37210 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

DEPARTMENT OF LABOR

Employment and Training

Administration

20 CFR Part 604

RIN 1205–AB21

Birth and Adoption Unemployment

Compensation

AGENCY: Employment and Training

Administration, Labor.

ACTION: Final rule.

SUMMARY: The Department of Labor

(Department) is issuing this Final Rule

to create an opportunity for State

agencies that administer the

Unemployment Compensation (UC)

program to provide partial wage

replacement, on a voluntary,

experimental basis, to parents who take

approved leave or who otherwise leave

employment following the birth or

placement for adoption of a child. This

regulation permits interested States to

experiment with methods for allowing

the use of the UC program for this

purpose.

EFFECTIVE DATE: This Final Rule is

effective August 14, 2000.

FOR FURTHER INFORMATION CONTACT:

Gerard Hildebrand, Office of Workforce

Security, Employment and Training

Administration (ETA), U.S. Department

of Labor, 200 Constitution Avenue,

N.W., Room S–4231, Washington, DC

20210. Telephone: (202) 219–5200 ext.

391 (this is not a toll-free number);

facsimile: (202) 219–8506; e-mail:

ghildebrand@doleta.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Overview

On December 3, 1999, we published

for comment in the Federal Register a

Notice of Proposed Rulemaking (NPRM)

proposing to add new part 604 to 20

CFR. Part 604 will permit the State

agencies that administer the UC

program to provide partial wage

replacement, on a voluntary,

experimental basis, to parents who take

approved leave or who otherwise leave

employment following the birth or

placement for adoption of a child.

The preamble in the NPRM contained

a detailed explanation, by subpart, of

each proposed section. Much of the

material in the NPRM is repeated in this

document to adequately respond to

comments and to eliminate the need for

readers to refer to the NPRM for context.

Where substantive changes to the

proposed rule are made, the changes are

discussed in the relevant preamble

section of this Final Rule. Technical

revisions, however, are not discussed in

this preamble. Unless otherwise

mentioned, references in this preamble

to changes are comparisons between the

NPRM and Final Rule.

The NPRM was published with two

appendices: Model State Legislation

(Appendix A), which is optional draft

legislation that States may use as a

guide in developing legislation, and a

Commentary (Appendix B) in questionand-answer format that provides

information on the Model State

Legislation and will aid States in

making policy decisions. Comments

received regarding these appendices are

discussed in this preamble. The

appendices are attached to this notice in

the form of an Unemployment Insurance

Program Letter (UIPL). The appendices

will not appear in the CFR.

The NPRM invited the public to

comment over a 45-day period. We

believed this period was ample because

of the simple nature of the experiment

and the relatively short length of the

proposed rule, although we did receive

a number of requests for additional

time. To accommodate the holiday

season, we extended the comment

period 15 days, through February 2,

2000. Comments were accepted by mail

and electronic media. All comments

submitted by this date, including

correspondence received prior to

publication of the proposed rule, were

considered in developing this Final

Rule.

B. Background

Based on findings from a 1996 study

conducted by the Commission on

Family and Medical Leave, which

indicated that parents were not able to

take needed leave because they could

not afford it, and in response to the

legislative efforts by some States to

provide UC to parents, the President

directed the Secretary of Labor on May

23, 1999, to propose regulations

allowing unemployment fund moneys

to be used to provide partial wage

replacement to mothers and fathers on

leave following the birth or adoption of

a child. The President elaborated on this

Birth and Adoption UC (BAA–UC)

proposal in a May 24, 1999,

memorandum to the heads of executive

departments stating that ‘‘the

Department of Labor is to evaluate the

effectiveness of using the system for

these or related purposes.’’

Through the BAA–UC experiment,

States will be able to provide partial

wage replacement to enable some

parents, who otherwise would not have

taken any leave, to do so. Others, who

took leave but were compelled to return

to work prematurely because they could

not afford to be off work, may be able

to take longer leave periods. We believe

this increase in both the incidence and

duration of leave-taking will benefit

these parents and their children by

allowing more time for parent-child

bonding and for arranging stable child

care. The BAA–UC experiment will test

whether enabling these parents to have

this time to be with their newborns and

newly-adopted children by providing

them with partial wage replacement will

promote their long-term attachment to

the workforce.

C. The Federal-State UC Program

The Federal-State UC program is

administered as a partnership of the

Federal government and the States.

States collect State UC taxes used to pay

compensation while the Federal

government collects taxes, used for

grants for State UC administration,

under the Federal Unemployment Tax

Act (FUTA). (The FUTA is codified at

26 U.S.C. 3301–3311.) The Department

has broad oversight responsibility for

the Federal-State UC program, including

determining whether a State’s law

conforms and its practices substantially

comply with the requirements of

Federal UC law. If a State’s law

conforms and its practices substantially

comply with the requirements of the

FUTA, then the Secretary of Labor

issues certifications enabling employers

in the State to receive credit against the

Federal unemployment tax, as provided

under section 3302, FUTA. If a State

and its law are certified under the

FUTA, and the State’s law conforms and

its practices substantially comply with

the requirements of Title III of the Social

Security Act (SSA), then the State

receives grants for the administration of

its UC program. (Title III of the SSA is

codified at 42 U.S.C. 501–504.) The

Department enforces Federal UC law

requirements through the FUTA credit

and grant certification processes.

D. Ability To Work and Availability for

Work

The Department has the authority and

responsibility to interpret the provisions

of Federal UC law such as the

requirements that individuals must be

‘‘able to work and available for work’’

(known as the A&A requirements) to be

eligible for UC. Although no explicit

A&A requirements are stated in Federal

law, the Department and its

predecessors (the Social Security Board

and the Federal Security Agency)

interpreted Federal UC law as requiring

participating States to have A&A

requirements.

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37211

In response to practical economic and

societal concerns, we have, on several

prior occasions, exercised our authority

to interpret Federal UC statutes

regarding the A&A requirements to

address several specific areas: approved

training, illness, jury duty and

temporary layoffs.

(1) Approved Training

Prior to incorporating the training

provision into the Federal laws, we

encouraged States to treat individuals in

training approved by the State agency as

meeting the A&A requirements since

such training represents the most

effective step available to the individual

to return to work. We cautioned that

State agencies should only approve

short-term training that would make

individuals job ready. In 1970,

Congress, recognizing the importance of

training in remedying unemployment,

made this training provision mandatory

for all States. (Section 3304(a)(8),

FUTA.)

(2) Illness

Eleven States allow an individual

who initially meets the A&A

requirements, but then becomes ill, to

receive UC payments without

interruption, provided that no suitable

work is offered and refused. We approve

such State laws in an effort to deter

disqualification for UC where a claimant

was not able and available for perhaps

one day, or even one hour, out of a

week. Two States, Alaska and

Massachusetts, cap the number of weeks

ill claimants can collect UC at six weeks

and three weeks, respectively; the other

States have no statutory limitations. The

Federal A&A requirements are

preserved because claimants must

initially demonstrate their ability to and

availability for work before the illness

and must be held ineligible if they

refuse an offer of suitable work.

Similarly, under the Federal-State

Extended Unemployment Compensation

Act of 1970 (EB) (26 U.S.C. 3304, note),

an ill individual may receive UC only if

no suitable work is rejected. The EB

program provides additional weeks of

compensation to individuals who have

exhausted their rights to regular

compensation during times of high

unemployment and contains a specific

‘‘work search’’ requirement. This work

search requirement is suspended for EB

claimants who are hospitalized for an

emergency or life-threatening condition

(20 CFR 615.8(g)(3)(i)(B)). This

suspension is permitted only if the State

law contains a similar provision to those

explained above, which must be

consistent with the Federal A&A

requirements.

(3) Jury Duty

We accept that States may pay UC to

individuals serving on jury duty

consistent with the Federal availability

requirement. This is reasonable because

individuals are compelled under the

threat of contempt of court by the

judicial branch of the government to go

on jury duty, and attendance at jury

duty may be taken as evidence that the

employee would otherwise be available

for work. It would be inconsistent for

the State to compel jury service and at

the same time disqualify unemployed

persons from UC for complying. Most

employment is not considered an

excuse for avoiding jury duty, and

unemployment would also likely not be

an excuse from jury duty. Indeed, EB

claimants are exempt from the work

search provision while on jury duty (20

CFR 615.8(g)(3)(i)(A)).

(4) Temporary Layoffs

In a temporary layoff, the employer is

unable to provide work for a short

period of time, but both the employer

and the employee have the expectation

that the employee will return to work on

a specific date. When the employer

recalls the employee, the employee

must accept or be denied UC. In these

cases, the availability requirement is

essentially limited to the employer who

laid off the employee. This recognizes

that such employees are frequently

career employees who would likely quit

a new job to return to their former

employer when the layoff ends;

therefore, other employers would not

likely hire such employees.

E. The BAA–UC Experiment

Under its authority to interpret

Federal UC law and consistent with its

broad oversight responsibility, we

interpret the Federal A&A requirements

to include this voluntary experiment for

examining the use of the UC program to

provide partial wage replacement to

employees who take approved leave or

who otherwise leave employment to be

with their newborns or newly-adopted

children. This experiment will allow

parents of newborns and newly-adopted

children to strengthen their availability

for work by providing them with the

time and financial support to address

several vital needs that accompany the

introduction of a new child into the

family. The experiment will test

whether this opportunity for parents to

provide the initial care that the child

will need, to form a strong emotional

bond with the child, and to establish a

secure system of child care, will

promote the parents’ long-term

attachment to the workforce.

II. Comment Overview

A. Pre-NPRM Publication

Correspondence

Approximately 500 pieces of

correspondence were received before

the NPRM was published in the Federal

Register. These comments came largely

from employers, both for-profit and notfor-profit, and employer associations.

We also received comments from

members of Congress, State legislators,

and private citizens.

The bulk of the pre-NPRM publication

correspondence addressed

compensation to individuals on leave

under the Family and Medical Leave

Act (FMLA) without regard to the

differences between the FMLA and the

Birth and Adoption UC (BAA–UC)

experiment. Because the majority of the

comments stated opinions regarding

compensating employees on leave under

the FMLA and because the

correspondence preceded publication of

the NPRM, we cannot discern

specifically many writers’ opinions

concerning BAA–UC. (For example,

concerns about the costs of wage

replacement for employees on leave

under the FMLA do not necessarily

translate into concerns about the costs

of BAA–UC which apply to a different,

though partially overlapping, universe

of potential recipients.) However, the

specific issues (i.e., the reasons that

support the opinions) noted in the preNPRM publication correspondence are

included, as appropriate, with the postNPRM publication comments.

B. Post-NPRM Publication Comments

Approximately 3,800 pieces of

correspondence were submitted by the

close of the comment period. Of those

expressing an opinion, the post-NPRM

publication correspondence indicated

almost equal levels of support for and

against BAA–UC. As with the preNPRM publication correspondence, the

respondents included employers and

employer associations, members of

Congress, State legislators, State

Employment Security Agencies

(SESAs), and private citizens. As with

the pre-NPRM publication

correspondence, much of the postNPRM correspondence solely addressed

the FMLA without distinguishing the

FMLA from the BAA–UC experiment.

All the timely comments were

considered and all correspondence is

included in the rulemaking record.

We also received comments that were

beyond the realm of both the BAA–UC

regulation and the UC program (e.g.,

prison reform, income tax reform,

Federally-mandated vacations,

availability of compensatory time in lieu

37212 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

of overtime pay under the Fair Labor

Standards Act, eligibility of BAA–UC

recipients for employer-paid benefits).

Because these comments exceed the

parameters of the UC program and this

regulation, they are not addressed

herein.

We appreciate the time and attention

that respondents gave to reviewing the

NPRM. Although some respondents

requested that we contact them

individually about their comments, the

large volume of comments prevented us

from doing that and we believe this

document adequately responds to their

comments.

III. The Issues

A. General Overview

Generally, proponents of BAA–UC

commented that BAA–UC is a logical

extension of the UC program that would

help new parents balance work and

family responsibilities, would keep

people off welfare, and could be easily

and inexpensively administered. Many

proponents referred to studies that

discussed the positive effects on the

workforce attachment of individuals

who receive paid parental leave.

Conversely, those opposing the rule

urged that we withdraw the rule

because the costs would be too great,

child care and rearing are the personal

responsibility of parents and beyond the

scope of government, and the BAA–UC

initiative runs counter to the intent of

both the UC program and the FMLA.

Some respondents consider the idea of

partial wage replacement for new

parents who are not working

commendable, but they think that the

UC program is the incorrect vehicle for

such a benefit.

B. Misconceptions About the Rule

Analysis of the comments revealed

two significant misconceptions

regarding BAA–UC: (1) that BAA–UC is

for leave under the FMLA, and (2) that

BAA–UC is a new program, separate

and apart from the regular UC program.

