56830 Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / Rules and Regulations 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

20 CFR Part 603 

RIN 1205–AB18 

Federal-State Unemployment 

Compensation Program (UC); 

Confidentiality and Disclosure of State 

UC Information 

AGENCY: Employment and Training 

Administration, Labor. 

ACTION: Final rule. 

SUMMARY: The U.S. Department of Labor 

(Department) is issuing this final rule to 

set forth the statutory confidentiality 

and disclosure requirements of Title III 

of the Social Security Act (SSA) and the 

Federal Unemployment Tax Act (FUTA) 

concerning unemployment 

compensation (UC) information. The 

final rule also amends the Income and 

Eligibility Verification System (IEVS) 

regulations, a system of required 

information sharing primarily among 

State and local agencies administering 

several federally assisted programs. 

DATES: Effective Date: This final rule is 

effective October 27, 2006. 

Applicability Date: States that need to 

amend their laws, rules, procedures, or 

existing agreements in order to conform 

and comply with the requirements of 

this rule have two years from the 

effective date of the final rule to do so. 

FOR FURTHER INFORMATION CONTACT: 

Gerard Hildebrand, Chief, Division of 

Legislation, Office of Workforce 

Security, Employment and Training 

Administration, (202) 693–3038 (this is 

not a toll-free number) or 1–877–889– 

5627 (TTY), or by e-mail at 

hildebrand.gerard@dol.gov. 

SUPPLEMENTARY INFORMATION:

Background 

The first Notice of Proposed 

Rulemaking concerning confidentiality 

and disclosure of State UC information 

was issued in 1992. (57 FR 10063 

(March 23, 1992).) Given the time that 

elapsed following this 1992 NPRM, the 

Department published a new NPRM on 

August 12, 2004. (69 FR 50022.) 

Comments were invited through 

October 12, 2004. 

General Discussion of Final Rule 

This final rule implements Federal 

UC laws concerning confidentiality and 

disclosure of UC information and 

establishes uniform minimum 

requirements for the payment of costs, 

safeguards, and data-sharing agreements 

to ensure responsible use when UC 

information is disclosed. The 

confidentiality requirement 

implemented by this rule is derived 

from the ‘‘methods of administration’’ 

requirement of Section 303(a)(1), SSA. 

The disclosure requirements are from 

Sections 303(a)(7), (c)(1), (d), (e), (f), (h), 

and (i), SSA, and Section 3304(a)(16), 

FUTA. This rule revises the regulations 

at 20 CFR Part 603, to implement all of 

these statutory provisions. (The present 

rule at Part 603, which this final rule 

replaces, addresses only Section 303(f), 

SSA (concerning IEVS)). These statutory 

provisions each address disclosure to 

governmental entities, but they vary 

with respect to the specific information 

to be disclosed and the terms and 

conditions of disclosure. 

The confidentiality and disclosure 

requirements in Title III of the SSA 

relating to UC information are 

conditions for receipt of grants by the 

States for UC administration. The 

disclosure requirements in the FUTA 

are conditions required of a State in 

order for employers in that State to 

receive credit against the Federal 

unemployment tax under 26 U.S.C. 

3302. 

Other Federal laws may require use or 

disclosure of confidential UC 

information. For example, the 

Workforce Investment Act (WIA) of 

1998, Public Law 105–220, requires 

States to measure their progress in 

providing services funded under Title I 

of the WIA against State and local 

performance measures using ‘‘quarterly 

wage records, consistent with State 

law.’’ 29 U.S.C. 2871(f)(2); 20 CFR 

666.150(a). Because these laws do not 

condition receipt of UC grants under the 

SSA or certification for employer tax 

credits under the FUTA on such use or 

disclosure, the rule does not implement 

these laws. However, the disclosure of 

confidential UC information in 

compliance with the WIA and other 

Federal laws is permitted under the 

general exceptions to confidentiality in 

§ 603.5 of this final rule. (For more 

information on the requirement to use 

wage records under the WIA, see 20 

CFR 666.150.) The Department stated 

previously and repeats here that it 

strongly encourages States to amend 

their laws to permit disclosure for WIA 

purposes if their State laws do not 

already provide for such disclosure. 

Comments Received on the NPRM 

The Department received 38 pieces of 

correspondence commenting on the 

NPRM by the close of the comment 

period. The majority of the comments— 

24—were from State UC agencies. Eight 

commenters—all State UC agencies— 

objected to the rule. The remaining 16 

State UC agencies appeared neutral, or 

even supported the objectives of the 

rule, while offering technical comments. 

Other commenters included employer 

interest groups, researchers, the U.S. 

Census Bureau, and the National 

Association of State Workforce 

Agencies. All timely comments were 

considered and are included in the 

rulemaking record. Several comments 

were not germane to this rulemaking 

and, therefore, are not addressed. 

Discussion of Comments—General 

Rule not necessary. Several 

commenters stated that the rule was not 

necessary because the UC program has 

functioned for 60 years without such a 

rule and there was no evidence of a 

problem that would be rectified by a 

Federal rule, which one commenter said 

was an ‘‘overreaction’’ to any abuses 

that may have occurred. 

While the Department appreciates 

that States have long protected certain 

UC information, the rule is necessary to 

comply with statutory mandates in the 

SSA. The SSA provides that the 

Department establish safeguards ‘‘in 

regulations’’ to insure that information 

required to be disclosed to certain 

governmental entities is used only for 

the purposes for which it is disclosed. 

Sections 303(d)(1)(B), (e)(1)(B), and 

(i)(1)(B), SSA. Section 303(h)(1)(C), 

SSA, also provides that the Department 

establish ‘‘safeguards’’ although it does 

not explicitly refer to regulations. 

Applying the regulation to all disclosed 

UC information will result in more 

uniform treatment among entities and, 

thereby, a certain degree of simplicity. 

Moreover, absent this regulation, 

information that is highly protected 

when collected for other Federal 

purposes (for example, Social Security 

and Federal income tax) would lack 

explicit protection under Federal laws 

and regulations when it is collected for 

purposes of the Federal-State UC 

program. Indeed, much of the demand 

for use of UC information for non-UC 

purposes exists because information 

collected for the UC program is 

currently subject to less stringent legal 

protections, although it is no less 

sensitive. That demand has been 

increasing as technology makes data 

sharing easier and as UC information is 

used for program evaluations. Thus, 

while the Department believes that a 

considerable degree of State flexibility 

should exist with regard to 

confidentiality and that data should be 

shared under certain circumstances, we 

do not believe it is appropriate to be 

passive in this matter, particularly in a 


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climate of heightened concern regarding 

identity theft. 

Requirements of the Rule. Several 

comments indicated confusion 

concerning the requirements of the rule. 

For example, some commenters viewed 

the rule as requiring that certain records 

must be open to the public or requiring 

certain disclosures that are merely 

optional on the part of the States. 

In response, we note that the rule has 

two distinct aspects. First, it sets 

minimum requirements concerning 

what UC information must be kept 

confidential and for the payment of 

costs, safeguards, and data-sharing 

agreements. Nothing prohibits States 

from having more stringent 

confidentiality provisions than those 

imposed by the rule, except for certain 

required disclosures (discussed in the 

next paragraph). For example, States 

may keep appellate records confidential 

even though the rule does not require it. 

Second, the rule implements certain 

provisions of Federal law requiring that 

certain UC information must be 

disclosed to certain governmental 

entities. For example, Section 303(e)(1), 

SSA, requires States to disclose 

information to State child support 

agencies for purposes of establishing 

certain child support obligations. These 

required disclosure provisions address 

what information must be disclosed to 

the relevant governmental entities. 

