce Agencies (NASWA).
    The arrangement provides, at Sec.  616.7(a), that any unemployed 
individual who had employment covered under the UC law of two or more 
States, whether or not he or she has earned sufficient wages to qualify 
for UC under one or more of them, may elect to file a CWC. Under the 
current regulations, Sec.  616.6(e)(1), the ``paying State'' is the 
State in which the claimant files the CWC, if he or she qualifies for 
benefits under the UC law of that State on the basis of combined 
employment and wages. Section 616.6(e)(2) identifies the ``paying 
State'' when either the CWC claimant does not qualify for unemployment 
benefits under the UC law of the State in which he or she files the CWC 
or when the claimant files a CWC in Canada.
    The NPRM proposed amending the definition in Sec.  616.6(e) to 
provide that any ``single State'' in which the claimant had base period 
wages and employment, and in which the claimant qualifies for 
unemployment benefits, may be a ``paying State.'' For example, if a 
claimant had wages and employment in the base period(s) of State A and 
the base period(s) of State B, the claimant may elect either State A or 
State B (assuming the claimant qualifies in both States), because the 
``paying State'' must be a ``single'' State. Further, no State other 
than State A or State B could serve as the ``paying State'' because the 
claimant did not have wages in the base period(s) of any other State. 
The amendment's purpose was to prevent ``forum shopping,'' under which 
an individual may file a claim in a State with a higher weekly benefit 
amount (WBA) than that which exists in any of the States in which the 
claimant had covered employment. The amendment limits the ``paying 
States'' to those States in which CWC claimants had base period wages 
and employment.
    The Department believes that ``forum shopping'' is undesirable for 
several reasons. First, it may unfairly advantage claimants who worked 
in multiple States over those who worked in just one State by affording 
CWC claimants the choice of filing a UC claim in a State with a higher 
WBA. Second, ``forum shopping'' results in higher costs for the 
claimant's employers, because the claimant files a CWC in a State 
paying higher benefits, which are ultimately funded by those employers.
    Moreover, ``forum shopping'' undermines the insurance principles of 
the Federal-State UC program. Under an insurance program, benefits are 
payable based on a specific plan. In the case of UC, benefits are 
payable under a State's plan for compensating unemployment. This plan 
balances premiums (in the form of employer contributions) with benefit 
outlays (in the form of payments to individuals), requiring that 
benefit rights and contribution rates be coordinated. CWCs are unique 
in that insured wages are necessarily combined under a single State's 
plan. Requiring that benefit eligibility be determined under the law of 
one State in which the claimant had insured base period wages conforms 
more closely to the insurance principles of the program.
    The NPRM proposed amending Sec.  616.7 by adding a new paragraph 
(f) to require a State that denies a CWC to notify the claimant of the 
option of filing in another State, and proposed a conforming amendment 
to Sec.  616.8(a) addressing the responsibilities of the ``paying 
State.'' The NPRM also proposed removing and reserving Sec.  616.5, 
which makes December 31, 1971 the effective date of the arrangement, 
because it is no longer necessary.

III. Comments on the Proposed Amendments

    The Department received 19 pieces of correspondence commenting on 
the NPRM by the close of the comment period. All were from State UC 
agencies. The Department considered all comments, although those that 
were not germane to this rulemaking are not addressed here.

Discussion of Comments

    In General. Eleven commenters generally supported the proposed 
amendments while four opposed the proposed amendments. Four other 
commenters limited their comments to matters related to implementation 
of the new definition of ``paying State'' and did not express support 
or opposition to the proposed amendments.
    Commenters favoring the proposed amendments noted the problem of 
``forum shopping.'' In describing the extent of forum shopping, one 
commenter related that payments attributable to CWCs without employment 
in that State totaled $41 million for the 12 months ending June 2006. 
Another commenter stated that the proposed amendment was an ``equitable 
solution'' to the problems created by the current rule. Commenters 
favoring the proposed amendment also stated that it ``would simplify 
combined-wage claim filing'' or that ``the revised definition should 
result in a more expedited and efficient processing of CWCs.''
    Conversely, commenters opposing the proposed amendment expressed 
concerns about an increased administrative burden and workload shifts 
between States. Three commenters proposed alternative amendments to the 
existing rule. These alternative approaches and concerns about 
administrative burdens are discussed below.
    Alternative Approaches. One commenter proposed that the current 
definition of ``paying State,'' under which the paying State is the 
State in which the claimant files the claim (as long as the claimant 
qualifies for benefits in that State), be retained, but require also 
that the claimant must have