(1) Relationship Between BAA–UC and

the FMLA

Many respondents referred to BAA–

UC as ‘‘paid FMLA’’ leave or ‘‘paid

family leave.’’ It was also apparent from

the many comments expressing

concerns about the potential for

employee abuse, personal illness, and

time away from work to care for family

members, as well as the administrative

burdens on employers in regard to the

FMLA, that respondents viewed BAA–

UC as tied to FMLA leave. The

misconception that BAA–UC is for leave

taken under the FMLA is

understandable, as an impetus for BAA–

UC was the finding in the 1996 study

conducted by the Commission on

Family and Medical Leave, A Workable

Balance: Report to Congress on Family

and Medical Leave Policies (April 30,

1996) (hereinafter called the ‘‘FMLA

study’’), that new parents were not

taking available unpaid leave because

they could not afford it. Although there

may be many cases where parents of

newborns and newly-adopted children

will be simultaneously eligible for

BAA–UC and leave under the FMLA,

the two are legally unrelated to each

other. For example, the FMLA applies to

employers with 50 or more employees

and provides eligible employees with

up to 12 weeks of unpaid, job-protected

leave for their own or a family member’s

serious health condition, or to care for

a newborn or newly-adopted child. The

BAA–UC initiative, on the other hand,

is voluntary on the part of the States,

may not be made contingent on

employer size, is limited to parents of

newborns and newly-adopted children,

does not guarantee leave, and has no job

protection component.

(2) BAA–UC Is Not a ‘‘New’’ Program

Some respondents commented that

BAA–UC is a new program, separate

and apart from the regular UC program.

Some comments included

administrative questions regarding the

relationship between ‘‘the new benefit

program’’ and the UC program. Other

respondents referred to BAA–UC as ‘‘a

new and disparate benefit unrelated to

legitimate’’ UC and stated that

development of BAA–UC was beyond

our authority. Concerns were also

expressed that this ‘‘entirely different

benefit’’ would artificially inflate the

unemployment rates that trigger the

extended benefit program. Based on the

idea that BAA–UC is a separate

program, many respondents contended

that the unemployment funds that

would be used to finance BAA–UC

should be refunded to the employers.

BAA–UC is not a new program.

Rather, it creates a new basis for

eligibility under the ‘‘regular’’ UC

program. BAA–UC is an experimental

opportunity that is based on an

expanded interpretation of the Federal

requirements that UC recipients be able

to work and available for work. As

discussed, interpretation of Federal UC

requirements is our responsibility and

within our authority.

The comments regarding the NPRM

fell into broad categories and are

discussed, by category, in the following

section.

C. The Comments

(1) Legal Authority For BAA–UC

(a) Presidential Directive

We received comments arguing that

Congress should act on this proposal

through legislation and that the

President’s directive to the Department

to use the UC program to pay benefits

in this manner is unconstitutional and

violates the Administrative Procedure

Act (APA). As the agency overseeing the

Federal-State UC program, the

Department has the authority to

interpret the Federal UC laws, and we

are exercising this authority through

notice-and-comment rulemaking. The

President’s directive in no way limits

the Secretary’s discretion to consider

comments in developing a final BAA–

UC rule. Nor does this rulemaking usurp

Congress’s legislative authority; this rule

represents the Department’s

interpretation of existing Federal UC

law requirements.

(b) Federal Authority

We received comments regarding the

Federal government’s authority under

the Federal UC laws to authorize the

payment of BAA–UC. Several

respondents suggested that no Federal

A&A requirements exist and that States

do not need a regulation to permit

BAA–UC and can provide even broader

coverage regarding eligibility beyond

the payment of BAA–UC. Some

respondents argued that Federal law

sets a floor, but not a ceiling or cap, on

UC coverage so that the States may pay

benefits to whomever they wish (e.g.,

even those on leave to care for a parent).

Other respondents argued that the

Federal UC laws necessarily prohibit the

payment of BAA–UC and others

suggested that the BAA–UC proposal is

inconsistent with the Federal A&A

requirements, as they have been

interpreted in the past, as part of the

Federal-State UC program.

The Department and its predecessors

(the Social Security Board and the

Federal Security Agency) have

interpreted and enforced Federal A&A

requirements since the inception of the

Federal-State UC program. Several

respondents noted that the A&A

requirements are not clearly stated in

the Federal UC statutes. Although no

explicit A&A requirements are stated in

Federal law, the Department and its

predecessors interpreted four provisions

of Federal UC law, contained in the

Social Security Act (SSA) and Federal

Unemployment Tax Act (FUTA), as

requiring that UC claimants be able to

and available for work. Two of these

provisions, at section 3304(a)(4), FUTA,

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37213

and section 303(a)(5), SSA, limit

withdrawals, with specific exceptions,

from a State’s unemployment fund to

the payment of ‘‘compensation.’’

Section 3306(h), FUTA, defines

‘‘compensation’’ as ‘‘cash benefits

payable to individuals with respect to

their unemployment.’’ The A&A

requirements provide a test of an

individual’s ‘‘unemployment.’’ The

other two provisions, found in section

3304(a)(1), FUTA, and section 303(a)(2),

SSA, require that compensation ‘‘be

paid through public employment

offices.’’ The requirement that UC be

paid through the public employment

system (the purpose of which is to find

people jobs) ties the payment of UC to

an individual’s ability to work and

availability for work. These A&A

requirements serve, in effect, to ‘‘cap’’

UC eligibility.

Some respondents noted that we

could authorize the payment by States

of BAA–UC simply by issuing a UIPL

rather than issuing a regulation. Other

respondents encouraged notice-andcomment rulemaking, rather than

issuing a UIPL. Because permitting

States to pay UC for birth and adoption

represents a change in interpretation

and in order to permit public input into

the decision-making process, we

engaged in notice-and-comment

rulemaking.

In addition to interpreting Federal UC

laws to include A&A requirements, we

have previously interpreted the A&A

requirements in some specific areas:

approved training, temporary layoffs,

illness, and jury duty. We received some

comments suggesting that existing

interpretations of the A&A

requirements, such as those regarding

approved training and temporary

layoffs, are not comparable to the

payment of BAA–UC because they are

directed toward re-employment.

However, the goal of the BAA–UC

experiment is to test the proposition

that providing UC to new parents can

enhance and strengthen their

attachment to the workforce through the

provision of benefits during a time

when they are faced with the added

responsibilities of a newborn or newlyadopted child so that they will remain

in the workforce.

While paying BAA–UC is a departure

from past interpretations, it is a

permissible departure which we see as

a natural progression evolving from our

prior interpretations. At the inception of

the Federal-State UC program, the A&A

requirements were narrowly interpreted,

but the realities of working life have,

over the years, led us to revise our

interpretation. We have gone from a

strict interpretation of the A&A

requirements to a more flexible one.

While the A&A requirements are a test

of unemployment measuring an

individual’s attachment to the

workforce, our interpretation recognizes

that people can still be attached to the

workforce even though there are

situations and circumstances affecting

their lives, like illness, jury duty,

approved training, or temporary layoffs

that affect their ability to meet the

stricter interpretation of the A&A

requirements.

Each of our four prior interpretations

of the Federal A&A requirements

recognize situations in which the classic

definitions of A&A should not apply for

reasons of practicality or economic

reality. The illness interpretation

recognizes that it is unreasonable to

penalize an individual who has already

established that s/he is available for

work simply because s/he becomes ill

for a short time. The jury duty

interpretation recognizes that it is

unreasonable to hold an individual

unavailable for work when the State has

compelled his or her attendance in court

for jury service. Both of these

interpretations derive from a flexible

application of the A&A requirements

because we want a practicable, sound,

workable system. The purpose of UC is

to provide partial wage replacement

during temporary spells of

unemployment. Terminating or denying

UC to someone for serving on a jury or

because the individual has a short

illness undermines this purpose by

leaving the individual without financial

support for no good reason. It would

deprive the individual of UC support

without regard to the realities of

working life, that is, that no one can be

constantly available for work. The

approved training interpretation

recognizes the economic reality that, in

some cases, making oneself unavailable

for immediate work opportunities

produces a greater benefit to an

individual’s ability to obtain good work

and strengthens his or her attachment to

the workforce. The temporary layoff

interpretation recognizes the economic

reality that when an individual already

has a job to which s/he will return, it

does not make sense to compel him or

her to be able and available for other

work. All of these interpretations

recognize the reality that attachment to

the workforce—the ultimate aim of the

A&A requirements—can be

demonstrated in other ways than by a

continuous availability for any job.

While none of these interpretations

precisely parallels the payment of BAA–

UC, they do operate on the same

premises: that situations exist in which

it is important to allow a flexible

demonstration of availability and in

which attachment to the workforce can

be demonstrated, and indeed

strengthened, without requiring a

current demonstration of availability.

Thus, in response to practical

economic and societal concerns, we

have revised our interpretation of the

A&A requirements for the limited

purposes of the BAA–UC experiment to

include parents of newborns and newlyadopted children. States may wish to

experiment by providing UC to these

individuals to measure whether such

payments will increase these

individuals’ attachment to the

workforce.

We acknowledge that this is a reversal

of our position taken in 1997, denying

the State of Vermont’s proposal to use

UC in this manner to pay individuals on

family and medical leave. The

subsequent interest shown by several

States, by various members of Congress,

and by private organizations in using

the UC program in this manner led us

to analyze and re-evaluate our policy on

this subject. While the interpretation

that supports this rule is a change from

the interpretation we expressed in our

1997 letter to Vermont, we believe that

the change is supported by studies

showing the benefits of providing cash

benefits to those seeking to take parental

leave. As demonstrated above, our new

interpretation is part of an evolving

interpretation of the Federal A&A

requirements that recognizes practical

and economic realities.

Several studies potentially relevant to

BAA–UC were mentioned in the

comments submitted by BAA–UC

proponents. A few of these studies

examined United States (U.S.) parental

leave practices, while others studied

European or other parental leave

systems. A few studies examined paid

leave, while others studied unpaid

leave; at least three studies examined

both, to some extent. The studies also

examined differing time periods,

controlled for different factors, and used

differing statistical methodologies.

Nonetheless, these studies collectively

contained the following potentially

relevant findings: (1) Family leave

coverage increased the likelihood that a

woman will return to her employer after

childbirth in the U.S., Britain, and Japan

(Waldfogel, Jane, et al. ‘‘Family Leave

Policies and Women’s Retention After

Childbirth: Evidence from the United

States, Britain, and Japan.’’ J. Popul.

Econ. (1999) 12:523–545); (2) U.S.

women with fully-paid leave worked

later into their pregnancies than women

with partially paid leave or women with

no leave (O’Connell, Martin. ‘‘Maternity

37214 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

Leave Arrangements: 1961–85.’’ Work

and Family Patterns of American

Women. U.S. Bureau of the Census,

Current Population Reports, Special

Studies Series P–23, No. 165. (March

1990), 17–20); (3) U.S. women with paid

leave started back to work sooner than

women with unpaid leave once their

infants were at least two months old

(Joesch, Jutta M. ‘‘Paid Leave and

Timing of Women’s Employment Before

and After Birth.’’ J. Marriage & Fam.

(November 1997). Vol. 59, No. 4, 1008–

1022); (4) women, as opposed to men,

account for almost all parental leave

taken, and rights to paid leave were

found to raise the percentage of women

employed in nine European countries

(Ruhm, Christopher J. ‘‘The Economic

Consequences of Parental Leave

Mandates: Lessons From Europe.’’ Q. J.

Econ. (February 1998). Vol. CX 113,

Issue 1, 285–317 ); (5) extending paid

maternal leave programs was shown to

raise rates of labor force participation

for women in the prime child-bearing

years in 17 industrialized countries

(Winegarden, C.R. and Bracy, Paula M.

‘‘Demographic Consequences of

Maternal-Leave Programs in Industrial

Countries: Evidence from Fixed-Effects

Models.’’ S. Econ. J. (April 1995). Vol.

61, No. 4, 1020–1035); and (6) U.S.

women, who stayed at their existing

jobs instead of quitting or changing jobs,

were those with the longest maternity

leaves and highest levels of ‘‘workplace

social support’’ (Glass, Jennifer L. and

Riley, Lisa. ‘‘Family Responsive Policies

and Employee Retention Following

Childbirth.’’ Social Forces (June 1998).

76(4):1401–35.).

As discussed below, while we do not

find these studies definitive, they do

appear to support the premise of the

BAA–UC experiment, that BAA–UC will

strengthen workforce attachment.

(2) Funding Issues

(a) Costs

A number of respondents viewed the

proposal’s costs as minimal, while

others believed that the costs would be

quite high. Comments also indicated

that the use of abundant State

unemployment funds for this purpose is

beneficial and would have the long-term

effect of keeping individuals off welfare.

Many respondents mentioned that high

State unemployment fund balances have

allowed employers in a number of

States to receive contribution rate

reductions. Some of these respondents

also believed that the costs of

administration would be limited

because systems for providing UC are

already well established.

Some respondents raised general

concerns regarding costs. Some also

disagreed with our BAA–UC cost

estimates. While some stated that our

estimate was too high and costs would

be minimal, others felt the estimate was

too low, suggesting figures in excess of

$36 billion per year. Some respondents

presented alternative methodologies

which did not account for some

important factors that would

significantly reduce the cost of BAA–

UC.