However, we note that the rule also 

permits, at State option, disclosure to 

public officials in the performance of 

their duties. As a result, the rule does 

not prohibit the State from disclosing 

more information to a governmental 

entity than is required under Federal UC 

law, provided such disclosures 

otherwise meet the conditions of the 

rule (such as payment of costs). 

Also, several State UC agencies 

requested more specificity regarding the 

regulation’s application in certain areas 

or the meaning of certain words. While 

these comments have resulted in certain 

clarifications (discussed in the 

Summary of Comments), in other cases 

no change to the rule resulted. In 

keeping with the principle that the rule 

establishes minimum requirements, the 

Department has chosen to leave many 

specific details of implementation to the 

States. For example, although the rule 

requires that penalties be assessed 

under State law for unlawful disclosure 

of confidential UC information, it does 

not specify what these penalties must 

be. Similarly, although the rule 

addresses disposition of confidential UC 

information when it is disclosed to 

governmental agencies or private 

entities, the Department, consistent with 

its long-established practice, has chosen 

not to regulate State court practices 

involving the UC program. States are, 

therefore, free to address disposition by 

their courts as they see fit. In addition, 

the Department does not believe it is 

necessary to define certain commonly 

used terms (such as ‘‘audit’’), as one 

commenter requested. 

Finally, several commenters 

expressed concerns about the limited 

scope of the mandatory disclosure 

provisions. For example, one 

commenter noted that the disclosure 

provision in § 603.6(b)(3) required 

disclosure of certain information to 

‘‘officers and employees of any State 

food stamp agency,’’ but not to ‘‘county 

social service agencies [that] carry out 

Food Stamp eligibility determinations 

under the policy direction of the State 

Food Stamp agency.’’ In this case, the 

rule reflects Federal law, which requires 

disclosure only to ‘‘any State food stamp 

agency.’’ (See Section 303(d)(1)(A), 

SSA.) However, nothing prohibits 

disclosure to public officials employed 

by a county when such disclosure is for 

use in the performance of a public 

official’s duties and is otherwise 

consistent with the rule. (See § 603.5(e)) 

Effect of Rule. One commenter 

expressed concern that any rule should 

‘‘(1) encourage uniform procedures 

among the States, preferably by 

including a model State law in the 

rulemaking, and (2) avoid unnecessary 

State legislation.’’ That commenter was 

also concerned about why a ‘‘State law’’

needed to specifically address 

disclosure of ‘‘an individual’s 

information to that individual, or an 

employer’s information to that 

employer.’’ In a similar vein, another 

commenter stated that the definition of 

‘‘State law’’ should be expanded to 

include ‘‘an administrative rule, written 

policy or administrative interpretation,’’

thereby avoiding State legislation. 

The Department does not believe 

model legislation is necessary or 

desirable. All State UC laws currently 

contain confidentiality provisions, 

which have been interpreted over the 

years through regulations, court cases, 

and administrative rulings. State UC 

agencies are aware of these 

interpretations, which will influence 

their implementation of the regulation’s 

requirements, including their 

determination of whether amendments 

to the State code, rules, or procedures 

are necessary to specifically address the 

requirements of the regulation. 

The Department considers regulations 

and administrative rulings to be part of 

the ‘‘State UC law’’ for purposes of 

conformity with Federal law. Since 

these regulations and rulings are treated 

as law, the Department does not believe 

there is need to change the definition of 

‘‘State law.’’

One commenter expressed the 

concern that the rule would lead to a 

‘‘lack of uniformity’’ among States. 

Other commenters believed that the rule 

would undermine State laws that are 

currently more restrictive than the rule. 

The Department believes that the rule 

will result in greater, rather than less, 

uniformity among States because it 

requires some States to raise their 

confidentiality requirements to meet the 

minimum requirements of this rule. The 

Department appreciates that States have 

valid reasons for maintaining UC 

confidentiality laws that are stricter 

than those required by the rule. On 

balance, we believe that the rule will 

serve to enhance confidentiality 

requirements by making disclosure 

subject to the minimum requirements of 

the rule, while permitting States to 

provide additional protections. 

Rule would increase costs and 

burdens. Several State UC agencies 

objected to the rule on the grounds that 

it would result in substantial new costs, 

would be excessively burdensome, or 

would be a distraction to program 

administration. 

The rule is, to the extent possible, 

written to minimize the burden on the 

States, recognize existing State 

practices, and permit implementation 

within existing resource levels. Our 

analysis of the objections regarding 

costs and burdens indicate that most 

were based on misunderstanding of the 

requirements of the rule. Notably, some 

commenters read the rule to require 

formal agreements before disclosure 

may be made to an individual’s agent, 

and some commenters objected to the 

requirement that States ‘‘periodically 

audit’’ every entity receiving UC 

information, including the individual’s 

agent. (See §§ 603.10(b)(2) and 

603.9(b)(2), respectively.) However, both 

of these requirements pertained only to 

ongoing disclosures made to a third 

party (other than an agent), who 

typically requests many individuals to 

authorize the disclosure of information 

to them. (For example, mortgage lenders 

once routinely asked applicants to 

authorize disclosure of their 

confidential UC information.) Also, 

these types of ongoing disclosures are 

entirely optional on the part of the State. 

Similarly, some commenters read the 

rule to require States to charge for the 

costs associated with disclosing an 

individual’s information to that 

individual or an agent, and stated that 

the administrative costs of establishing 

such a collection system would be 

burdensome. However, such a collection 

system would only be necessary where 


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the disclosure of information is for nonUC purposes and where the associated 

costs for the disclosure are not nominal 

(as determined on a case-by-case basis) 

and which, therefore, must be 

reimbursed. (See § 603.8(b).) While 

nominal costs need not be reimbursed 

under this final rule, the State or State 

UC agency is not precluded from 

charging for the costs of such 

disclosures. 

Another notable area concerning 

burden was that some commenters read 

the notification provisions of § 603.11 

(pertaining to claimants and employers) 

to require far greater effort than they 

actually require. The content of the 

notice to claimants and employers need 

not be complex or lengthy, and need not 

specify all potential uses of confidential 

UC information. The notice may simply 

state that confidential UC information 

will be used for other governmental 

purposes, including verifying an 

individual’s eligibility for other 

governmental programs. Because the 

current rule at § 603.4 already requires 

notice to claimants that information will 

be used for IEVS purposes, the 

Department does not believe that the 

new notification requirements 

materially increase the burden on 

States. 

As a result of these comments, the 

final rule has been edited for clarity. 

Specific clarifications are discussed in 

the Summary of Comments. Also 

discussed in the Summary of Comments 

are revisions to the provisions requiring 

a motion to quash subpoenas to 

recognize that States may have more 

informal, less costly means of prevailing 

against subpoenas without actually 

filing a motion to quash. (See discussion 

of § 603.7(a).) 

Some commenters were concerned 

that the rule would be ‘‘an unfunded 

mandate’’ on State UC agencies or on 

requesting entities. One commenter 

disagreed with our determination that 

the rule was not ‘‘economically 

significant’’ because of the costs that 

recipients of UC data would incur under 

the rule. In response, the Department 

notes that the final rule—like the 

proposed rule—requires that costs of 

providing UC information for non-UC 

purposes must be paid by the requesting 

entity. The final rule further provides 

that such costs may be paid, if 

applicable, by another source paying on 

behalf of the recipient. Thus, with 

regard to UC agencies, which this rule 

regulates, it will not create an unfunded 

mandate. 