[[Page 63070]]

wages in that State. If the claimant did not have wages in that State, 
the ``paying State'' would be the State where the claimant was last 
employed in covered employment (among those States in which the 
claimant qualifies for UC on the basis of combining employment and 
wages).
    This alternative approach thus has two parts: The first part makes 
the ``paying State'' a State in which the CWC claimant files the claim 
as long as the claimant qualifies for benefits in that State. This is 
similar to the NPRM's approach, in that it requires the claimant to 
have wages in, as well as qualify for benefits in, the ``paying 
State.'' This first part, therefore, serves the same purpose of the 
NPRM to prevent forum shopping.
    However, the second part of the alternative approach would require, 
in instances where the claimant did not have wages in the first State 
in which the CWC was filed, that the ``paying State'' be the State 
where the claimant was last employed. This approach, however, would 
unnecessarily restrict a claimant's choice as to the ``paying State.'' 
Under the first part of the alternative approach, a claimant would be 
free to file a claim in, and therefore select among, any of the States 
in which he or she qualified for benefits and had wages. However, the 
claimant would lose this right if he or she had the misfortune of 
initially filing in a State which did not meet the definition of 
``paying State.'' In that event, the selection of the ``paying State'' 
would default to a particular State, that is, the State of last 
employment, thereby eliminating any choice the claimant originally had 
in selecting the ``paying State''. Thus, the Department declines to 
adopt this alternative.
    Another commenter suggested that the ``paying State'' be either the 
State in which the claimant had the most recent covered employment or 
the most recent base period employment, regardless of where the claim 
was filed. This approach raises concerns because the identification of 
a claimant's most recent employer may not be readily available at the 
time a claim is filed due to the fact that wages are often not reported 
until several weeks after the end of the last calendar quarter in which 
the claimant was employed. Moreover, if a claimant had more than one 
employer during that quarter, those reports will not identify which one 
was the claimant's last employer during that quarter, and the claimant 
may not know the correct name of the last employer. The delay is even 
greater for CWCs that are based in whole or in part on Federal 
employment, as wages are not reported by Federal employers until after 
a claim is filed, and thus States cannot immediately determine Federal 
employment and wages at the time of filing in order to make a 
determination of the ``last employer.''
    In addition, the proposed alternative fails to treat CWCs 
consistently with ``regular'' claims, because ``regular'' claims are 
based on base period wages and employment rather than the claimant's 
most recent wages and employment. Moreover, the claimant's most recent 
employment in a State might be only incidental, yet this definition 
would require the filing of a CWC in that State even though the 
claimant had earned considerable base period wages in one or more other 
States. This approach is therefore inconsistent with the insurance 
principles of the UC program since it permits the claimant to receive 
UC benefits from a State in which the claimant's employer made 
incidental contributions. Thus, the Department declines to adopt this 
alternative.
    Another commenter proposed a residency requirement for CWC 
claimants. As discussed above, the Department values consistency in the 
treatment of CWC and ``regular'' claimants. For a claimant with base 
period wages and employment in only one State, the claimant's 
eligibility is determined under that State's law, regardless of where 
the claimant resides. Similarly, residency should not be taken into 
account in a CWC. Also, determining residency is not always a simple 
matter. For example, establishing the residency of a claimant who 
recently moved from one State to another could be complex, 
unnecessarily delaying the payment of UC. Therefore, the Department 
declines the suggestion to incorporate residency into the requirements.
    Accordingly, after due consideration of the comments, the final 
rule adopts the proposed amendment of the ``paying State'' definition 
without change.
    Administrative Burden. Commenters addressing the administrative 
burden of the proposed amendments were concerned about proposed 
paragraph (f) in Sec.  617.7, providing that if a State denies a CWC, 
``it must inform the claimant of the option to file in another State in 
which the State finds that the claimant has wages and employment.'' 
Eleven of the 19 commenters expressed concern that State agencies would 
be required to provide detailed information on claim filing and 
research claimant options.
    The commenters apparently read the word ``finds'' in paragraph (f) 
to mean that a State must issue a formal determination listing the 
States in which the claimant has wages and employment. That is not 
correct. The purpose of proposed Sec.  617.7(f) was to assure the 
notification of any claimant whose CWC was denied under one State's law 
that the individual has the option to file against another State. It 
did not intend to require that a State make a formal finding, but 
merely to direct a State to inform the claimant of this option. 
However, to clarify this matter and eliminate any confusion, the final 
rule deletes the words ``State finds that.''
    Workload Shifts. One commenter was concerned that the proposed rule 
would shift CWC workload from one State to another, which would shift 
the amount of funding provided by the Department for State UC 
administration. Another commenter was also concerned about workload 
increases.
    CWCs are generally not a large part of the UC claims workload and, 
as a result, workload shifts likely would be minimal and have little 
effect on administrative funding. For example, in calendar year 2007, 
only about 4 percent of initial claims were CWCs. Moreover, the 
Department believes that any rule related to claimant eligibility 
should be based on fair and equitable treatment of claimants, and not 
be influenced by incidental workload shifts. The proposed rule would 
achieve this fair and equitable treatment by allowing the claimant to 
choose to file in any State in which the claimant qualified for 
unemployment benefits based upon insured base period wages and 
employment in that State. Accordingly, the final rule is adopted as 
proposed.
    Another commenter noted that State Information Technology (IT) 
systems would require re-programming in order to add an advisement to 
claimants who are denied CWCs of the possibility of filing against 
another State. Although the amendment may require a relatively minor 
change(s) to a State's IT system this is a one time change that is 
within the scope of States' customary updates to claim filing systems 
and does not impose additional workload responsibilities on State 
agencies.
    Implementation and other Administrative Issues. Several commenters 
raised questions related to the implementation and the timing of 
implementation. The Department believes that specific procedural 
guidance for implementation is best addressed through program letters 
and similar guidance. The Department plans to issue this guidance 
immediately after publication of the final rule.
    The Department recognizes the significance of the questions related 
to