For example, several respondents

assumed that all States would provide

12 weeks of BAA–UC and that all leavetakers would take all 12 weeks. UC data

collected by the Department as well as

independent research suggest duration

would be lower than 12 weeks. Our

estimate combines data on distribution

of leave duration from the FMLA study,

with an assumed increase in duration,

based on several independent UC

duration studies, due to the availability

of BAA–UC. This results is an estimated

BAA–UC average duration of about 6

weeks (including any waiting week) for

unpaid leave-takers.

Another cause for overestimation was

the assumption of a 100% take-up rate

for both States and individuals. Several

respondents assumed all States would

provide BAA–UC, and all parents would

receive benefits. As explained below,

we do not think all States will adopt

BAA–UC. Also, not all new parents are

employed or covered by UC, either

because they are self-employed or they

do not have a sufficient work history to

be eligible. Of those who are eligible,

some will receive some form of income

support from their employers such as

paid annual leave. These individuals

either would not apply for BAA–UC or

would receive BAA–UC for a shorter

duration. Even among those who are not

paid by their employer, not all leavetakers would apply for BAA–UC. Based

on studies on UC take-up rates, about

65% of eligible workers actually applied

for UC before phone claims were

available. The introduction of phone

claims is estimated to increase take-up

rates by about 10 percentage points.

Several respondents provided

alternative methodologies for estimating

the cost of BAA–UC. For example, one

respondent suggested starting with the

overall employment-population ratio

and adjusting it to the participation

rates for women ages 16 to 44, assuming

that the majority of women taking leave

for a child under one year old would be

under 44. This methodology gives a less

precise estimate of the relevant

employment-population ratio than the

data we relied on from the Current

Population Survey, published in the

Bureau of Labor Statistics publication,

‘‘Employment Characteristics of

Families in 1998.’’ This publication

provides the employment-population

ratio for mothers with a child under one

year old (54%). This same respondent

also pointed out that parents adopting

children from foreign countries should

be included in the estimate. These

parents were excluded from the original

estimate; however, based on the number

of immigrant visas issued to orphans by

the State Department, foreign adoptions

represent only 0.4 percent of the

number of women with children under

one year old. (For the number of

immigrant visas issued to orphans, see

the State Department website at

<http://travel.state.gov/

orphan_numbers.html.>) Although the

effect of foreign adoptions is small, we

have now included these adoptions in

our cost estimate.

Another respondent cited problems

with using data from the FMLA study.

Although we did use some of the

percentages gathered in this study, the

findings were adjusted for the

differences between the FMLA and

BAA–UC. On one hand, the BAA–UC

proposal has a broader scope, in some

respects, because those who work for

companies with fewer than 50

employees will be able to receive BAA–

UC while they would be ineligible for

FMLA leave. Therefore, the percentages

of men and women taking leave are

found by weighting the average

percentages of both FMLA-covered and

non-covered leave-takers. On the other

hand, BAA–UC is more limited than

FMLA-covered leave because it covers

only those taking leave to care for a

newborn or newly-adopted child. The

respondent was concerned that the

FMLA study did not account for

incentives and changes in leave-taking

patterns since the FMLA was enacted,

thus representing a ‘‘premature look at

the FMLA.’’ The FMLA study provided

some categorized data showing that, in

fact, 98% of women needing leave for

newborn care actually took some leave.

There is, therefore, only a small margin

for an increase in leave-taking by

women because of incentives under

either the FMLA or BAA–UC. Even so,

we increased the percentage of women

leave-takers by 1 percentage point to

account for these potential incentives

and increased the percentage of men by

5 percentage points, from 63% to 68%,

for the same reason. According to the

study, 91% of all women and men

needing leave for birth or adoption took

some leave; however, many felt

compelled to cut short their leave

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37215

because they could not afford to be off

work.

In the NPRM, we estimated that the

BAA–UC costs would range from zero to

approximately $68 million per year.

This figure was based on the ‘‘expressed

interest’’ of a small number of States as

measured by whether BAA–UC

legislation was introduced in a State. A

respondent suggested that the four

States specifically cited would not enact

BAA–UC legislation; other respondents

indicated more States would enact

BAA–UC legislation.

Since the publication of the NPRM, a

significant number of additional States

have introduced BAA–UC legislation

indicating that potentially more States

than were included in our original

estimate may enact BAA–UC. We do not

know at this time which States will

enact BAA–UC legislation;

consequently, as described below, we

revised the method of selecting States

for inclusion in the cost estimate. This

revised methodology and minor

revisions in various estimating factors

have changed the possible annual

aggregate BAA–UC cost to an estimated

range from zero to approximately $196

million.

In our revised methodology, we relied

on past enactment of UC benefit

expansions as an indicator of possible

State participation in the BAA–UC

experiment. We think this history of

benefit expansions is a better indicator

than introduced legislation because: (1)

Additional States will likely introduce

legislation in the future, and (2) it is

extremely difficult to predict whether a

particular State will actually enact

legislation. Thus, to determine the

number of States that may enact BAA–

UC legislation, we grouped the States

based on population as large, medium,

and small. We then found the average

number of States, by population group,

that had enacted certain UC benefit

expansions. Based on these findings, we

estimated that 3 large states, 6 medium

states and 4 small states may enact

BAA–UC legislation. We then assigned

to each State the average cost for its

group. We assumed that States would

gradually enact BAA–UC legislation

over a 5-year period. We assumed that

two States would enact BAA–UC

legislation in the first year after the rule

becomes effective, two more in the

second year, and three more in each of

the subsequent three years. The

resulting year-by-year costs were then

converted to their present value and

averaged over the five-year period. The

resulting average annual cost, $196

million, is the upper limit of our cost

range. More detail on the cost

calculation can be found in the

Regulatory Impact Analysis which is

part of the rulemaking record and

available to the public.

Costs beyond the cost specific to

BAA–UC were also discussed in the

comments. For example, some

respondents believe that the costs to

government would be reduced because

BAA–UC would increase individuals’

workforce attachments and keep them

off welfare. We expect to have more

information in this area as a result of the

BAA–UC experiment.

Other respondents, however,

expressed concern about additional

costs, citing lost productivity as a key

problem of paying BAA–UC. However,

the FMLA study found that most

employers found no effect of the FMLA

itself on productivity, and if they did

report an effect, it was ‘‘as likely to be

positive as negative on business

productivity and growth’’ (p. xviii).

Another study of nearly 300 employers

in November 1993 also found that

mandated leave policies can improve

morale, public relations, and

supervisory relationships, as well as

decrease the level of absenteeism.

(William M. Mercer et al. ‘‘Survey

Results: Family and Medical Leave Act’’

(January 1994); see Final Rule for

Family and Medical Leave Act, 60 FR

2237 (January 6, 1995).) Another

concern was the loss of income taxes as

a result of increased leave-taking.

However, those receiving BAA–UC

benefits would be required to pay taxes

on their benefits. Therefore, although

some individuals will pay income taxes

on reduced income, some individuals

who would have taken unpaid leave

will pay more taxes than otherwise.

Also, many employers use temporary

employees to perform the duties of a

person taking leave to care for a new

baby. Thus, we believe there would be

a minimal loss in income taxes

collected.

(b) Experience Rating

Several respondents expressed

concerns regarding the effect of BAA–

UC on State experience rating systems

and employer contribution rates. They

argued that contribution rates will go up

as a result of replacement employees

being laid off; that charging employer

accounts for BAA–UC payments

conflicts with Section 3303(a)(1), FUTA;

that noncharging will shift the costs

from one group of employers to another;

and that employers who reimburse

States for payments of UC (e.g., local

governments and non-profit

organizations, such as hospitals, school

districts, and health care organizations)

would have no relief from charges in

some States. A respondent also

suggested that contributing employers

would be subsidizing reimbursing

employers.

Concerning the statements that

contribution rates will go up as a result

of replacement employees being laid off,

we believe that, because many

employers already respond to leavetaking by using temporary employees or

shifting the duties of current employees,

the effect on contribution rates is likely

to be small.

Regarding the comment that charging

employers for BAA–UC would conflict

with Section 3303(a)(1), FUTA, we see

no cause for concern. Section 3303(a)(1),

FUTA provides that ‘‘no reduced rate’’

of unemployment insurance taxes may

be assigned except on the basis of an

employer’s ‘‘experience with respect to

unemployment or other factors bearing

a direct relation to unemployment risk.’’

The objections to charging employers

for BAA–UC costs are apparently

premised on the fact that the employer

may exercise little or no control over an

employee’s taking of leave. While this

may be true, it is well established that

employers may be charged for situations

where they did not create the

unemployment; section 3303(a)(1),

FUTA, permits a State to charge an

employer so that the employer possibly

pays a higher tax rate. For example, we

do not require a State to ‘‘noncharge’’

(i.e., spread the costs among all

employers) an employer when an

employee quits for good cause not

attributable to the employer; however, a

State may choose to noncharge these

costs.

Concerning the statements that

noncharging employer accounts for

BAA–UC costs would shift costs from

one group of employers to other

employers, effectively creating a

situation where BAA–UC payments

attributable to employers whose

employees receive BAA–UC are being

subsidized by employers whose

employees may not receive BAA–UC,

we note that this is not an issue specific

to BAA–UC. States currently noncharge

employers in specific situations,

especially when the separation is

beyond an employer’s control. Just as

States currently consider the effects of

noncharging, we expect States to

consider the effects of noncharging

BAA–UC payments on the overall

contribution system. Recognizing the

arguments on both sides, we think that

spreading BAA–UC costs among all

employers is the most equitable means

of financing this experiment.

Consequently, our Model State

Legislation provides for noncharging,

and we encourage States to include such

a provision in their legislation.

37216 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

As with experience-rated employers,

States may noncharge reimbursing

employers. Specifically, in situations

where the State determines that the UC

paid is not attributable to service in the

employ of the reimbursing employer,

States may choose not to require

reimbursement. As the commentary in

Appendix B of the NPRM pointed out

(64 FR 67979 (December 3, 1999)),

reimbursing employers may be

noncharged for BAA–UC payments just

as the accounts of contributing

employers may be noncharged. A

respondent suggested that we make

noncharging options for reimbursable

employers more clear; however, the

BAA–UC regulation makes no changes

to the experience rating or

reimbursement requirements and we see

no reason to single out this one facet of

the UC program for elaboration. For

more information regarding the

noncharging of reimbursable employers,

interested individuals are referred to

UIPL No. 21–80 and UIPL No. 44–93 (58

FR 52790, 52792 (April 12, 1993)).

(c) Other Funding Methods

Some respondents suggested that

benefits like BAA-UC could be funded

in ways other than the current method

of financing benefits through employer

contributions to State UC programs.

Suggested funding methods for BAA–

UC included using Federal

unemployment tax revenues, using

Social Security funds, allowing tax-free

withdrawals from retirement plans, and

creating Federal loan programs similar

to student loans. Suggestions for State

funding included the introduction of an

employee-paid tax, such as currently

exists for temporary disability insurance

in some States. There was also a

suggestion that individuals obtain

private insurance.

Federal law governs how Federal

unemployment tax revenues may be

used. Nothing in Federal law authorizes

the Department to use these revenues

for purposes such as the BAA–UC

experiment. The other suggested Federal

funding mechanisms are beyond the

Department’s jurisdiction. As for the

suggested State funding mechanisms,

States are (and always have been) free

to develop means outside the UC

program to provide income support for

new parents who are not working. Also,

if a State elects to use a funding source

outside the UC program, the State’s

program would not be subject to the

requirements of the BAA–UC regulation.

(d) Potential Loss of Administrative

Funding and Employer Tax Credits

We also received some comments

expressing concern about the loss of

Federal unemployment tax credits and

UC administrative funding if, after a

State enacts BAA–UC, a Federal court

were to strike down our regulation

authorizing it. We are the only agency

authorized to institute conformity and

compliance proceedings against States

which could result in the loss of these

tax credits to employers. We will not

withhold certification for administrative

funding and employer credits for States

participating in an effort that we have

sanctioned. While we do not believe a

court would strike down this rule, prior

to any conformity and compliance

proceeding, we would follow the

normal procedures outlined in 20 CFR

601.5(b) to permit the State a reasonable

time to change its laws in order to come

into compliance.

(e) Unemployment Fund Solvency

Some respondents expressed concern

that BAA–UC would jeopardize the

financial solvency of the UC program, in

particular the program’s ability to

handle future recessions. Others thought

we should require States that enact

BAA–UC to meet and maintain an

unemployment fund solvency

requirement of a 1.00 average high cost

multiple (AHCM) or another measure

that reflects a reasonable index of fund

solvency. Some respondents recalled

that we have expressed concern over

many States’ insufficient unemployment

fund balances and pointed out that the

Federal Government has had to

‘‘rescue’’ State unemployment funds in

the past.