The sharing of UC information for 

non-UC purposes has never been a 

permissible cost of administering the 

State’s UC law. (Specifically, Section 

302(a), SSA, permits the Secretary to 

certify as payable to States only 

amounts ‘‘necessary for the proper and 

efficient administration of’’ the State’s 

UC law. Further, Section 303(a)(8), SSA, 

limits the use of the State’s UC grant to 

the ‘‘proper and efficient administration 

of’’ the State’s UC law.) State UC 

agencies should already be charging for 

all costs associated with disclosures that 

incur more than incidental costs. Thus, 

on this point, the rule merely reflects 

current law. For this reason, we do not 

believe the rule is ‘‘economically 

significant’’ because, based on the 

information available to the Department, 

almost all States already charge 

recipients for the costs of disclosure. 

Confidentiality Principles. Two 

commenters raised questions 

concerning the confidentiality 

principles that were contained in the 

preamble of the proposed rule. 

One commenter noted that, although 

one fair information principle provided 

that subjects of an information 

collection ‘‘should have the right to 

access and amend information about 

them,’’ the rule itself did not 

specifically address the right to amend. 

The commenter expressed concern that, 

if amendment of the wage record were 

required, this would create new costs 

and questioned whether these costs 

would be payable through UC grant 

funds. 

This commenter is correct that the 

right to amend is not explicitly 

addressed in the rule. As a result, States 

are left to decide when allegations of 

erroneous wage records would be 

investigated and when amendment 

would occur. Because most wage 

records are purged without ever being 

used for UC purposes, it is unnecessary 

to attempt to correct every alleged 

erroneous wage record. Further, 

correcting wage records might impose a 

substantial, but unnecessary, burden on 

the State. For example, prior to 

correcting a wage record, an audit may 

be needed to resolve an individual’s 

allegation that an employer failed to 

report wages, or whether the individual 

was properly classified as an 

independent contractor, in which case 

no wages would be reportable. States 

may use such assertions in targeting 

employers for UC audits, which may be 

paid from UC grants. However, if such 

corrections do not in any way serve the 

administration of the UC program (such 

as correcting a wage record that is no 

longer in the State’s base period and 

that does not affect taxes owed by the 

employer), the costs of these corrections 

may not be paid from grant funds 

because they are not necessary for the 

proper and efficient administration of 

the UC program. Therefore, under the 

rule, the State is not required to make 

such corrections. 

The Department’s expectation is that 

wage records will be corrected as 

necessary in the course of the routine 

administration of the State’s UC law. 

This usually occurs during the claims 

determination process or in the process 

of determining if the worker’s services 

were performed in covered 

employment. 

Another commenter stated it would 

be helpful to ‘‘provide further 

illumination of these fair information 

principles because it would be helpful 

for State agencies in explaining the 

rationale behind the federal rule.’’ The 

Department believes sufficient 

explanation of these principles in terms 

of the UC program and the rationale for 

promulgating this rule were provided in 

the preamble to the proposed rule. 

Timeframe for Compliance with Rule. 

Several commenters asked questions 

concerning the effective date of the rule. 

The rule is effective 30 days after 

publication and States should make 

reasonable efforts to implement its 

requirements by that date, especially in 

cases where the rule involves only 

minor changes to State procedures. 

However, the Department recognizes 

that States may need additional time to 

changes laws, rules, procedures, or 

existing agreements. As such, States will 

be given two years from the effective 

date of this rule to conform and comply 

with its requirements, as provided in 

the ‘‘Applicability Date’’ section of this 

preamble. 

Use of Social Security Account 

Numbers for UC Purposes. One 

commenter, representing employer 

interests, encouraged the Department 

‘‘to require all State UC agencies to use 

the [social security account number] as 

the sole UC claim record identifier’’ or, 

alternatively, to create a ‘‘uniform 

record identifier, which attaches to an 

existing [social security account 

number] after the filing of a claim.’’

Essentially, this comment reflected 

concerns that employers may not be 

able to identify claimants, and therefore 

participate in the UC eligibility process, 

if the social security account number is 

not used. 

The Department appreciates this 

concern. However, the Department 

believes this comment is beyond the 

scope of this rulemaking, which sets 

minimum requirements for States in 

preserving the confidentiality of UC 

information. Instead, the Department is 

addressing this commenter’s concern by 

working with the States to assure that 

employer participation in the UC 

program is not impinged. The 


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Department issued Unemployment 

Insurance Program Letter (UIPL) 21–05 

to raise awareness of this concern. 

Comments that are not addressed in 

the above general discussion are 

discussed below in the Summary of 

Comments. Also discussed below are 

any substantive changes made to the 

rule, stemming primarily from the 

comments received. Non-substantive 

changes are not discussed. The 

following Summary is organized 

sequentially by section heading. 

Summary of Comments 

To efficiently respond to public 

comments and explain changes to the 

rule resulting, in large part, from those 

comments, only the pertinent portions 

of the rule are discussed below. The 

basic format of the below summary of 

comments begins with a review of the 

proposed rule provision, followed by a 

discussion of the public comments, and 

concludes with what, if any, resulting 

changes are reflected in the final rule. 

Section 603.2 What definitions apply 

to this part? 

(c) Public Domain Information 

The proposed rule included appeals 

records and decisions, and precedential 

determinations on coverage or 

employers, employment, and wages 

within the definition of public domain. 

The inclusion of these records within 

this definition was intended to afford 

States discretion in choosing whether to 

permit the disclosure of such 

information, since the proposed rule 

would not have required that 

information in the public domain be 

kept confidential. 

However, several commenters 

expressed concern about treating 

appeals records and decisions as public 

domain information. They apparently 

interpreted the treatment of appeals 

records and decisions as being in the 

‘‘public domain’’ to imply that the 

public had a right to such decisions. To 

establish that this is not the case, and to 

insure that some appeals information 

such as social security account numbers 

remain confidential, appeals records 

and decisions have been removed from 

the definition of public domain 

information in the final rule. 

Appeals records and decisions, as 

well as precedential determinations on 

coverage of employers, employment, 

and wages (which often are appellate 

decisions), are now treated in the final 

rule under § 603.5(b) as exceptions to 

the confidentiality requirement. This 

means that a State may, but need not, 

disclose this information. These matters 

are addressed more fully in the 

discussion relating to § 603.5(b). 

(d) Public Official 

The proposed rule limited disclosures 

for legislators (elected officials) to those 

who need confidential UC information 

for ‘‘oversight’’ purposes. Commenters 

expressed concern that this standard, as 

it related to elected officials, was vague 

and that, as a result, it would be 

difficult to implement and difficult to 

determine whether a particular elected 

official was performing ‘‘oversight’’

functions. In response to these 

comments, the Department has omitted 

the reference to ‘‘oversight’’ in the 

definition of ‘‘public official’’ in the 

final rule. 

Some commenters also expressed 

concern that the proposed rule would 

impinge upon an elected official’s need 

and ability to address constituent 

inquiries concerning a UC matter. 

However, the proposed rule would have 

permitted an elected official performing 

constituent services to obtain 

confidential UC information because the 

elected official is acting as the agent of 

the constituent who requested the 

elected official’s assistance. The final 

rule clarifies this treatment of elected 

officials and this clarification is further 

discussed in § 603.5(d)(1) (pertaining to 

agents). 