[[Page 63071]]

implementation. All States must convert to the new definition of 
``paying State'' at the same time; failure to achieve this would be 
confusing and unfair to claimants and the employers who bear the 
benefit costs and would create additional implementation issues. To 
assure that all States have adequate time to address operational 
issues, including training new staff, the final rule will be effective 
January 6, 2009.
    Some commenters also expressed concerns over more long-range 
implementation issues. Several expressed concern that not all wages are 
reported by employers in a correct or timely fashion to State UC 
agencies. These commenters emphasized the importance of cooperation and 
participation among all States to ensure that timely information is 
available. The Department agrees and will facilitate such efforts 
through procedural guidance and ongoing training efforts.
    Technical Changes. We did not receive comments addressing the 
deletion as unnecessary of Sec.  616.5, which makes December 31, 1971, 
the effective date of the arrangement. Nor were there any comments 
about a conforming amendment to Sec.  616.8(a), which eliminates 
language deemed irrelevant in light of the new definition of ``paying 
State'' because it addressed a scenario in which a State issues CWC 
determinations, even if the claimant had no covered wages in the 
``paying State.'' These amendments are included in the final rule.
    One commenter noted language in Sec.  616.8(a), which mentions 
``wages in the paying State, if any.'' The final rule deletes the words 
``if any'' because, under the new definition of ``paying State,'' there 
must always be wages in the paying State.
    Lastly, the proposed rule solicited comments on the desirability of 
amending any of the provisions of Part 616, because the CWC arrangement 
has been in existence for over thirty-five years without change to its 
basic structure. We received no comments. Accordingly, we have made no 
amendments other than those described above.