We have never interpreted Federal

law to require ‘‘solvency.’’ While we

will continue to encourage all States to

meet and maintain an AHCM of 1.00,

we do not think we should tie BAA–UC

specifically to fund solvency. A State in

a weak solvency position should not

conduct a BAA–UC experiment without

also creating a means of financing it.

Just as States currently assess the costs

to their unemployment funds whenever

coverage, benefit expansions, or tax

changes are considered, we expect

States to consider the costs of BAA–UC

before enactment. We will provide

technical assistance to States needing

assistance in determining their solvency

positions and, if requested, will work

with States to determine financing

options.

(3) Fundamental Program Changes

(a) The FMLA Program

As stated above, we received many

comments that relate the BAA–UC

proposal to the FMLA. The respondents

see the payment of BAA–UC as an

attempt to require paid leave under the

FMLA, which contains no such

requirement. They contended that this

proposal violates and/or amends the

FMLA by converting unpaid leave

under the FMLA into paid leave under

the Federal-State UC program and runs

counter to the notion that the FMLA

would never require paid leave. Other

respondents questioned whether BAA–

UC requires the employer to hold the

job for a BAA–UC claimant.

The FMLA is a distinct and entirely

different statute from the SSA and

FUTA which established the FederalState UC program. The FMLA

guarantees certain eligible employees

unpaid, job-protected leave for up to 12

weeks for their own or a family

member’s serious health condition, or to

care for a newborn or newly-adopted

child. While the FMLA in no way

mandates paid leave, it does not

prohibit employers from providing paid

leave to employees exercising their right

to leave under the FMLA. Furthermore,

the FMLA provides that nothing in it

should be construed to supersede State

or local laws that offer benefits greater

than those contained in the FMLA.

Consequently, neither the BAA–UC

regulation nor the implementation of

BAA–UC in the States would violate the

FMLA. This regulation does not impose

paid leave or address employment

rights. Rather, it permits the States,

through the UC program, to pay partial

wage replacement to employees who

choose to take time off for the very

narrow purpose of being with a new

child. The provision of BAA–UC is

voluntary for States, and this regulation

does not amend or change the FMLA.

Thus, while nothing in BAA–UC

changes the basic understanding that

the FMLA does not require paid leave,

States are free to enact BAA–UC as part

of an effort to provide benefits greater

than those contained in the FMLA.

Indeed, we are not interpreting the

FMLA, but the Federal UC laws.

(b) The UC program

Based on the premise that Federal UC

law requires recipients to be

involuntarily unemployed and actively

seeking work, many respondents view

BAA–UC as a fundamental change to

the UC program. We received many

comments suggesting that the group

covered under this experiment

constitutes persons not entitled to UC

because they presumably would be

voluntarily leaving their employment to

be with their newborns or newlyadopted children. However, we have

never interpreted Federal UC law to

require that an individual’s separation

from employment be ‘‘involuntary’’ as a

condition of entitlement to benefits.

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37217

Indeed, in those situations where a job

relocation forces a spouse to quit his/her

job to follow the other, some States

allow the payment of UC without

disqualification.

We also received many comments

alleging that the group of employees

covered by the proposed regulations are

not truly ‘‘unemployed’’ as that term has

been understood in common usage. The

comments focused on the fact that these

new parents would not, for the most

part, be laid off by their employers but

would be leaving a job the employer

would continue to allow them to have.

These comments appear to assume that

there is a requirement in the UC

program that in order to be considered

unemployed, the employment

relationship must be severed. This is not

the case as illustrated by the payment of

UC to individuals on recall. Whether an

individual is unemployed within the

meaning of Federal law depends on

whether the individual has experienced

an actual reduction in hours worked.

(See UIPL 08–98, 63 FR 6774, 6776

(February 10, 1998)). (Most States define

‘‘unemployment’’ as a reduction in

hours worked. See also 20 CFR

625.2(w)(1).) Persons receiving BAA–UC

would come under this definition since

they would have suffered a loss of work.

Moreover, an individual need not

completely sever his or her connection

to his or her employment to qualify for

UC as Federal law also permits

payments to individuals for partial

unemployment.

We also received comments

expressing concern that the regulation

does not require BAA–UC recipients to

demonstrate, prior to the end of the

leave period, that they intend to go back

to work. There was a similar concern

that individuals who otherwise leave

employment, but do not intend to return

to the workforce, will receive BAA–UC.

Still other respondents were concerned

that BAA–UC recipients are not

required to actively seek work and that

the regulation will eliminate the

‘‘refusal of suitable work’’

disqualification. Respondents also noted

that BAA–UC would conflict with

existing eligibility requirements under

State UC laws.

The BAA–UC regulation defines

‘‘approved leave’’ as ‘‘a specific period

of time, agreed to by both the employee

and employer or as required by law or

employment contract (including

collective bargaining agreements),

during which an employee is

temporarily separated from employment

and after which the employee will

return to work for that employer.’’

Therefore, by definition, BAA–UC

recipients on approved leave from their

employers have demonstrated their

intent to return to work by agreement or

by contract. States may establish BAA–

UC overpayments if individuals on

approved leave choose not to return to

work. As for individuals who otherwise

leave employment, the BAA–UC

experiment will also test whether their

workforce attachment is strengthened.

As for work search requirements and

the ‘‘refusal of suitable work’’

disqualification, these are not generally

applicable Federal UC requirements but

are permissible restrictions contained in

various State UC laws. Except for the

extended benefits program, there is no

Federal requirement that States ensure

that UC recipients be actively seeking

work. While the BAA–UC experiment

neither specifically mandates nor

eliminates these State-imposed

requirements, States would need to

amend their State UC laws with regard

to these requirements to the extent they

interfere with the payment of BAA–UC

should they wish to implement BAA–

UC.

(4) Scope

Several respondents stated that BAA–

UC should be extended to all adults

who fulfill parental responsibilities,

such as foster parents, step-parents,

domestic partners, or any individual

who stands in loco parentis to a child.

Still others think that experimental

BAA–UC should be expanded to other

types of medical and family leave, such

as leave during pregnancy, for personal

illness, and to care for ill family

members. There was also a suggestion

that we clarify that States may provide

‘‘supplemental’’ BAA–UC.

No decisions regarding expanding the

potential universe of recipients will be

made until we have evaluated BAA–UC.

Because BAA–UC is an experimental

effort, there must be limitations, as with

any experiment. Consequently, we have

limited BAA–UC to the parents of

newborns and newly-adopted children.

This small, easily-defined group can be

used to test whether compensating

absences from employment will assist

individuals to maintain, or even

improve upon, their connection to the

workforce. Changing the definition of

parents to include all parents as defined

under the FMLA or to extend UC to all

FMLA leave will not enhance the

experiment.

As for ‘‘supplemental BAA–UC,’’

States currently have the authority to

provide supplemental (commonly

known as additional) UC. For example,

some States provide supplemental UC to

‘‘displaced’’ workers or to workers in

State-approved training. BAA–UC is no

different. While the regulation does not

prohibit supplemental BAA–UC, we had

not contemplated its provision when

developing the experiment.

(5) Eligibility

A number of respondents noted with

approval that the States would have the

opportunity to determine eligibility

criteria (work history requirements) and

benefit amounts and durations, as is

currently done. Others indicated that

the BAA–UC regulations should be

more prescriptive in terms of eligibility

and benefits for BAA–UC. A few

respondents felt the UC program would

discriminate against the poorest workers

by tying benefit levels to past wages.

Others said that BAA–UC claimants

should receive the same benefit levels as

regular UC claimants.

(a) Breadth of Eligibility

We received comments characterizing

the potential eligible population as

overly broad. The stated concerns

included:

• No limitations on the number of

times parents may claim BAA–UC,

allowing parents to take extensive

periods of leave multiple times (for

example, BAA–UC eligibility is not

restricted to a specific number of births

or adoptions);

• No limitation on the number of

parents per child who may make a claim

for BAA–UC, thereby allowing both the

biological and adoptive parents of a

child to claim benefits;

• No requirement that the child

actually live with the parents or be

cared for by the parents; and

• Silence in the regulations regarding

continuing eligibility in cases where an

adoptive parent ceases to be the parent

or in cases where the child dies.

States have broad latitude regarding

UC eligibility requirements.

Consequently, we designed the

regulation in a manner, consistent with

the general structure of the UC program,

that is not overly prescriptive. By so

doing, the States have the flexibility

necessary to best meet the needs of their

respective populations. States are free to

consider these kinds of issues in

developing eligibility rules for their

BAA–UC experiments.

Although State flexibility and

innovation are key elements of BAA–

UC, all Federal UC law requirements

must be maintained, such as making

payments when due (which also means

not making payments that are not due)

as required by section 303(a)(1), SSA,

and not introducing eligibility factors

unrelated to the fact or cause of an

individual’s unemployment. For

example, restricting BAA–UC eligibility

based on the number of births or

37218 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

adoptions for which an individual has

previously received BAA–UC is

unrelated to the fact or cause of the

individual’s unemployment, and,

therefore, would be inconsistent with

Federal law.

(b) Length of Eligibility Period

One respondent felt that the

availability of BAA–UC any time within

the year following the birth or

placement for adoption of a child was

longer than needed for parent/child

bonding. Several respondents advocated

a period of at least one year because

they believed it would encourage breastfeeding for the health and well-being of

the child, while shorter periods may

encourage premature weaning. Another

respondent stated that, as long as

benefits began within the first year,

States should be allowed to extend the

eligibility period beyond the first year.

Some respondents advocated that BAA–

UC be provided intermittently

throughout the eligibility period, in

some cases in time frames as short as

one-half hour.

Research suggests that parental leave

is beneficial for early childhood

development. In terms of the eligibility

period, we selected one year as the

eligibility period because it correlates

the needs related to introducing a new

child into a family with the current

benefit year under the UC program:

States could establish a shorter

eligibility period. Our Model State

Legislation provides for a 12-week

benefit period within a one-year

eligibility period, and we encourage

States to include such a provision in

their legislation.

The BAA–UC regulation does not

require that BAA–UC be paid only for

consecutive weeks; therefore, as part of

the regular UC program, BAA–UC may

be provided intermittently throughout

the benefit year. Partial BAA–UC may

also be claimed for weeks in which an

individual is partially unemployed;

however, BAA–UC may be reduced

under State law by wages earned during

a week of partial unemployment.

Typically, wages earned during one-half

week or more exceed the available UC;

therefore, very short time frames of

unemployment (such as one hour per

day) would not be compensable.

(c) Employer-Provided Benefits

Some respondents expressed the

opinions that employers should be able

to require employees to take employerpaid leave before being eligible for

BAA–UC, and that employers who

provide paid leave or disability coverage

should be excepted from BAA–UC

coverage. Other respondents suggested

that employers who currently provide

paid leave will reduce or eliminate

those benefits to avoid paying twice.

BAA–UC is part of the UC program

and applies to all employers covered by

State UC law. Therefore, just as there is

no basis for excepting employers who

provide private unemployment

insurance to their employees, there is no

basis for excepting employers from

BAA–UC based on employer-provided

benefits. As stated earlier, the

introduction of factors unrelated to the

fact or cause of an individual’s

unemployment would be inconsistent

with Federal law. Consequently, even

though employers may require

employees to take employer-paid leave

before taking unpaid leave under the

FMLA, States may not make BAA–UC

eligibility contingent upon the

exhaustion of employer-paid leave.

States may, however, reduce BAA–UC

by the amounts of the employer-paid

benefits and wages. Generally, States

and employers could have lower costs if

employers continue to provide benefits.

Our Model State Legislation provides

for employer-provided wages and

benefits to be deducted from BAA–UC,

and we encourage States to include such

a provision in their legislation.

(d) BAA–UC Exhaustions

A few respondents requested

clarification as to what happens after

BAA–UC is exhausted. These

respondents questioned whether States

could pay UC where conventional A&A

requirements apply upon exhaustion

and whether States could demand

repayment of BAA–UC if an individual

failed to return to work.

BAA–UC is a part of the States’

regular UC programs. States are,

therefore, free to determine BAA–UC’s

relationship to UC where the

conventional A&A requirements apply.

Thus, a State could pay an individual

conventional UC after BAA–UC is

exhausted if the individual meets all

conventional UC eligibility

requirements. Whether BAA–UC counts

toward the maximum number of weeks

of conventional UC in this case is also

a State decision. Our Model State

Legislation provides for counting BAA–

UC weeks toward the maximum UC

entitlement, and we encourage States to

include such a provision in their

legislation.

Concerning overpayments, the

questions and answers that

accompanied the NPRM indicated that a

State may declare an overpayment of

BAA–UC when the individual did not

return to work after receiving BAA–UC.

We note, however, that there may be

cases where the individual is unable to

return to work. For example, the

employer may have had a general layoff.

In cases such as this, a more equitable

approach is to determine whether the

individual meets all other State UC

requirements, including actively seeking

work. For these and operational reasons,

our Model State Legislation does not

provide for recoupment of

overpayments.