Section 603.4 What is the 

confidentiality requirement of Section 

303(a)(1) of the SSA? 

(b) Interpretation 

The proposed rule set forth the 

Department’s interpretation of Section 

303(a)(1), SSA, as including a basic 

requirement of confidentiality. It 

explained that States are required to 

maintain the confidentiality of any UC 

information which reveals the name or 

any identifying particular about any 

individual or any past or present 

employer or employing unit, or which 

could foreseeably be combined with 

other publicly available information to 

reveal any such particulars, and to bar 

the disclosure of such information, 

except as provided in the rule. 

Moreover, the proposed rule 

explained that the confidentiality 

requirement has its origin in the 

beginning of the program and is derived 

from Section 303(a)(1), SSA. Section 

303(a)(1), SSA, requires States to 

provide in their laws, as a condition of 

administrative grants, for such 

‘‘methods of administration’’ as the 

Secretary determines are ‘‘reasonably 

calculated to insure full payment of 

unemployment compensation when 

due.’’ From the early years of the 

program this provision has been 

interpreted to require the confidentiality 

of information collected from 

individuals and employers for UC 

program administration. Confidentiality 

is necessary to avoid deterring 

individuals from claiming benefits or 

exercising their rights, to encourage 

employers to provide information 

necessary for program operations, to 

avoid interference with the 

administration of the UC program, and 

to avoid notoriety for the program if 

program information were misused. 

Two commenters, while generally 

agreeing that UC information should be 

kept confidential, objected to using the 

‘‘methods of administration’’

requirement of Section 303(a)(1), SSA, 

as a statutory basis for the rule. One 

noted that this section’s language does 

not ‘‘lead to the conclusion that 

confidentiality is required by federal 

law.’’ While the Department agrees that 

this section of the law contains no 

explicit reference to confidentiality, it 

does give the Secretary the authority to 

determine what ‘‘methods of 

administration’’ are necessary. For the 

reasons explained above, the 

Department has long interpreted Section 

303(a)(1), SSA, to require confidentiality 

of certain UC information as a ‘‘method 

of administration * * * reasonably 

calculated to insure full payment of 

unemployment compensation when 

due.’’ Also, Congress has several times 

directed the Department to establish 

safeguards ‘‘in regulations’’ to insure 

that certain information is used only for 

the purposes for which it is disclosed. 

Since it makes no sense to require States 

to assure the continued confidentiality 

of disclosed information if that 

information is not, in the first place, 

considered confidential, the Department 

believes Congress recognized a 

longstanding Federal requirement that 

UC information be confidential. Section 

303(a)(1), SSA, is the source of that 

requirement. No change to the final rule 

resulted from the above comments. 

Two other commenters asserted that 

Section 906, SSA, which relates to the 

Secretary establishing a program of 

research for the UC system, should be 

used as a statutory basis for the rule. 

While some research conducted under 

Section 906 may result in the Secretary 

(or her agents) obtaining confidential 

UC information from the States, it does 

not in any way place any requirements 

on the States. Therefore, the Department 

has not added Section 906 to the 

statutory authority. 


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Section 603.5 What are the exceptions 

to the confidentiality requirement? 

This section of the proposed rule sets 

forth the permissible exceptions to the 

confidentiality requirement. Only those 

paragraphs for which comments were 

received are discussed below. 

(a) Public Domain Information 

The confidentiality requirement does 

not apply to information in the public 

domain, as defined in § 603.2(c). This 

means the determination of whether and 

how much information is open to the 

public or is kept confidential is left to 

the State. 

Some UC information, such as 

employer names and addresses, is 

public in the sense that it is available 

from other public sources like telephone 

directories, but it is not public domain 

information for the purposes of this 

final rule and, therefore, must be kept 

confidential by the State or State UC 

agency because it is collected from 

employers expressly for purposes of 

administering the UC program. Since 

the scope of this final rule applies to 

State and State UC agencies, it does not 

attempt to restrict access to information 

that may be available from other public 

resources. 

As noted previously and detailed 

below, the final rule differs from the 

proposed rule in that ‘‘appeals records 

and decisions’’ are no longer listed as 

being public domain information, 

although ‘‘precedential decisions on 

benefit eligibility’’ would be public 

domain information, as are any other 

precedential decision. Appeals records 

and decisions are now treated under 

paragraph (b) of § 603.5. 

(b) UC Appeals Records 

(‘‘Administration of the UC Program’’ in 

the Proposed Rule) 

In the proposed rule, paragraph (b) of 

§ 603.5 addressed the inapplicability of 

the confidentiality requirement when 

disclosure was necessary for the proper 

administration of the UC program. 

However, paragraph (a) of § 603.6 of the 

proposed rule also required the 

disclosure of confidential UC 

information necessary for the proper 

administration of the UC program. 

Because the rule requires this 

disclosure, the Department determined 

that the exception at paragraph (b) of 

§ 603.5 relating to ‘‘administration of the 

UC program’’ was repetitive and 

unnecessary. As a result, proposed 

paragraph (b) of § 603.5 has been 

deleted from the final rule and replaced 

with the new paragraph on ‘‘UC appeals 

records’’. 

This new paragraph on UC appeals 

records was developed to minimize the 

confusion on the part of commenters, 

caused by its original placement within 

the definition of ‘‘public domain.’’ In 

the proposed rule, appeals records were 

treated as being excluded from the 

confidentiality requirements because 

they were identified as ‘‘public domain’’

information. Because some commenters 

took this to mean that appeals records 

must be in the public domain, the 

Department has placed ‘‘UC appeals 

records’’ in paragraph (b) as an 

exception to the confidentiality 

requirement. Thus it should be clear 

that a State may, but need not, disclose 

these records. 

Two commenters argued that hearing 

records and appeals decisions should be 

closed to the public. One commenter 

noted that employers may have to 

disclose ‘‘trade secrets such as customer 

lists, cost and price data, sales forecasts, 

and financial reports during [the] 

proceeding.’’ This commenter noted that 

parties may also have to ‘‘submit 

information that may be embarrassing, 

such as drug test results, or 

inflammatory, such as allegations of 

sexual harassment’’ and that ‘‘a critical 

element of a case may require disclosure 

of information that would be protected 

by law in other contexts, such as 

personal medical information.’’

Although the Department recognizes 

that these are strong arguments for 

closing appeals hearings and keeping all 

appeals records confidential, there are 

also arguments for open hearings and 

records. The Department has 

historically held that the public interest 

in proper administration of the UC 

program, specifically in payments of 

benefits only to eligible individuals, and 

in open governmental adjudicatory 

proceedings is served by open hearings 

and hearing records. Further, public 

access to hearings ensures fair treatment 

by the appeals tribunal. Thus, in 

recognition of these competing views, 

the Department continues to believe that 

any determination of whether to close 

appellate hearings and keep records 

confidential should be left to the States. 

As a result, the final rule maintains the 

position that appeals records and 

decisions are not subject to the 

confidentiality requirement. 

One commenter addressed the issue 

of redacting information that may 

identify the individual or claimant. The 

Department agrees that social security 

account numbers should be redacted 

from appeals records and decisions 

before they may be made available to 

the public. Identity theft related to 

misuse of social security account 

numbers is a growing concern, and, as 

a result, an individual may be reluctant 

to pursue an appeal if it results in his 

or her social security account number 

becoming publicly available. While the 

Department does not believe redaction 

of an individual or employer’s name is 

necessary, the final rule does not 

prohibit States from redacting more 

information than is required to be kept 

confidential. Indeed, we recognize that 

redaction of such information already 

occurs in some States and may be 

mandated by both the State’s UC law 

and other State confidentiality statutes. 