IV. Administrative Provisions

Executive Order 12866--Regulatory Planning and Review

    The Department has determined that this final rule is not 
economically significant. Under Executive Order 12866, a rule is 
economically significant if it materially alters the budgetary impact 
of entitlements, grants, user fees, or loan programs; has an annual 
effect on the economy of $100 million or more; or adversely affects the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities in a material way. The Department has 
determined that this rule is not economically significant under this 
Executive Order because it will not have an economic impact of $100 
million or more on the State agencies or the economy. The Department 
has consulted with the Office of Management and Budget (OMB) on this 
final rule. Based on their analysis, OMB has deemed that this rule is 
not a significant action under Executive Order 12866, therefore the 
Department is not required to submit the final rule to OMB for 
approval.

Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA), the Department of Labor is 
required to submit any information collection requirements to the 
Office of Management and Budget (OMB) for review and approval (44 
U.S.C. 3501 et seq.). As it does not impose any new requirements or 
modifications of existing requirements on the States that have not 
already been approved by OMB for collection, the Department has 
determined that this final rule does not contain new information 
collection requiring it to submit a paperwork package to OMB.

Executive Order 13132: Federalism

    Executive Order 13132 at section 6 requires Federal agencies to 
consult with State entities when a regulation or policy may have a 
substantial direct effect on the States or the relationship between the 
National Government and the States, or the distribution of power and 
responsibilities among the various levels of government, within the 
meaning of the Executive Order. Section 3(b) of the Executive Order 
further provides that Federal agencies must implement regulations that 
have a substantial direct effect only if statutory authority permits 
the regulation and it is of national significance.
    Further, section 3304(a)(9)(B) of FUTA requires consultation with 
the State agencies in developing the CWC arrangement. Section 616.2 of 
the CWC regulations also provides that for purposes of ``such 
consultation in its formulation and any future amendment the Secretary 
recognizes, as agents of the State agencies, the duly designated 
representatives of the National Association of State Workforce Agencies 
(NASWA).''
    Consultation has occurred on an informal basis with the States 
through NASWA. The Department consulted with the UC Committee and other 
representatives of the States selected by the NASWA, during the 60-day 
comment period for this proposed rule.

Unfunded Mandates Reform Act

    This regulatory action has been reviewed in accordance with the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Under the Act, a 
Federal agency must determine whether a regulation proposes a Federal 
mandate that would result in the increased expenditures by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year. The Department has 
determined that this final rule does not create any unfunded mandates 
because it will not significantly increase aggregate costs of the CWC 
arrangement, as these changes are considered to be within the scope of 
States' customary updates to claim filing systems. The effect of this 
final rule is to preclude ``forum shopping'' and tie UC eligibility 
more closely to the insurance principle of the Federal-State UC 
program, and it does not create additional entitlements.

Assessment of Federal Regulations and Policies on Families

    The final rule does not have an impact on the autonomy or integrity 
of the family as an institution, as it is described under section 654 
of the Treasury and General Government Appropriations Act. We have 
assessed that while there may be costs associated with the rule, they 
are not of a magnitude to adversely affect family well-being. This 
provision protects the stability of family life, including marital 
relationships, financial status of families, and parental rights.

Regulatory Flexibility Act/Small Business Regulatory Enforcement Act

    We have notified the Chief Counsel for Advocacy, Small Business 
Administration, and made the certification according to the Regulatory 
Flexibility Act (RFA) at 5 U.S.C. 605(b), that this rule will not have 
a significant economic impact on a substantial number of small 
entities. Under the RFA, no regulatory flexibility analysis is required 
where the rule ``will not * * * have a significant economic impact on a 
substantial number of small entities'' (5 U.S.C. 605(b)). A small 
entity is defined as a small business, small not-for-profit 
organization, or small governmental jurisdiction (5 U.S.C. 601(3)-(5)). 
Therefore, the definition of the term ``small entity'' does not include 
States.