(6) Experimental Nature of BAA–UC

(a) Experiment Versus Non-Experiment

We received numerous comments

concerning the experimental nature of

BAA–UC. Some respondents argued that

we do not have the authority to conduct

an experiment. Some respondents stated

that there was no need to experiment

because other studies have already

proven the benefits of compensated

parental leave. Noting that the

Department did not require a period of

experimentation in other areas, such as

allowing payment of UC to individuals

in approved training programs or to ill

individuals, some respondents asked

why experimentation was necessary for

BAA–UC. A respondent suggested that

if we intended to conduct a test we

should fully fund a pilot involving a few

States.

Other respondents questioned

whether BAA–UC really is an

experiment. Among the comments were

claims that it would be difficult and

politically unpopular to stop once

started, and that the purpose of the

experiment (that is to test whether the

provision of BAA–UC would promote a

continued connection to the workforce)

‘‘is an unmeasurable, wholly subjective

concept.’’ Other respondents suggested

that BAA–UC was not truly

experimental because the proposed

regulation did not include specific

measures and lacked definitive

beginning and ending periods. Still

other respondents saw BAA–UC as the

first phase of an inevitable, continued

expansion of the UC program.

Some respondents approved of our

approach. They likened the BAA–UC

experiment to the UC program design

and quoted President Franklin

Roosevelt in his message to Congress

encouraging enactment of the SSA:

‘‘[T]he Federal act should require high

administrative standards, but should

leave wide latitude to the States in other

respects, as we deem varied experience

necessary within particular provisions

in unemployment compensations laws

in order to conclude what types are

most practicable in the country.’’ 79

Cong. Rec. 546 (1935).

BAA–UC is indeed an experiment. We

have the authority to interpret Federal

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37219

UC law, and we chose an experimental

approach to test whether BAA–UC

promotes parents’ continued connection

to the workforce. Thus, through

voluntary State participation, the BAA–

UC experiment will allow us to gather

the necessary facts on whether a

positive correlation exists between the

provision of UC to parents of newborns

and newly-adopted children and a

demonstrated connection to the

workforce by these parents. The factfinding in this experiment is critical in

assisting us to fulfill our authority and

responsibility to assure that the States’

UC programs conform to Federal UC

law.

As stated in the NPRM, this

experiment recognizes the impact of

women in the workforce and responds

to the societal and economic changes

resulting from the large number of

families where both parents work. We

intend to gather information and

evaluate the impact of the provision of

partial wage replacement on employees,

employers, and States’ unemployment

funds. We have chosen to adopt an

experimental approach because the

introduction of BAA–UC represents a

significant shift in our view of the

Federal UC requirements. We think the

impact on not only employees, but also

on employers and State unemployment

funds should be studied. Consequently,

rather than developing a pilot that might

be less flexible, we chose an

experimental approach that is designed

to promote State innovation.

Several respondents suggested that

the U.S. lags behind other developed

countries in providing paid family and

medical leave and pointed to studies

that discussed the positive effects of

paid leave in other countries. However,

the benefits programs of other countries

are dissimilar to the UC program in the

U.S. Other respondents pointed to

existing studies in this country that

indicated positive effects on workforce

attachment from paid parental leave.

While these studies support our

initiative, we believe it advisable to

independently study the effects of

partial wage replacement for parents of

newborns and newly-adopted children

on the States’ UC programs, since no

study was specific to the UC program.

Therefore, we see experimentation with

BAA–UC as a logical step.

Statistics reported for the regular UC

program will include all data related to

BAA–UC. Additional administrative

data will be collected, using an existing

data collection mechanism, from

participating States as soon as they

implement experimental BAA–UC.

Several respondents proposed specific

elements that should be evaluated.

While the specifics have yet to be

determined, we anticipate that the

administrative data will include, among

other items, initial claims, weeks

claimed, weeks compensated, and

benefits paid. As States gain experience

with BAA–UC, we will evaluate the

effect of BAA–UC on each

implementing State’s UC program as

part of an ongoing evaluation.

Some respondents criticized the

regulations for not placing any formal

sunset or termination provisions or time

frame for the study. Because of the

flexible nature of the BAA–UC

regulations and the potentially different

enactment dates, we have set a target

that would trigger a comprehensive

evaluation of BAA–UC when at least

four States have implemented

legislation and operated BAA–UC for a

minimum of three years, as noted in

section I. B. (4) of the preamble to the

NPRM (64 FR 67974).

We believe an evaluation based on

this target will provide reliable

information that takes into account the

variations among the States’ BAA–UC

experiments and allows us to ascertain

the impact of BAA–UC on States’

unemployment funds, employees, and

employers’ contribution rates, in

addition to determining the workforce

connections of BAA–UC recipients.

While all these factors are important, we

note that many respondents were

interested in the impact of BAA–UC on

State unemployment funds. Therefore,

even though we are not establishing a

solvency requirement, we will

thoroughly evaluate how States

determined their solvency positions and

the impact of BAA–UC on State

unemployment funds.

BAA–UC legislation introduced in

States prior to the issuance of the NPRM

varied substantially—an early

indication that BAA–UC experiments

among the States could differ greatly. In

addition, regardless of whether States

enact vastly different BAA–UC

legislation or enact similar legislation,

demographics, take-up rates, benefit

levels, and benefit charging

methodologies could vary substantially

among the States. A comprehensive

evaluation, therefore, will be conducted

when at least four States have operated

BAA–UC for at least three years. We are

committed to completing a

comprehensive evaluation, and this

evaluation will serve to determine

whether to make BAA–UC permanent,

to expand it, or to end it entirely. If four

States do not enact BAA–UC legislation,

we will then consider how best to

comprehensively evaluate the

experiment given the limited data.

(b) Impact of Experimental BAA–UC on

Employees, Employers, and Families

Employees. Numerous respondents

commented on the potential negative

impact of BAA–UC on employees. Some

speculated that, because of costs

associated with BAA–UC, employers

would be discouraged from providing

employer-paid benefits to employees or

from hiring individuals of childbearing

age. Others asked about the effects of

BAA–UC on an individual’s eligibility

for various employer-paid benefits and

on Federally-mandated benefits, such as

private health insurance benefits under

the Consolidated Omnibus Budget

Reconciliation Act of 1985 and the

Health Insurance Portability and

Accountability Act of 1996. Others

expressed concern that employers

would move jobs out of the country,

causing employees to lose jobs. Some,

noting that the work of absentee

employees would likely be spread

among co-workers, predicted ‘‘negative

effect[s] on co-workers and their

families.’’ Among claims that BAA–UC

discriminates against employees who do

not meet the eligibility requirements,

there was speculation that

implementation of BAA–UC would pit

childless employees against employees

with children in addition to pitting

employees unemployed as a result of

economic downturns against BAA–UC

recipients vying for benefits from

diminishing unemployment funds.

There were also numerous comments

focusing on the positive impact of BAA–

UC on employees. Respondents

suggested that providing BAA–UC

would decrease worker anxiety and

reduce employee turnover, resulting in

greater productivity.

Employers. As with employees, we

received many comments about the

impact of BAA–UC on employers. Many

speculated that employer costs and

administrative burdens would be

excessive, that litigation would increase,

and that worker shortages would be

exacerbated because employees would

be more able to take off work. Some

employers worried that their global

competitiveness would suffer, and some

small employers were concerned that

they would be subsidizing leave taken

by employees of FMLA-covered

businesses. Many employers urged a tax

cut for businesses instead of expanding

UC. A few respondents suggested that,

as increased employer State UC taxes

are passed on, employees and

consumers will suffer. Others suggested

that employer costs would be minimal

and employers would benefit from a

more stable workforce resulting in lower

employee turnover and greater

37220 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

productivity. Respondents also referred

to studies that indicate that women who

have paid maternity benefits take less

time from work and are less likely to

quit their jobs than women with access

to unpaid leave or women who have no

leave available. Others suggested

different ways of reporting FMLA leave

on UC forms as an alternative to

providing BAA–UC.

Families. There seems to be general

agreement in the comments that families

would benefit from parents and children

having the opportunity to bond. Many

respondents commented that quality

day care is expensive and scarce.

However, as noted above, some

respondents think that there will be a

negative impact on the families of the

co-workers of BAA–UC recipients due

to increased workloads and overtime

required to cover for persons on leave.

There were also comments that BAA–

UC would be bad for families because it

would encourage both spouses to work

and promote parental attachment to the

workforce instead of the family. Some

respondents criticized us for

encouraging population growth, and

others stated that income tax cuts or

child tax credits would be more

beneficial than BAA–UC in helping

families with children.

Although the effects of BAA–UC on

employers, employees, and families

have not yet been documented, these

effects concern us, and we expect that

States will consider potential effects

prior to enacting BAA–UC. As part of

our study of the BAA–UC experiment,

we will compile the necessary

information needed to evaluate the

effects of BAA–UC on employees and

employers.

As stated in the NPRM, we believe

that providing BAA–UC will have a

positive impact on families because it

will allow more parents to take leave to

be with their newborns or newlyadopted children. Although studies

suggest a positive impact on the

workforce from compensated maternity

and family leave, this is the first test of

the effects on employers and employees

of using the UC program to provide

partial wage replacement for parents

following the birth or adoption of a

child. Because our cost estimates for the

BAA–UC experiment are relatively low

as a percentage of overall UC costs, we

do not believe that BAA–UC will move

jobs out of the country, impair U.S.

global competitiveness, or otherwise

adversely affect employers. For that

same reason, we do not believe that

litigation or employer administrative

burdens would significantly increase.

Regarding size-of-employer concerns,

BAA–UC applies to employees of both

small and large employers. Small

employers not subject to the FMLA may

well approve leave without the

compulsion of the FMLA. Also, States

are free to offer BAA–UC to individuals

who otherwise leave their employment

as a result of being ineligible for leave

under the FMLA. The effect that the

receipt of BAA–UC might have on either

employer-paid benefits or non-UC

Federally-mandated benefits would be

determined by those programs and/or

applicable statutes. But these effects are

among the things we will review when

evaluating the BAA–UC experiment.

Finally, we have no data to suggest that

providing partial wage replacement

promotes higher birth rates,

discriminates against individuals of

childbearing age, or creates worker

shortages; and, as we noted earlier,

other options to help families, such as

tax cuts or credits, are outside our

purview.

(7) Voluntary Effort

Some respondents referred to BAA–

UC as a mandate by the Administration.

There were also some comments

maintaining that the experiment is not

really voluntary in that all States will be

impacted because of interstate and

combined-wage claims. (In an interstate

claim, the individual has worked in one

State, but files a claim in another. In a

combined-wage claim, an individual has

worked in more than one State and

combines the work into one State for

purposes of qualifying for UC or for

receiving higher benefit amounts or

longer duration. (See 20 CFR Part 616.))

Noting that each State participating in

the Interstate Arrangement for

Combining Employment and Wages

must act as an agent for other

participating States, one respondent

held that it would be ‘‘impossible for

one [S]tate to have an experimental

program without impacting other

[S]tates.’’

BAA–UC is a State option, not a

mandate. States currently have wide

latitude in determining most eligibility

criteria. Indeed, with a few exceptions,

States determine most aspects of their

UC programs, such as earnings

requirements, ‘‘good cause’’ for

voluntary quit occurrences,

disqualifications, benefits amounts and

durations, and continuing eligibility

requirements. In this regard, there are

substantial variations among the State

UC programs. As a result, there are

situations where benefits are paid in one

State that would not be paid in another,

and this is reflected in combined-wage

claims. We agree that, just as there now

is some financial impact on States

resulting from combined-wage claims,

there will be some impact on non-BAA–

UC States resulting from combinedwage claims which are also BAA–UC

claims. That impact is the result of State

participation in the Federal-State UC

program.

(8) Administration

Some respondents, particularly

SESAs, submitted a broad range of

administrative questions. The scope of

the questions included how to count

BAA–UC claims on Federal reporting

forms, required documentation for

eligibility determinations, and

confidentiality of information.

We will issue specific reporting and

other administrative guidance on these

issues and others to SESAs in a

directive separate from this rule. States

will be required to report specific BAA–

UC claims data. When States implement

BAA–UC, statistics reported for the

regular UC program will include all data

related to BAA–UC. To identify only

BAA–UC activity, we will use the

‘‘Quick Response Report’’ (the report

used when collections involve fewer

than 10 States, assuming that fewer than

10 States implement BAA–UC) under

the standard reporting requirement

authority in section 303(a)(6), SSA. This

report provides for the collection of up

to 12 items of information. It is

anticipated that data collected will

include, among other items, initial

claims, weeks claimed, weeks

compensated, and benefits paid. If 10 or

more States enact BAA–UC, reporting

requirements will be issued in a

separate information collection request

in accordance with the Paperwork

Reduction Act.