Recognizing this, the final rule provides 

that disclosure of appeals records and 

decisions, including precedential 

decisions, is conditioned upon the 

above redactions as consistent with 

applicable laws. 

As a result of these comments, the 

final rule has been revised to provide 

that appeals records and decisions are 

excluded from the confidentiality 

requirement as are precedential 

determinations on coverage of 

employers, employment, and wages 

(which usually are appellate decisions). 

The final rule also conditions disclosure 

of these records upon the redaction of 

social security account numbers, 

provided that such disclosure is 

otherwise consistent with Federal and 

State law. 

(d) Informed Consent 

The proposed rule provided for 

disclosure of confidential UC 

information on the basis of informed 

consent to an ‘‘agent or attorney’’ of the 

individual or employer about whom the 

information pertains and to ‘‘third 

parties.’’ Under both informed consent 

provisions, a written release from the 

individual or employer was required; 

however, additional conditions were 

placed upon disclosures to ‘‘third 

parties’’ because of the greater potential 

for misuse of the information. The 

‘‘third parties’’ provision was intended 

to capture those requests for 

confidential UC information that occur 

on an ongoing basis (such as an income 

verification service for lenders), not 

requests wherein the entity is acting as 

an agent, that is, someone who is 

working on behalf of the individual or 

employer (such as an attorney 

representing an individual or employer 

in the litigation of a UC claim). This 

distinction was not clear to commenters 

and led to confusion as to the intent and 

actual requirements of each provision. 

As a result of comments, the 

Department has made several changes in 

paragraph (d) in the final rule. The 

paragraph has been restructured to 

eliminate confusion regarding the 

requirements of each provision 

(including the requirements associated 

with written releases). Further, we reVerDate Aug<31>2005 17:52 Sep 26, 2006 Jkt 208001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\27SER4.SGM 27SER4

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titled paragraph (d)(2) and we clarified 

that it applies to instances where an 

entity is not acting as an agent and to 

instances where disclosure is made on 

an ongoing basis. Specific changes 

relating to the each provision are 

addressed below following a discussion 

of the comments that led to those 

changes. 

As a general note, the Department 

emphasizes that this provision imposes 

minimum requirements on disclosure. 

The final rule does not require States to 

disclose information under this 

exception. Also, if a State authorizes 

disclosure based on informed consent, 

the final rule does not prohibit States 

from placing additional restrictions on 

such disclosures. 

Paragraph (d)(1)—Agent (‘‘Agent or 

Attorney’’ in the Proposed Rule) 

The title of paragraph (d)(1) was 

changed from ‘‘Agent or attorney’’ in the 

proposed rule to ‘‘Agent’’ in the final 

rule with explanation provided as to the 

meaning of ‘‘agent,’’ which would 

include an attorney. These changes 

resulted from confusion expressed by 

commenters and to better distinguish 

between paragraph (d)(1) and paragraph 

(d)(2) (discussed below) and their 

differing requirements. It was and still 

is intended that disclosures under 

paragraph (d)(1) will generally be onetime only events in terms of both the 

individual (or employer) requesting the 

disclosure and the agent receiving the 

information. 

Two commenters requested 

explanation of the term ‘‘agent.’’ Under 

common usage, the term ‘‘agent’’

describes one who acts for or in the 

place of an individual or employer by 

the authority of that individual or 

employer. In response to such 

comments, paragraph (d)(1) of the final 

rule has been changed to include this 

description of ‘‘agent.’’

Several commenters expressed 

concern that the proposed rule did not 

permit disclosure to elected officials 

performing constituent services. (This 

was discussed above under § 603.2 

regarding disclosure to public officials.) 

The Department disagrees. When an 

elected official is acting in response to 

a constituent’s inquiry about a UC 

matter, such as the individual’s UC 

claim, the elected official is acting on 

the individual’s behalf and, therefore, is 

effectively the individual’s agent in 

resolving issues related to the claim. 

This general principle of acting on 

behalf of an individual (or employer) 

may apply to other situations, such as 

a governor’s ombudsman acting on the 

individual’s (or employer’s) behalf. We 

do not believe it practical to attempt to 

list all possible applications of this 

principle in the final rule. However, to 

eliminate the confusion regarding 

constituent services, the final rule now 

explicitly acknowledges that an elected 

official performing constituent services 

is acting as an agent of the constituent. 

The following discussion pertains to 

comments on the proposed written 

release requirements associated with 

disclosures to an agent under paragraph 

(d)(1). 

Some commenters noted that many 

States have established ‘‘electronic’’

relationships with claimants and 

employers and questioned whether the 

requirement for ‘‘written releases’’

would mean that States could not do 

business electronically. In response to 

such comments, paragraph (d)(1) of the 

final rule was revised to permit a State 

to disclose confidential UC information 

based on an electronically submitted 

release, if the State determines that the 

release is authentic. The final rule does 

not prescribe requirements for 

determining if a written (including 

electronic) release is authentic. Rather, 

such a determination would depend 

upon the State’s own practices and 

whether the State has established such 

‘‘electronic relationships’’. 

Another commenter pointed out that 

elected officials may receive requests for 

assistance that do not specifically 

authorize the disclosure of confidential 

UC information, even though such 

disclosure is necessary for the official to 

adequately respond to the constituent. 

In response, the final rule has been 

revised by adding language in paragraph 

(d)(1) that permits the elected official to 

present reasonable evidence of a request 

for assistance, such as a letter from the 

individual or employer requesting 

assistance or a written record of a 

telephone request from the individual or 

employer rather than being required to 

present the ‘‘written release’’ described 

in the proposed rule. It is the 

Department’s experience that, in most 

cases, a U.S. Congressman’s request for 

the Department’s assistance in 

reviewing a particular claim includes 

such reasonable evidence and, as a 

result, it is unnecessary to request 

further evidence from the Congressman. 

One commenter argued that an 

attorney’s legal and ethical obligations 

would sufficiently protect the party 

about whom information is requested 

without the need for written releases. 

While the Department recognizes these 

obligations, we are not convinced that 

an attorney should in all cases 

automatically be given any information 

regarding a client without the client’s 

knowledge, which is evinced through a 

written release. However, the 

Department agrees that an attorney’s 

assertion that he or she has been 

retained to represent an individual or 

employer on a UC matter is sufficient to 

authorize the disclosure of confidential 

UC information to the attorney. As in 

the above case of disclosure to an 

elected official performing constituent 

services, when the individual or 

employer retains an attorney for UC 

purposes, the expectation is that the 

attorney will have access to the 

confidential UC information necessary 

to act on behalf of the individual or 

employer. As a result, paragraph (d)(1) 

of the final rule has been revised to 

permit disclosure when the attorney 

asserts that he or she has been retained 

to represent the individual or employer 

on a UC matter. 

Paragraph (d)(2)—Third Party (Other 

Than an Agent) or Disclosures Made on 

an Ongoing Basis (‘‘Third Party’’ in the 

Proposed Rule) 

As mentioned previously, the title of 

paragraph (d)(2) was changed from 

‘‘Third party’’ in the proposed rule to 

‘‘Third party (other than an agent) or 

disclosures made on an ongoing basis’’

in the final rule in an effort to better 

distinguish it from paragraph (d)(1). 