[[Page 63072]]

    This rule describes procedures governing State administration of 
the CWC arrangement under the Federal-State UC program, which does not 
extend to small governmental jurisdictions. Therefore, the Department 
certifies that this final rule will not have a significant impact on a 
substantial number of small entities and, as a result, no regulatory 
flexibility analysis is required.
    In addition, the Department certifies that this rule is not a major 
rule as defined by section 804 of the Small Business Regulatory 
Enforcement Act of 1996 (SBREFA). Under section 804 of SBREFA, a major 
rule is one that is an ``economically significant regulatory action'' 
within the meaning of Executive Order 12866. Because this final rule is 
not an economically significant rule under Executive Order 12866, the 
Department certifies that it also is not a major rule under SBREFA.

Executive Order 13045--Protection of Children From Environmental Health 
Risks and Safety Risks

    Executive Order 13045 concerns the protection of children from 
environmental health risks and safety risks. This NPRM addresses UC, a 
program for unemployed workers, and has no impact on safety or health 
risks to children.

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    Executive Order 13175 addresses the unique relationship between the 
Federal Government and Indian tribal governments. The order requires 
Federal agencies to take certain actions when regulations have ``tribal 
implications.'' Required actions include consulting with tribal 
governments prior to promulgating a regulation with tribal implications 
and preparing a tribal impact statement. The order defines regulations 
as having ``tribal implications'' when they have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes, or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes.
    The Department has reviewed this NPRM and concludes that it does 
not have tribal implications. This regulation does not affect the 
relationship between the Federal Government and the tribes, nor does it 
affect the distribution of power and responsibilities between the 
Federal Government and tribal governments. Accordingly, we conclude 
that this rule does not have tribal implications for the purposes of 
Executive Order 13175.

Executive Order 12630--Government Actions and Interference With 
Constitutionally Protected Property Rights

    The final rule does not impose limitations on private property use 
as described under Executive Order 12630, Governmental Actions and the 
Interference with Constitutionality Protected Property Rights. It does 
not propose or implement licensing, permitting or other condition 
requirements on the use thereof, nor require dedications or exactions 
from owners of private property. Accordingly, we have determined this 
rule does not have takings implications.

Executive Order 12988--Civil Justice

    This regulation has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The regulation has been written so as to 
minimize litigation and provide a clear legal standard for affected 
conduct, and has been reviewed carefully to eliminate drafting errors 
and ambiguities.

Plain Language

    The Department drafted this rule in plain language.

List of Subjects in 20 CFR Part 616

    Unemployment compensation.

0
For the reasons stated in the preamble, the Department amends 20 CFR 
part 616 as set forth below:

PART 616--INTERSTATE ARRANGEMENT FOR COMBINING EMPLOYMENT AND WAGES

0
1. The authority citation for 20 CFR part 616 is revised to read as 
follows:

    Authority: 26 U.S.C. 3304(a)(9)(B); Secretary's Order No. 3-
2007, Apr. 3, 2007 (72 FR 15907).


Sec.  616.5  [Removed]

0
2. Remove Sec.  616.5.


Sec.  616.6  [Amended]

0
3. Revise paragraph (e) of Sec.  616.6 to read as follows:


Sec.  616.6  Definitions.

* * * * *
    (e) Paying State. A single State against which the claimant files a 
Combined-Wage Claim, if the claimant has wages and employment in that 
State's base period(s) and the claimant qualifies for unemployment 
benefits under the unemployment compensation law of that State using 
combined wages and employment.
* * * * *


Sec.  616.7  [Amended]

0
4. Add new paragraph (f) to Sec.  616.7 of 20 CFR to read as follows:


Sec.  616.7  Election to file a Combined-Wage Claim.

* * * * *
    (f) If a State denies a Combined-Wage Claim, it must inform the 
claimant of the option to file in another State in which the claimant 
has wages and employment during that State's base period(s).


Sec.  616.8  [Amended]

0
5. In Sec.  616.8(a) remove the words ``, if any'' and the words ``, 
even if the Combined-Wage Claimant has no earnings in covered 
employment in that State''.
* * * * *

    Signed at Washington, DC, this 16th day of October 2008.
Brent R. Orrell,
Deputy Assistant Secretary for Employment and Training.
 [FR Doc. E8-25097 Filed 10-22-08; 8:45 am]
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