Concerning administrative methods,

States are required under section

303(a)(1), SSA, to have ‘‘methods of

administration * * * reasonably

calculated to insure the full payment of

unemployment compensation when

due.’’ For BAA–UC, this means that, as

is the case for all types of UC, States

must have reasonable administrative

methods to assure that an individual is

eligible. States are expected to obtain

the requisite documentation, for

example, that an individual is on

approved leave or has left his or her

employment, that the individual has a

newborn child under one year old, or

that a child has been placed for

adoption. States must have reasonable

methods to assure that the individual is

eligible for each week claimed and

methods for detecting and collecting

overpayments. Each State already has

all of these methods in place for the

regular UC program; States need only

modify them as appropriate to

accommodate BAA–UC requirements. If

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37221

we identify a need for further guidance

on any ‘‘methods of administration,’’ we

will issue guidance as appropriate.

Concerning confidentiality of

information, States must treat BAA–UC

claims information in the same manner

as claims information for the regular UC

program. Guidance on confidentiality is

found in UIPL No. 34–97 (62 FR 40118,

40119 (July 25, 1999)).

(9) Inconsistency With Welfare to Work

(WtW) and Workforce Investment Act

(WIA) Initiatives

Some respondents contended that

experimental BAA–UC is inconsistent

with the WtW and WIA initiatives. As

they pointed out, these programs are

designed to help and encourage

individuals to join the workforce.

Comparing BAA–UC to the pre-1996

welfare program, one respondent

asserted that BAA–UC was counter to

the WtW and WIA initiatives in that it

would ‘‘create a disincentive for

individuals to access WIA training and

child care programs, and encourage

them not to enter or stay in the

workforce.’’ Respondents also were

concerned that BAA–UC would

discourage personal responsibility.

We view BAA–UC and the WtW and

WIA initiatives as compatible efforts.

Just as the WtW and WIA initiatives

help individuals enter into the

workforce, BAA–UC may help them

maintain a connection to the workforce.

As with all UC recipients, experimental

BAA–UC recipients must have a

sufficient work history, as determined

by each State, to be eligible for benefits.

Consequently, implementation of BAA–

UC provides no inducement to avoid

entering into the workforce. Indeed, the

whole premise of BAA–UC is that

individuals who receive these benefits

will be more attached to the workforce.

Because, as with all UC programs,

experimental BAA–UC will provide

only short-term, partial wage

replacement, we see no disincentive to

individuals to remain in the workforce.

(10) Fraud and Abuse

Some respondents expressed concern

about the potential for fraud and abuse,

noting that the regulation does not

condition receipt of BAA–UC on any

evidence of parent-child bonding

efforts, on the parent(s) and child

sharing a residence, or on whether the

parent(s) support and/or actually spend

time with the child. Some respondents

surmised that BAA–UC would be ‘‘a

paid vacation plan.’’

The purpose of the regulation is to

test whether compensating absences

from employment will help parents of

newborns or newly-adopted children

maintain or improve their connection to

the workplace; it is not designed to test

whether the parents and children

actually bond. We do not presume that

any specific parental activity or

circumstance is more (or less)

appropriate for promoting bonding

between parents and children. The

regulation, therefore, does not impose

upon States the burden of verifying

specific bonding activities. As is the

current practice, methods of fraud

detection and overpayment collection

will be developed as deemed

appropriate by the SESAs.

(11) UC Program Reform

We received several recommendations

that BAA–UC should be aligned with

other State UC program reform efforts

and that we should track and measure

all reform efforts of States that

implement BAA–UC. We believe that

UC reform is of the utmost importance

and have been diligently working to

promote UC reform through the

legislative process and have tracked and

evaluated such efforts. Although we

would like to see broad reform of the UC

program, such reform is beyond the

scope of this rule.

(12) Comment Period

Under the Administrative Procedure

Act (APA), an agency is required only

to provide a 30-day comment period

and public hearings are not required by

the APA for notice-and-comment

rulemaking. We received several

hundred responses from interested

parties requesting that we extend the

initial 45-day comment period ending

on January 18, 2000, and/or that public

hearings be held in venues around the

country. Given the simple nature of the

experiment and the relatively short

length of the proposed rule, we thought

that a 45-day comment period was

adequate and that hearings were

unnecessary. Some of the initial

comments noted that the comment

period fell during the holiday season, so

we decided to extend the comment

period 15 days through February 2,

2000, for a total 60-day comment period.

A few respondents requested in their

timely submissions that we permit them

to submit additional comments after

February 2, 2000. However, the sheer

volume of comments, as well as the

extensive detail of some of the

comments received, including the

timely comments from the respondents

asking to submit additional comments,

convinced us that sufficient time was

allotted for comments and that

additional time was not necessary.

(13) Rulemaking Requirements

We received comments that this rule

is subject to the Regulatory Flexibility

Act requirements because it will have a

significant economic impact on a

substantial number of small entities,

and it violates the Unfunded Mandates

Reform Act of 1995.

Respondents challenging our

conclusion that BAA–UC is not subject

to the Regulatory Flexibility Act

requirements suggested that the

experiment will undoubtedly have a

significant economic impact on a

substantial number of small entities

since the experiment will result in a

potentially higher payment of UC due to

the expansion of coverage to include

new parents, thus requiring a regulatory

flexibility analysis. However, the BAA–

UC regulations impose no regulations

upon small entities (American Trucking

Association v. EPA, 175 F.3d 1027, 1044

(D.C. Cir. 1999)), rather, we are

regulating the States that choose to

experiment with BAA–UC.

Furthermore, the Unfunded Mandates

Reform Act of 1995 (UMRA) is not

applicable to this regulation since this is

not a ‘‘Federal intergovernmental

mandate’’ as defined in section 421(5) of

the Congressional Budget and

Impoundment Control Act of 1974 (2

U.S.C. 658), as amended by section

101(a)(2) of the UMRA. Indeed, we are

not mandating that a State, local or

tribal government, or the private sector

implement BAA–UC.

(14) Model State Legislation

We received some comments about

the Model State Legislation that was

appended to the proposed rule in the

NPRM. Some comments indicated that

respondents interpreted the Model State

Legislation to be required legislative

language. Others suggested that the

Model State Legislation be restructured

with affirmative language to guarantee

payment of BAA–UC and suggested that

the Model State Legislation be changed

to read ‘‘compensation shall be

provided’’ rather than stating that

compensation ‘‘shall not be denied’’ as

published in the NPRM.

The Model State Legislation is

provided only as a guide to aid the

States that enact BAA–UC in developing

State legislation: States are not required

to use it. The Model State Legislation is

written in the style that States typically

use in their statutes. We think there is

no substantive difference between the

suggested language style and the style

used in the Model State Legislation;

therefore, no stylistic changes were

made. States that elect to follow the

37222 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

Model State Legislation must adapt it to

their State UC laws.

IV. Explanation of Final Rule and

Changes to Proposed Rule by Section

There is little difference between the

proposed rule and the Final Rule. An

explanation is provided where

differences occur. Technical changes are

not discussed.

Subpart A—General Provisions

Subpart A of rule discusses the

purpose of the rule, the scope of the rule

and critical definitions. The definitions

of ‘‘approved leave,’’ ‘‘newly-adopted

child,’’ ‘‘placement,’’ and ‘‘parents’’

warranted amendment and are

discussed below. All other aspects of

Subpart A remain unchanged from the

proposed rule.

Definition of ‘‘Approved Leave’’

Respondents raised two concerns

about ‘‘approved leave’’ as it is

described in the NPRM—one that it

would make individuals eligible for

benefits while still employed and the

other that it would inhibit eligibility by

forcing legally permissible leave to pass

an employer approval test.

In the preamble to the NPRM,

‘‘approved leave’’ was described as ‘‘an

approved, temporary separation from a

specific employer.’’ Pointing to the

phrase ‘‘specific employer,’’ concerns

were expressed that this would permit

employees who work for multiple

employers to be eligible for BAA–UC

based on a separation from one

employer while continuing to work for

other employers and that the

individual’s UC would be charged to the

other employers. We also received

comments about whether individuals

could receive partial BAA–UC while

working a reduced number of hours for

the same employer.

The Federal-State UC program already

is designed to accommodate situations

where an individual separates from one

job while continuing another and where

individuals are continuing to work at

reduced hours. We expect States to

handle these types of BAA–UC

situations just as they currently handle

similar situations. For example, an

individual continuing to hold a job will

have earnings; these earnings will affect

the individual’s eligibility, including

the amount payable, under BAA–UC.

Other respondents expressed concern

that the ‘‘approved leave’’ definition

limits the availability of BAA–UC; some

respondents suggested that the

definition of ‘‘approved leave’’ be

amended to include ‘‘required’’ leave.

The concern was that some employees

are granted leave under law or contract,

regardless of whether the employer

‘‘approves’’ the leave. The respondents

were concerned that, under the

definition of ‘‘approved leave’’ in the

NPRM, these employees would not be

eligible for BAA–UC.

We do not intend to exclude from

BAA–UC eligibility employees who are

provided leave by law or contract. To

assure that this group of employees is

not unintentionally excluded from

BAA–UC, the definition of ‘‘approved

leave’’ is amended to read ‘‘a specific

period of time, agreed to by both the

employee and employer or as required

by law or employment contract

(including collective bargaining

agreements), during which an employee

is temporarily separated from

employment and after which the

employee will return to work for that

employer.’’

The other concerns about the

definition of ‘‘approved leave’’ stemmed

from the notion that only employers

covered by the FMLA would approve

leave and that, as a result, employees of

smaller businesses would not be eligible

for BAA–UC. As a result, some

respondents thought there was

conflicting information within the

NPRM regarding eligibility because

employees of smaller businesses would

not be eligible for BAA–UC if eligibility

is conditioned on approved leave. Some

respondents suggested as a remedy that

the State option to limit BAA–UC to

individuals on approved leave be

eliminated. We expect States to evaluate

whether employees of small businesses

would be unable to obtain approved

leave and to determine whether to cover

these individuals under 20 CFR 604.10,

which applies to employees who

otherwise leave their employment.

Definition of ‘‘Newly-Adopted Child’’

In an effort to afford States maximum

flexibility and in acknowledgment that

adopted children may be more than one

year old, the definition of ‘‘newlyadopted child’’ in the NPRM included

no limitation on the age of an adopted

child. We received comments stating

that, without an age limitation on

adopted children for purposes of BAA–

UC, there was potential for adults who

adopted adults to be eligible for BAA–

UC.

The BAA–UC experiment is clearly

designed for the parents of young

children and will test whether

providing those parents with BAA–UC

during the first year of a child’s life or

placement for adoption will help

maintain or even promote their

connection to the workforce by allowing

them time to bond with their children

and develop stable child care systems

while adjusting to the accompanying

changes in lifestyle before returning to

work. To help assure that BAA–UC is

used for this purpose, we are

establishing an age limitation of 18

years old or less within the definition of

‘‘newly-adopted children.’’ This age

limitation is within the commonly

accepted age range of a ‘‘child’’ and also

acknowledges that adopted children

may be more than one year old. The

definition of ‘‘newly-adopted children’’

is amended to read ‘‘means children,

age 18 years old or less, who have been

placed within the previous 12 calendar

months with an adoptive parent(s).’’

Definition of ‘‘Placement’’

Respondents also raised concerns

about the definition of ‘‘placement.’’

Placement was defined in the NPRM as

‘‘the time a parent becomes legally

responsible for a child pending

adoption.’’ Comments indicated a

concern that individuals in the process

of adopting a child and who have

actually received the child would be

precluded from receipt of BAA–UC

because adoption agencies may retain

legal responsibility for a child until the

adoption is complete. Therefore, to

assure that these parents are not

excluded on a technicality, the word

‘‘legally’’ has been deleted from the

definition. Generally, foster parents are

excluded from BAA–UC; however, this

change may, in some situations, permit

some foster parents in the adoption

process to be eligible for BAA–UC.

‘‘Placement’’ is defined in this rule as:

‘‘the time a parent becomes responsible

for a child pending adoption.’’ A minor

change was made to the definition of

‘‘parents’’ to make it more compatible

with the definition of ‘‘placement.’’

Subpart B—Federal UC Requirements

No changes were made to this section;

therefore, Subpart B of the Final Rule is

the same as Subpart B in the NPRM.

Subpart C—BAA–UC Eligibility

A review of Subpart C resulted in two

changes. First, the subpart title was

changed to ‘‘Subpart C—Coverage and

Eligibility’’ to better reflect the subpart’s

content. Second, the review revealed

that § 604.22 was unnecessary because it

did not regulate State actions.

Consequently, § 604.22 is not included

in the Final Rule.

Executive Order 12866

This rule is a ‘‘significant regulatory

action’’ within the meaning of Executive

Order 12866 because it meets the

criteria of Section 3(f)(4) of that Order

in that it raises novel or legal policy

issues arising out of legal mandates, the

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37223

President’s priorities, or the principles

set forth in the Executive Order. It is

also ‘‘economically significant’’ within

the meaning of Section 3(f)(1) of that

Executive Order because it may have an

annual effect on the economy of $100

million or more. Specifically, the

estimated costs range from zero to $196

million. Accordingly, this rule was

submitted to, and reviewed by, the

Office of Management and Budget. As

directed by Section 6(a)(3)(C) of

Executive Order 12866, we have

prepared a Regulatory Impact Analysis

that assesses the costs, benefits, and

alternatives associated with this

regulation. The Regulatory Impact

Analysis is available to the public as

part of the rulemaking record.