The purpose behind this provision is 

to permit disclosure of confidential UC 

information, under certain conditions, 

to third parties who are not acting as the 

agent of the individual or employer and 

to third parties who may reasonably be 

expected to obtain confidential UC 

information on an ongoing basis. These 

often include situations where an entity 

requests or encourages an individual to 

permit the disclosure of confidential UC 

information through signing a release 

form. One such example is the 

disclosure of wage records to a third 

party for purposes of determining if an 

individual qualifies for a mortgage. 

Such a practice, when routinely 

followed, may result in the entity 

compiling considerable information 

pertaining to individuals. (The 

Department notes that, if the third party 

entity is a governmental entity, then the 

governmental entity may be able to 

obtain information under paragraph (e), 

permitting disclosure to public officials 

for use in the performance of his or her 

official duties, without such a written 

release.) 

As explained in the proposed rule, the 

Department believes that additional 

protections, including additional 

conditions attached to the written 

release, are necessary for these types of 

third party disclosures because of the 

greater potential threat to employer or 

individual privacy posed by the entity’s 

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56836 Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / Rules and Regulations 

and possible misuse of confidential UC 

information. (This question was dealt 

with in Unemployment Insurance 

Program Letter 23–96 (‘‘Disclosure of 

Confidential Employment information 

to Private Entities,’’ 61 FR 28236), 

which is superseded by this final rule.) 

The purpose specified in the release 

must be limited to providing a service 

or benefit to the individual signing the 

release that such individual expects to 

receive as a result of signing the release, 

or carrying out administration or 

evaluation of a public program to which 

the release pertains. If the release does 

not meet these requirements, the State 

may not disclose confidential UC 

information. It is expected that the 

entity requesting information on an 

ongoing basis would create a standard 

release form, approved by the State 

agency, that would meet all these 

requirements. States are expected to use 

their judgment in confirming whether a 

release provides a service or benefit to 

the individual. 

Additional requirements are payment 

of costs, safeguards, and agreements, as 

provided in §§ 603.8 through 603.10. 

Also, the States are required by §§ 603.9 

and 603.10 to impose certain penalties 

for the misuse of data and to maintain 

systems sufficient to allow an audit of 

disclosed information, among other 

things. 

One commenter argued that the rule 

should permit sharing information for 

purposes of evaluating education and 

training programs established under 

State law. The commenter stated that 

‘‘States should also be allowed to share 

data on an interagency basis where the 

same level of confidentiality protections 

are in place within the State’’ without 

requiring ‘‘informed consent.’’ The 

Department agrees and notes that the 

rule already provides for the type of 

data-sharing addressed in the comment. 

Where sharing occurs with another 

governmental entity for purposes of 

administering a law, disclosure of 

confidential UC information is 

permitted under paragraph (e) 

(discussed below) without any 

‘‘informed consent’’ on the part of the 

individual. Further, under this rule, 

administering a law includes 

conducting research with respect to 

whatever program(s) are administered 

under the law. This is discussed in 

paragraph (e) (exception pertaining to 

disclosures to ‘‘public officials’’) since it 

relates directly to that exception and 

serves to clarify an element of that 

provision. No change is made in 

paragraph (d)(2) of the final rule as a 

result of this comment. 

Another commenter stated that the 

Department should permit a system 

where confidential UC information will 

automatically be disclosed for certain 

purposes under the Workforce 

Investment Act unless the individual 

‘‘opts out’’ from disclosing personal 

information. Under the proposed and 

the final rule, this type of system would 

be permissible when disclosure is solely 

to public officials in the performance of 

his or her official duties. However, for 

non-governmental entities, the 

Department believes that any sharing of 

confidential UC information in this 

regard should be made only following 

an affirmative release by the individual. 

A passive system, such as an ‘‘opt out’’

system, does not guarantee that the 

individual fully understands the 

purposes of the disclosure and may 

result in the individual feeling coerced 

to disclose data. No change in the final 

rule is made as a result of this comment. 

(e) Public Official 

The proposed rule provided for 

disclosure of confidential UC 

information to a public official in the 

performance of his or her official duties. 

Since the 1970s, the Department’s 

guidance to States has recognized this 

exception, which allows for a variety of 

uses of confidential UC information that 

the Department believes are beneficial, 

such as law enforcement, fraud and 

benefit accuracy in programs not 

addressed by Federal UC law (for 

example, Black Lung and State workers’

compensation programs), program 

assessment (for example, of WIA and 

Vocational Education programs), and 

research. 

The proposed rule described 

‘‘performance of official duties’’ as 

administration or enforcement of law or, 

in the case of the legislative branch, 

oversight of UC law. It also stated that 

although research by a public official 

was permitted under this exception, this 

exception did not include research by 

an individual at a public or private 

university. However, it also stated that, 

where appropriate, a researcher could 

obtain access to confidential UC 

information under the exceptions 

provided for in proposed paragraph (f) 

(agent or contractor of a public official) 

or proposed paragraph (d)(2) (third 

party). Under paragraph (f) of the 

proposed rule, the public official would 

maintain the responsibility of insuring 

that the confidential UC information is 

safeguarded by its agent (for example, 

the researcher). The Department 

continues to believe that there is less 

risk of unauthorized use or disclosure of 

confidential UC information if 

responsibility for safeguarding 

confidentiality remains within the 

executive or legislative branches of 

government. 

As discussed above in § 603.2 (d) 

(definition of public official), 

commenters expressed concern that 

limiting disclosure to only those 

legislators with ‘‘oversight’’

responsibility for the UC program was 

vague and, as a result, difficult to 

implement and determine as to the 

performance of ‘‘oversight’’ functions. In 

response, this reference to ‘‘oversight’’

was removed from the final rule. In so 

doing, paragraph (e) also required 

revision since it, too, included the 

‘‘oversight’’ limitation as to elected 

officials (with regard to the meaning of 

‘‘performance of official duties’’). 

As a result, paragraph (e) of the final 

rule has been revised so that 

‘‘performance of official duties’’ now 

means ‘‘administration or enforcement 

of law or the execution of the official 

responsibilities of a Federal, State, or 

local elected official.’’ For further 

clarification, it also now provides that 

‘‘administration of law’’ includes 

research related to the law administered 

by the public official. This sentence has 

been added to the final rule to eliminate 

any confusion regarding whether 

research conducted by a public official 

is part of the administration of its law. 

In addition, new language has been 

added to the final rule to explain that 

‘‘execution of official responsibilities’’

does not include solicitation of 

contributions or expenditures to or on 

behalf of a candidate for public or 

political office or a political party. This 

language has been added to make it 

clear that UC records are not to be used 

to identify subjects for campaign 

solicitations. 

(f) Agent or Contractor of Public Official 

The proposed rule provided for 

disclosure of confidential UC 

information to an agent or contractor of 

a public official to whom disclosure is 

permissible under paragraph (e) (public 

official). This provision took into 

account that certain functions, 

including research, are often contracted 

out by public agencies. If confidential 

UC information could not be disclosed 

to agents or contractors of public 

officials, valuable research might be 

forgone or become more expensive, as 

agencies would have to undertake 

interviews of program participants in 

order to gather program evaluation 

information. A public official, ideally 

one with responsibility for the program 

or initiative on which research is being 

conducted, would be required to enter 

into the written agreement required by 

§ 603.10 and be held responsible for use 

of the information by the contractor or 


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agent. Redisclosure of such information 

by a public official to an agent or 

contractor would be permitted only as 

provided in § 603.9(c). 