We have evaluated the rule and find

it consistent with the regulatory

philosophy and principles set forth in

Executive Order 12866, which governs

agency rulemaking. Although the rule

will impact States and State agencies, it

will not adversely affect them in a

material way. The rule would permit

States to voluntarily participate in an

experiment to determine the

effectiveness of using the UC program to

support parents taking leave from their

employment to be with their newborns

or newly-adopted children; it would not

impose any new requirements on States.

Paperwork Reduction Act

We have determined that this rule

contains no information collection

requirements. If the evaluation of this

experiment requires information

collections covered under the

Paperwork Reduction Act, we will seek

OMB approval at that time.

Executive Order 13132

This regulation has been reviewed in

accordance with Executive Order 13132

regarding federalism. The order requires

that agencies, to the extent possible,

refrain from limiting State policy

options, consult with States prior to

taking any actions which would restrict

States’ policy options, and take such

action only when there is clear

constitutional authority and the

presence of a problem of national scope.

We do not believe that Executive Order

13132 applies. In the interest of

consultation, however, we invited major

intergovernmental associations to a

meeting at which we briefed the

associations on the proposed rule.

Executive Order 12988

This rule has been drafted and

reviewed in accordance with Executive

Order 12988, Civil Justice Reform, and

will not unduly burden the Federal

court system. The rule has been written

to minimize litigation and provide a

clear legal standard for affected conduct,

and has been reviewed carefully to

eliminate drafting errors and

ambiguities.

Unfunded Mandates Reform Act of 1995

This rule has been reviewed in

accordance with the Unfunded

Mandates Reform Act of 1995 (UMRA)

(2 U.S.C. 1501 et seq.). We have

determined that this rule does not

include any Federal mandate. States

have full discretion to decide whether

or not to enact BAA–UC.

Regulatory Flexibility Act

This rule will not have a significant

economic impact on a substantial

number of small entities. The rule

affects States and State agencies, which

are not within the definition of ‘‘small

entity’’ under 5 U.S.C. 601(6). Moreover,

States have complete discretion in

deciding whether or not they will enact

BAA–UC under this regulation. Under 5

U.S.C. 605(b), the Secretary has certified

to the Chief Counsel for Advocacy of the

Small Business Administration to this

effect. Accordingly, no regulatory

flexibility analysis is required.

Effect on Family Life

We certify that this rule has been

assessed in accordance with section 654

of Public Law 105–277, 112 Stat. 2681,

for its effect on family well-being. We

conclude that the rule will not adversely

affect the well-being of the nation’s

families. Rather, it should have a

positive effect on family well-being by

permitting States to enable more parents

to take leave from their employment to

be with their newborns or newlyadopted children.

Congressional Review Act

Consistent with the Congressional

Review Act, 5 U.S.C. 801, et seq., we

will submit to Congress and the

Comptroller General of the United

States, a report regarding the issuance of

this Final Rule prior to the effective date

set forth at the outset of this document.

OMB has determined that this rule is

a ‘‘major rule’’ as defined in the

Congressional Review Act. The rule is

likely to result in an annual effect on the

economy of $100 million or more. The

cost estimate is discussed in Section

III.C.(2)(a) of the ‘‘Supplementary

Information,’’ above. The effective date

of this rule has been adjusted in

accordance with the requirements of the

Congressional Review Act.

Catalogue of Federal Domestic

Assistance Number

This experiment is listed in the

Catalogue of Federal Domestic

Assistance at No. 17.225,

Unemployment Insurance.

List of Subjects in 20 CFR Part 604

Unemployment compensation.

Signed at Washington, DC on June 7, 2000.

Alexis M. Herman,

Secretary of Labor.

Words of Issuance

For the reasons set forth in this

preamble and in the NPRM, Chapter V

of Title 20, Code of Federal Regulations,

is amended by adding new part 604 to

read as follows:

PART 604—REGULATIONS FOR BIRTH

AND ADOPTION UNEMPLOYMENT

COMPENSATION

Subpart A—General Provisions

Sec.

604.1 What is the purpose of this

regulation?

604.2 What is the scope of this regulation?

604.3 What definitions apply to this

regulation?

Subpart B—Federal Unemployment

Compensation Program Requirements

604.10 Beyond the interpretation of the able

and available requirements for Birth and

Adoption unemployment compensation,

does this regulation change the Federal

requirements for the unemployment

compensation program?

Subpart C—Coverage and Eligibility

604.20 Who is covered by Birth and

Adoption unemployment compensation?

604.21 When does eligibility for Birth and

Adoption unemployment compensation

commence?

Authority: 42 U.S.C. 503 (a)(2) and (5) and

1302(a); 26 U.S.C. 3304(a)(1) and (4) and

3306(h); Secretary’s Order No. 4–75 (40 FR

18515); and Secretary’s Order No. 14–75

(November 12, 1975).

Subpart A—General Provisions

§ 604.1 What is the purpose of this

regulation?

The regulation in this part allows the

States to develop and experiment with

innovative methods for paying

unemployment compensation to parents

on approved leave or who otherwise

leave employment to be with their

newborns or newly-adopted children.

States’ experiences with Birth and

Adoption unemployment compensation

will enable the Department of Labor to

test whether its interpretation of the

Federal ‘‘able and available’’

requirements promotes a continued

37224 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

connection to the workforce in parents

who receive such payments.

§ 604.2 What is the scope of this

regulation?

The regulation in this part applies to

and permits all State unemployment

compensation programs to provide

benefits to parents on approved leave or

who otherwise leave employment to be

with their newborns or newly-adopted

children. A State’s participation is

voluntary.

§ 604.3 What definitions apply to this

regulation?

The following definitions apply to the

regulation in this part:

(a) Approved leave means a specific

period of time, agreed to by both the

employee and employer or as required

by law or employment contract

(including collective bargaining

agreements), during which an employee

is temporarily separated from

employment and after which the

employee will return to work for that

employer.

(b) Birth and Adoption

unemployment compensation means

unemployment compensation paid only

to parents on approved leave or who

otherwise leave employment to be with

their newborns or newly-adopted

children.

(c) Department means the United

States Department of Labor.

(d) Newborns means children up to

one year old.

(e) Newly-adopted children means

children, age 18 years old or less, who

have been placed within the previous 12

calendar months with an adoptive

parent(s).

(f) Parents means mothers and fathers

(biological, legal, or who have custody

of a child pending their adoption of that

child).

(g) Placement means the time a parent

becomes responsible for a child pending

adoption.

(h) State(s) means one of the States of

the United States of America, the

District of Columbia, the

Commonwealth of Puerto Rico, and the

United States Virgin Islands.

Subpart B—Federal Unemployment

Compensation Program Requirements

§ 604.10 Beyond the interpretation of the

able and available requirement for Birth and

Adoption unemployment compensation,

does this regulation change the Federal

requirements for the unemployment

compensation program?

No, the regulation in this part does

not change the Federal unemployment

compensation requirements. Under its

authority to interpret Federal

unemployment compensation law, the

Department interprets the Federal able

and available requirements to include

experimental Birth and Adoption

unemployment compensation. The

regulation in this part applies only to

parents who take approved leave or

otherwise leave employment to be with

their newborns or newly-adopted

children.

Subpart C—Coverage and Eligibility

§ 604.20 Who is covered by Birth and

Adoption unemployment compensation?

If a State chooses to provide Birth and

Adoption unemployment compensation,

all individuals covered by the State’s

unemployment compensation law must

also be covered for Birth and Adoption

unemployment compensation. Just as

with current unemployment

compensation programs, individuals

may not be denied experimental Birth

and Adoption unemployment

compensation based on facts or causes

unrelated to the individual’s

unemployment, such as industry,

employer size or the unemployment

status of a family member. The

introduction of such facts or causes

would be inconsistent with Federal

unemployment compensation law.

§ 604.21 When does eligibility for Birth and

Adoption unemployment compensation

commence?

Parents may be eligible for Birth and

Adoption unemployment compensation

during the one-year period commencing

with the week in which their child is

born or placed with them for adoption.

Weeks preceding the week of the birth

or placement and weeks following the

end of the one-year period are not

compensable.

Note: The following appendix will not

appear in the Code of Federal Regulations.

Appendix to the Preamble—

Unemployment Insurance Program

Letter No. 26–00

U.S. Department of Labor

Employment and Training Administration,

Washington, D.C. 20210

CLASSIFICATION: UI

CORRESPONDENCE SYMBOL: TEUL

DATE: May 31, 2000

DIRECTIVE: Unemployment Insurance Program

Letter No. 26–00.

TO: All State Employment Security Agencies.

FROM: Grace A. Kilbane, Administrator,

Office of Workforce Security.

SUBJECT: Model State Legislation and

Commentary to aid States implementing

Birth and Adoption Unemployment

Compensation Unemployment Compensation

(BAA–UC).

Rescissions: None.

Expiration Date: Continuing.

1. Purpose. To provide Model State

Legislation and Commentary for States

implementing BAA–UC. The Model State

Legislation is offered as a guide for States

that need to amend their current UC laws, it

is not required. The Commentary provides

information on the Model State Legislation

and will aid States in making policy

decisions.

2. References. 20 Code of Federal

Regulations (CFR) parts 604, 615, and 625;

sections 303(a)(1) and (8), Social Security Act

(SSA); Unemployment Insurance Program

Letters (UIPLs) No. 21–80 and No. 44–93;

Family and Medical Leave Act, Pub. Law

103–3; the Manual of Employment Security

Legislation (rev. 1950); UIPL No.787

transmitting the Secretary of Labor’s Decision

of September 25,1964, In the Matter of the

Hearing to the South Dakota Department of

Employment Security Pursuant to Section

3304(a) of the Internal Revenue Code of 1954;

and Jenkins v. Bowling, 691 F.2d 1225 (7th

Cir. 1982).

3. Background. The Department of Labor

(Department) created, by regulation, an

opportunity for State agencies that

administer the UC program to pay, as part of

a voluntary, experimental effort, UC to

parents who take time off from employment

after the birth or placement for adoption of

a child. (20 CFR Part 604.) This regulation

allows States the opportunity to develop

innovative ways of using UC to support

parents taking approved leave or who

otherwise leave their employment to be with

their newborns or newly-adopted children

and will permit us to evaluate the

effectiveness of using the UC program for

these or related purposes.

4. Model State Legislation. The attached

Model State Legislation is offered as an

optional aid for States that choose to enact

BAA–UC. The Model State Legislation

assumes that States will provide BAA–UC

based on the same earnings and employment

criteria that apply to other individuals. It also

assumes that States will provide BAA–UC for

no more than 12 weeks, that BAA–UC

payments will count toward the maximum

number of weeks of UC, and that employers

will not be charged for BAA–UC. Further, the

Model State Legislation provides for the

deduction of other income from BAA–UC.

The Model State Legislation conforms to the

regulations at 20 CFR Part 604; however,

States have wide latitude in creating their

BAA–UC provisions within the parameters of

those regulations.

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37225

5. Commentary. A Commentary in

question-and-answer format is also attached

(Attachment II) as an aid for States. The

Commentary discusses policy approaches

taken in the Model State Legislation and also

discusses other matters.

6. Action. We suggest that States consider

developing a BAA-UC experiment to provide

partial wage replacement to parents on

approved leave or who otherwise leave

employment to be with their newborns and

newly-adopted children. We expect that

States will take into consideration the impact

of such an effort on their unemployment

funds prior to enactment. Appropriate staff

should be provided with this UIPL.

7. Inquiries. Please direct inquiries to the

appropriate Regional Office.

Attachments

Attachment I—Model State Legislation

Attachment II—Commentary

Attachment I—Model State Legislation

Sectionll. Birth and Adoption

Unemployment Compensation

(a) A parent on a leave of absence from his/

her employer or who left employment to be

with his/her child during the first year of life,

or during the first year following placement

of a child age 18 or less with the individual

for adoption, shall not be denied

compensation under Section llfor

voluntarily leaving employment,

Sectionllrelating to availability for work,

Sectionllrelating to inability to work, or

Sectionllfor failure to actively seek work.

(b) For purposes of this section, the

following definitions apply:

(1) Parent means a mother or father

(biological, legal, or who has custody of a

child pending her or his adoption of that

child); and

(2) Placement means the time a parent

becomes responsible for a child pending

adoption in accordance with [cite State

adoption law].

(c) Sectionll, concerning the reduction

of the amount of compensation due to receipt

of disqualifying income, shall apply to

payments under this section. In addition, the

following payments shall cause a reduction

in the compensation amount:

(1) Any payment from the employer

resulting from a birth or adoption described

in subsection (a); and

(2) Any payment resulting from a birth or

adoption described in subsection (a) from a

disability insurance plan contributed to by an

employer, in proportion to the employer’s

contribution to such plan.

(d) Compensation is payable to an

individual under this section for a maximum

of 12 weeks with respect to any birth or

placement for adoption.

(e) Each employer shall post at each site

operated by the employer, in a conspicuous

place, accessible to all employees,

information relating to the availability of

Birth and Adoption unemployment

compensation.

(f) Any compensation paid under this

section shall not be charged to the account

of the individual employer.

(g) Two years following the effective date

of this legislation, the commissioner shall

issue a report to the governor and the

legislature evaluating the effectiveness of

Birth and Adoption unemployment

compensation.

(h) This section shall be applied consistent

with regulations issued by the U.S.

Department of Labor.

Attachment II—Commentary

General

1. Must States implement Birth and

Adoption unemployment compensation

(BAA–UC)?

No. This effort is voluntary for the States.

However, implementation of BAA–UC will

require some legislation on the part of every

State seeking to adopt it. The Model State

Legislation is provided for the convenience

of States that wish to implement BAA–UC.

2. Does the BAA–UC regulation enable a

State to pay UC for other types of family or

medical leave?

No. This regulation enables States to pay

UC, on an experimental basis, to parents on

approved leave or who otherwise leave

employment to be with their newborns or

newly-adopted children. The experiment will

test whether providing UC to individuals

within this group will strengthen their

workforce attachment and will provide data

on the impact of BAA–UC on employees,

employers, and States’ unemployment funds.

Permitting payment of UC for other types of

family leave or care would be inconsistent

with this experimental effort.

3. Must all employer-paid leave be

exhausted before BAA–UC is available?

No. BAA–UC is designed to provide partial

wage replacement to parents on approved

leave or who otherwise leave employment to

be with their newborns or newly-adopted

children. The Model State Legislation

assumes that any wages paid for the period

of employer-provided leave will be deducted.

However, States need not deduct these wages

from BAA–UC.

4. Does the BAA–UC regulation impose

any solvency requirements upon the States

before they enact BAA–UC?

No. The Department expects that a State

will not enact changes without assessing the

effect on the solvency of its unemployment

fund. A State in a weak solvency position

should not conduct a BAA–UC experiment

without creating a means of financing it.

Each State has the responsibility to assess the

cost to the State’s unemployment fund

whenever coverage, benefit expansions, or

tax changes are considered within the State’s

UC program. We will provide technical

assistance to States needing assistance in

determining their solvency positions.

Monetary Qualifications and Benefits

5. What are the earnings and employment

requirements for BAA–UC?

States may establish their own

requirements. The Model State Legislation

assumes that States will use the same

earnings and employment criteria that apply

to all other individuals.

6. What is the weekly benefit amount for

individuals eligible for BAA–UC?

States may establish their own weekly

benefit amounts. The Model State Legislation

assumes that individuals eligible for BAA–

UC will receive the same weekly benefit

amount as other individuals eligible for UC.

7. How does the receipt of other income

effect payment of BAA–UC?

States will determine whether BAA–UC

will be reduced by other income. Under the

Model State Legislation, the amount of BAA–

UC will be reduced in the same manner as

any other payment of UC as provided under

State law. The Model State Legislation also

provides for the deduction of any payment

from the employer as a result of the birth or

placement for adoption, and for the

deduction of any disability insurance

payment received as a result of the birth or

placement for adoption in proportion to the

employer’s contribution to the disability

insurance plan. This provision, which is

limited to payments triggered by the same

event which triggers BAA–UC, reflects the

view that the unemployment fund should not

be held responsible when wage replacement

is available from other sources, particularly

when both payments are financed by the

employer. States should examine their laws

to determine if all types of appropriate

income are, or should be, deductible. For

example, some leave payments which are not

normally deductible under State law may

cover costs of birth and adoption leave.

8. How does the BAA–UC entitlement

relate to UC payments where conventional

able and available requirements apply?

States are free to determine this. The

Model Legislation assumes that BAA–UC

counts toward the maximum number of

weeks of conventional UC.

Period of Eligibility

9. When may BAA–UC benefits begin?

Under 20 CFR 604.21, parents may receive

BAA–UC only during the one-year period

commencing with the week in which the

child is born or placed for adoption. For

example, an individual taking leave in the

51st week following birth or placement for

adoption, would be eligible for BAA–UC only

for weeks 51 and 52. Periods preceding the

week of birth or placement for adoption are

not compensable. States are free to reduce the

one-year period.

10. How many weeks of BAA–UC may

individuals receive?

States are free to determine this. The

Model State Legislation provides a maximum

duration of 12 weeks per individual with

respect to any one birth or adoption. States

may also relate the duration of leave to the

individual’s weekly amount of UC. For

example, for each birth or adoption, an

individual may receive an amount equal to

12 times the individual’s weekly UC amount.

To prevent confusion between the FMLA

and BAA–UC, States should inform potential

BAA–UC beneficiaries of the dissimilarities

between BAA–UC and leave under the FMLA

(for example, BAA–UC does not guarantee

job retention).

11. If a child is born in the middle of the

week or the placement occurs in the middle

of the week, is BAA–UC payable for this

week?

37226 Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations

Under the Model State Legislation, BAA–

UC would be payable for this week, assuming

all applicable eligibility conditions, such as

the deductible income provisions, are met.

States may provide the full weekly

compensation amount for this week or

prorate the weekly amount to reflect only

periods following birth or adoption. If the

amount is prorated, the State may pay the

remaining balance for the last partial week if

the individual is still on leave.

12. Must the individual serve a waiting

period?

No. Nothing in Federal law requires States

to have a waiting week for conventional UC

or BAA–UC. However, not having a waiting

week would eliminate the 50 percent Federal

share for the first week of all Extended

Benefits claims. Under 20 CFR 615.14(c)(3),

a State is not entitled to a Federal share for

the first week of Extended Benefits if the

State’s law provides ‘‘at any time or under

any circumstances’’ for the payment of UC

for the first week of unemployment.

13. When is a child considered ‘‘placed’’

for adoption?

Under 20 CFR 604.3(g), placement occurs

at the time a parent becomes responsible for

a child pending adoption. State UC agencies

should consult the adoption laws of their

States to determine precisely when

placement occurs.

Other Eligibility Issues

14. May both parents receive BAA–UC? If

so, may they both receive such compensation

at the same time?

The answer to both questions is ‘‘yes.’’

States implementing BAA–UC must allow

both parents, if otherwise eligible, to receive

BAA–UC concurrently or consecutively. A

State may not prohibit payment of BAA–UC

simply because the other parent is taking

leave for the same purpose. A State law

which does so is inconsistent with Federal

law because the eligibility of one parent will

be determined based on whether the other

parent is receiving UC. Specifically, in a 1964

conformity decision involving the State of

South Dakota, the Secretary of Labor held

that Federal law prohibits the introduction of

any eligibility test unrelated to the fact or

cause of the individual’s unemployment.

(See Secretary of Labor’s Decision of

September 25, 1964, In the Matter of the

Hearing to the South Dakota Department of

Employment Security Pursuant to Section

3304(a) of the Internal Revenue Code of 1954,

transmitted by Unemployment Insurance

Program Letter No. 787, October 2, 1964.)

The recipient status of the other parent is

unrelated to the fact or cause of an

individual’s unemployment. Thus, both

parents may receive BAA–UC, whether

concurrently or consecutively. Similarly,

States may not limit use of BAA–UC to the

‘‘primary’’ parent.

15. Must BAA–UC apply to individuals

employed by all employers subject to State

UI law?

Yes. As explained in the previous answer,

States may not impose eligibility conditions

not related to the fact or cause of the

individual’s unemployment. Assuming the

services are taxable for UC, States may not,

for example, limit BAA–UC based on

employer size.

16. May States provide BAA–UC to

individuals who otherwise leave

employment (not on approved leave) to be

with their newborns or newly-adopted

children?

Yes. While States are free to determine

their own requirements, there are compelling

reasons for providing BAA–UC to individuals

who otherwise leave employment. Although

many employers may grant leave, others may

not. The Department believes that all parents

should be treated identically for UC purposes

when they take time away from employment

to be with their newborn or newly-adopted

child. As such, their eligibility for BAA–UC

should not be based on whether an employer

grants the leave, but on the parent’s reason

for wanting to take the leave.

17. May eligibility be conditioned on

whether the individual gave notice to the

employer?

Yes. Although the Model State Legislation

does not provide for such a condition

because it may result in denials due to the

technicality of when the individual requested

leave, States may impose it. The basis of such

a requirement is that employers should be

given sufficient time to accommodate the

leaving/absence of the individual. If such a

provision is included, the Department

recommends that the notice be required to be

given no more than 30 days prior to birth or

placement, but only where practicable.

18. Must States declare an overpayment of

benefits if the individual does not return to

work?

No, although a State may choose to declare

an overpayment of benefits if the individual

fails to return to work. However, States may

not delay payment until after the individual

returns to work. Section 303(a)(1), SSA,

requires the full payment of benefits when

due, precluding States from delaying

payment while awaiting the individual’s

return to work. See Jenkins v. Bowling, 691

F.2d 1225 (7th Cir. 1982).

19. May an individual be paid BAA–UC

under the Federal-State extended benefit

program or any of the federally funded

unemployment programs?

It depends on the program. Benefits under

the UC for Federal Employees (UCFE) and

UC for Ex-Servicemembers (UCX) programs

are, by Federal law, required to be paid on

the same terms and subject to the same

conditions as State benefits (with exceptions

not relevant here). Therefore, BAA–UC will

be paid to individuals under these programs

to the same extent as under State law.

Individuals may only receive Disaster

Unemployment Assistance (DUA) when their

unemployment is caused by a disaster as

provided in 20 CFR Part 625. However, if

they meet their State’s Birth and Adoption

UC provisions, then they will satisfy the

availability requirement at § 625.4(g), and so

may continue to qualify for DUA. For

example, an individual who is unemployed

due to a major disaster may later give birth.

If this individual satisfies the BAA–UC

requirements in the State’s law, she may

receive DUA.

Extended Benefit claimants may not

receive Birth and Adoption UC since they

cannot meet the systematic and sustained

work search requirements in 20 CFR 615.8(g).

Individuals claiming trade readjustment

allowances (cash benefits) under the Trade

Adjustment Assistance and the North

American Free Trade Act Transitional

Adjustment Assistance programs will be

ineligible since such individuals are required

to either be in full-time training or conduct

the systematic and sustained work search

required for the Extended Benefit program.

Financing Costs of BAA–UC

20. May BAA–UC costs be spread among

employers?

Yes. States are free to spread the costs—

commonly called ‘‘noncharging’’—of BAA–

UC. We think that spreading BAA–UC costs

among all employers is the most equitable

means of financing this experiment;

therefore, the Model State Legislation

provides for this. This position applies to

both contributory and reimbursing

employers.

Noncharging contributory employers is

common in most States; however, some

States do not noncharge reimbursing

employers. States interested in noncharging

reimbursing employers for BAA–UC are

referred to UIPLs No. 21–80 and No. 44–93

(58 FR 52790, 52792 (April 12, 1993)) for

general information about noncharging

reimbursing employers.

21. May BAA–UC costs be paid from a

State fund other than the State’s

unemployment fund, for example, a State’s

temporary disability insurance (TDI) fund?

Yes. Nothing in Federal UC law governs

the treatment of moneys in these funds

because they are financed by a separate tax

and held separately from the State’s

unemployment fund. For example, a State

with a TDI program may enact a special

disability insurance tax on employers and

deposit the proceeds in a disability fund. If

the State chooses to use one of these funds

(or create such a fund) to pay birth and

adoption leave benefits, the requirements of

the Department’s BAA–UC regulation will

not apply.

Administrative Costs

22. May States use UC administrative

grants received from the Federal government

to pay for the administration of BAA–UC?

Provided that all the requirements of the

BAA–UC regulation are met, the use of UC

administrative grants is permissible,

including for purposes of studying and

evaluating BAA–UC. However, if the

regulation’s requirements are not met, the

expenditures of grant funds are not for the

proper and efficient administration of the

State’s law as required by section 303(a)(8),

SSA.

Federal Register / Vol. 65, No. 114 / Tuesday, June 13, 2000 / Rules and Regulations 37227

Reporting

23. Will States need to amend their laws

to address any Federal reporting

requirements concerning BAA–UC?

Although this is a matter for States to

determine, the Department anticipates that

few, if any, States will need to amend their

laws since most State laws already contain

language concerning reporting. Many of these

laws are based on the language on page 95

of The Manual of Employment Security

Legislation, as revised September 1950,

which requires that the agency ‘‘make such

reports, in such form and containing such

information as the Secretary of Labor may

from time to time require, and shall comply

with such provisions as the Secretary of

Labor may from time to time find necessary

to assure the correctness and verification of

such reports.’’

24. What are the reporting requirements?

The Department has not yet finalized a

methodology for evaluating BAA–UC. When

that methodology is completed, State

reporting requirements will be issued in a

separate information collection request and,

if subject to the Paperwork Reduction Act,

published for public comment in the Federal

Register.

[FR Doc. 00–14801 Filed 6–12–00; 8:45 am]

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