One commenter suggested that the 

regulation be expanded ‘‘to allow State 

agencies to disclose [confidential] UC 

information to researchers if the State 

agencies believe that the results of such 

research would be beneficial to the 

agency for the administration of agency 

programs,’’ in light of the fact ‘‘States do 

not have to pay’’ for research from 

which they benefit. Another commenter, 

from a university, indicated concern 

that the public official must actually pay 

for the research as opposed to private 

foundations. The same commenter 

expressed concern that a university 

could not be viewed as an ‘‘agent’’ of the 

public official if the university was 

performing research of privately funded 

programs, such as employer-funded 

training or those supported by entities 

such as the United Way. The commenter 

stated that this ‘‘significantly narrowed’’

allowable uses of data. 

In response, the Department notes 

that neither the proposed nor this final 

rule prohibits the sharing of information 

with researchers when an official of a 

public agency believes the research 

would be beneficial to the public 

agency. In such case, the researcher 

functions as the public agency’s 

‘‘agent,’’ even if the research was not 

initiated or funded by the agency, or 

even if the research may have 

applicability beyond the agency itself. 

To address the commenter’s example of 

private training programs, the 

Department believes that allowing a 

public agency to correlate results of 

private research initiatives with its own 

programs would be beneficial to the 

public agency and, thus, the public 

agency could be persuaded to accept 

responsibility for the disclosure and use 

of confidential UC information. The 

Department believes this properly 

balances the need to protect confidential 

UC information with the desire to not 

restrict research. Therefore, no change is 

made in the final rule. 

The Department emphasizes (as it 

stated in the preamble to the proposed 

rule) that States should provide nonconfidential UC information to 

researchers in lieu of confidential UC 

information. Indeed, the expectation is 

that State agencies would explore this 

approach prior to providing confidential 

UC information. State agencies may, for 

example, encrypt identifiers before 

providing data to a researcher so that 

the researcher cannot identify 

individuals or employers. The agency 

could add subsequent years of data for 

the researcher using the same 

encryption so that the researcher can 

conduct longitudinal studies. 

(g) Bureau of Labor Statistics 

The proposed rule provided that the 

confidentiality requirement did not 

apply to information collected 

exclusively for statistical purposes 

under a cooperative agreement with the 

Bureau of Labor Statistics (BLS) and that 

Part 603 did not restrict or impose any 

condition on the transfer of any other 

information to the BLS under an 

agreement, or the BLS’s disclosure or 

use of such information. 

Under the proposed rule, transfers of 

information to the BLS were excepted 

from the confidentiality requirement 

because the conditions under which 

they occur already satisfied the 

requirements of the confidentiality rule, 

and the Department did not wish to 

interfere with the BLS’ existing 

agreements or the ability of the BLS to 

carry out its statistical programs. 

Specifically, safeguards, agreements, 

and payment of costs are already in 

place. The BLS funds States for 

collection and disclosure of 

information. The BLS applies strict 

safeguards to protect the confidentiality 

of information it receives. Transfers of 

information to the BLS are governed by 

agreements that provide assurance that 

these safeguards will be followed. 

Moreover, the exemption for BLS is also 

based on the fact that its data is 

integrally related to the administration 

of the UC program. The collection and 

reporting authority of BLS is based on 

existing Federal law (29 U.S.C. 2) and 

subject to the confidentiality protections 

outlined in the Secretary of Labor’s 

Order No. 9–75. 

The U.S. Census Bureau commented 

on the proposed rule and expressed 

concern that ‘‘several components of the 

proposed rule, if enacted, would be 

problematic for the Census Bureau’s 

need to continue accessing [UC 

information].’’ Further, the Census 

Bureau wanted to ensure that its 

activities would not be hampered by 

implementation of the confidentiality 

rule. As such, the Census Bureau 

requested it be afforded the same 

exemption as BLS from the 

confidentiality requirement. Another 

commenter also expressed support for 

exempting the Census Bureau from the 

confidentiality requirement. 

The Department fully supports the 

Census Bureau’s analytical efforts and 

its policy-relevant research. However, 

based on the Census Bureau’s 

description of its current processes for 

securing and protecting confidential UC 

information and the fact that it is a 

public agency (to whose officials States 

are permitted to disclose confidential 

UC information), it appears that the rule 

would not inhibit its ability to obtain 

this information. Indeed, the rule 

merely sets forth the Department’s longstanding guidance to States regarding 

disclosure to public officials and the 

terms and conditions which apply. 

States should already be following this 

guidance when disclosing to the Census 

Bureau. Therefore, no change to the rule 

is made as a result of these comments. 

(i) UC Program Oversight and Audits 

(‘‘As Required by Federal Law’’ in the 

Proposed Rule) 

This paragraph of the proposed rule 

provided for the disclosure of 

confidential UC information as required 

by ‘‘Federal Law.’’ However, other 

Federal agencies would already be 

covered under § 603.5(e) (disclosure to 

public officials, including disclosure to 

the IRS for Health Coverage Tax Credit 

(HCTC) purposes), § 603.5 (h) 

(disclosure in response to a court order 

or to an official with subpoena 

authority), or § 603.6(a) (disclosure 

necessary for the proper administration 

of the UC program, including 

disclosures to the Internal Revenue 

Service for purposes of UC tax 

administration). Given the unnecessary 

duplication it presented, proposed 

paragraph (i) (as required by Federal 

law) has been revised in the final rule 

(as discussed below). 

To be more specific regarding its 

scope, paragraph (i) of the final rule is 

now limited to UC program oversight 

and audits. The proposed rule lacked 

such a provision (unlike the 1992 

proposed rule) and the Department 

believes it is necessary to explicitly 

address the inapplicability of the 

confidentiality requirement to any 

disclosure to the Federal Government 

for purposes of UC program oversight 

and audits. As a result, paragraph (i) of 

the final rule provides that the 

confidentiality requirement does not 

apply to any disclosures to a Federal 

official for purposes of UC program 

oversight and audits, including 

disclosures necessary under the 

Department’s rules at 20 CFR part 601 

and 29 CFR parts 96 and 97. 

The Department notes that the final 

rule does not implement the Secretary 

of Labor’s authority under Section 

303(a)(6), SSA. Section 303(a)(6) 

requires that State UC laws include 

provision for ‘‘[t]he making of such 

reports, in such form and containing 

such information, as the Secretary of 

Labor may from time to time require 

* * * Section 303(a)(6) stands as a basis 

for requiring disclosure to the 

Department. 


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Section 603.6 What disclosures are 

required by this subpart? 

(‘‘What disclosures are required by 

Federal UC law’’ in the proposed rule.) 

In the proposed rule, this section was 

entitled, ‘‘What disclosures are required 

by Federal UC law?’’ The Department 

determined, upon further review, that a 

more appropriate characterization of 

this section is ‘‘disclosures required by 

this subpart’’ since the regulation is the 

mechanism that effectively implements 

the provisions of Federal UC law. 

Paragraph (a) of the proposed rule set 

forth the Department’s interpretation of 

Section 303(a)(1), SSA, as requiring 

disclosure of all information necessary 

for the proper administration of the UC 

program. This included disclosure to 

the Internal Revenue Service for 

purposes of UC tax administration or to 

the U.S. Citizenship and Immigration 

Services for purposes of verifying a 

claimant’s immigration status. It also 

required disclosure for purposes of 

interstate and cross-program offsets 

under Section 303(g), SSA. 

The Department believes it is 

necessary to clarify that the disclosures 

required under paragraph (a) are not 

subject to the confidentiality 

requirement. As a result, the final rule 

explicitly provides that the 

confidentiality requirement of 303(a)(1), 

SSA, and § 603.4 are not applicable to 

the disclosures required under 

paragraph (a). This paragraph continues 

to provide that ‘‘administration of the 

UC program’’ includes disclosures to 

claimants, employers, the Internal 

Revenue Service (for purposes of UC tax 

administration), and the U.S. 

Citizenship and Immigration Services 

(for purposes of verifying a claimant’s 

immigration status). 

Section 603.7 What requirements 

apply to subpoenas, other compulsory 

process, and disclosure to officials with 

subpoena authority? 

(a) In General 

In the proposed rule, this section set 

forth the Department’s long-standing 

position on State responses to 

subpoenas and other compulsory 

processes attempting to obtain 

confidential UC information. Under 

certain conditions, it required the State 

or State UC agency to file and pursue a 

motion to quash, in the appropriate 

forum, when a subpoena or other 

compulsory process of a lawful 

authority, which required the 

production of or appearance for 

testimony about such information, is 

served upon the State UC agency or the 

State. If such a motion were denied, 

after a hearing in the appropriate forum, 

confidential UC information may be 

disclosed, but only upon such terms as 

the court or other forum may order, 

including that the recipient protect the 

disclosed information and pay the 

State’s or State UC agency’s costs of 

disclosure. 

Several State UC agencies noted that 

the proposed rule appeared to require a 

motion to quash a subpoena even 

though most subpoenas can be avoided 

or resolved through other means that are 

far more efficient and economical. 

These commenters recommended that 

the rule recognize these other means. 

Another commenter noted that the court 

may order the disclosure of information 

through ‘‘a true court order, and not 

merely a subpoena,’’ and questioned the 

application of the rule in such cases. 

The Department agrees with these 

comments. As a result, this provision of 

the final rule has been revised to 

recognize that other means of avoiding 

disclosure of confidential UC 

information may be pursued before the 

need to file a motion to quash. Also, the 

final rule now recognizes that a motion 

to quash is necessary only if the court 

has not already ruled on the disclosure. 

(b) Exceptions 

The proposed rule provided two 

exceptions to the requirement to quash 

a subpoena: First, where a court has 

previously issued a binding 

precedential decision that requires such 

disclosures and, second, when 

confidential UC information is 

requested by an official of State or 

Federal government, other than a clerk 

of court on behalf of a litigant, with 

authority to obtain the information by 

subpoena under State or Federal law. 

These proposed exceptions recognized 

that filing a motion to quash in these 

circumstances may indeed be futile and 

a waste of administrative resources. 

They would also facilitate State 

cooperation with law enforcement. 

Commenters requested clarification of 

the reference to ‘‘binding legal 

precedent,’’ noting that courts routinely 

deny motions to quash or otherwise 

order disclosure of confidential UC 

information without ever publishing a 

decision that may be considered 

precedential. In the same vein, another 

commenter objected to ‘‘futile’’ motions 

to quash, while another addressed this 

situation by urging an exception for 

situations ‘‘where the obligation to 

disclose such data has been well 

established by a pattern of prior judicial 

decisions.’’ The Department agrees that 

well-established patterns of judicial 

decisions may be treated as precedent. 

As a result, the final rule has been 

revised to permit disclosure where a 

well-established pattern of prior court 

decisions have required the same type 

of disclosure. Nonetheless, the 

Department encourages those States 

within which courts routinely deny 

motions to quash, to examine their laws 

and regulations to determine if an 

amendment may result in such motions 

being upheld. 

Two State UC agencies noted the 

proposed rule’s exception from filing a 

motion to quash applied to State or 

Federal governmental officials with 

subpoena authority, but did not apply to 

county or metropolitan governmental 

officials with the authority to subpoena 

records, such as prosecutors. The 

Department notes that, generally, a 

governmental official will need to 

exercise subpoena authority only when 

State UC law does not specifically allow 

the disclosure to such official. However, 

the Department did not intend to 

prohibit these officials from obtaining 

information for administration of their 

official duties. As a result, the final rule 

has been revised to include ‘‘local’’

governmental officials within this 

exception. 

One commenter noted that § 603.7(b) 

of the proposed rule was ‘‘confusing’’

because it stated that the exceptions to 

filing a motion to quash a subpoena 

applied ‘‘regardless of whether a 

subpoena was issued.’’ The quoted 

language was included to permit the 

State UC agency, if it so chose, to 

disclose information that was requested 

by a public official with subpoena 

authority without forcing the public 

official to actually issue the subpoena. 

To more accurately reflect this option, 

the Department has changed the final 

rule to clarify that the State or State UC 

agency may disclose the requested 

confidential UC information to a public 

official with subpoena authority without 

the actual issuance of a subpoena. 

The Department believes that filing 

motions to quash subpoenas involving 

the disclosure of confidential UC 

information is an important means of 

avoiding unnecessary or unlawful 

disclosures, which might deter 

claimants from exercising their rights or 

employers from providing information. 

Where the exceptions apply, a State may 

still file such a motion if warranted, or 

may file a motion to require that the 

recipient protect the disclosed 

information or for reimbursement of 

costs. (As described in § 603.8(b), 

seeking reimbursement in some manner 

is required if grant funds are used to 

cover the costs of the disclosure.) If the 

State law is sufficiently rigorous 

concerning the disclosure of 

confidential UC information, the courts 

may be less inclined to enforce 


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subpoenas; so, States may wish to 

review their State laws in this regard. To 

conserve time and funds, States may 

wish to pursue a motion to quash by 

mail or by telephone if permitted by 

State law. 

Finally, some commenters questioned 

the need for the proposed rule to 

address disclosing confidential UC 

information to public officials with 

subpoena authority given that § 603.5(e) 

permits disclosure to public officials. 

The Department’s answer is that 

disclosures under § 603.5(e) must be 

made under the agreements described in 

§ 603.10, which require, among other 

things, the payment of costs and the 

safeguarding of information, before any 

information may be disclosed. Thus, 

that provision is limited to cases where 

disclosure is explicitly authorized or 

required under the State UC law. The 

subpoena exception, however, pertains 

to situations where governmental 

officials have the authority to demand 

information under their laws, but where 

State UC law may not permit such 

disclosure or where an agreement may 

not have been entered into, thus 

necessitating the public official to 

obtain the confidential UC information 

through a subpoena. Therefore, no 

change is made in the final rule. 

Section 603.8 What are the 

requirements for the payment of costs 

and program income? 

(a) In General 

This paragraph of the proposed rule 

explained, in general, that grant funds 

could not be used to pay any of the costs 

of making any disclosure (except as 

provided in paragraph (b) of this 

section). Upon review, clarifications to 

proposed paragraph (a) became 

necessary. 

First, ‘‘disclosure to the IRS for HCTC 

purposes’’ was misidentified in 

proposed paragraph (a) as a reference to 

§ 603.5(h) when it should have 

referenced § 603.5(i). However, as 

discussed previously, proposed 

paragraph (i) of § 603.5 was replaced 

with a new provision in the final rule 

concerning UC program oversight and 

audits. In the discussion concerning the 

changes to proposed paragraph (i), it 

was explained that ‘‘disclosure to the 

IRS for HCTC purposes,’’ like 

disclosures to other Federal agencies, 

would already be covered under the 

provision relating to disclosure to 

public officials (§ 603.5(e)). As a result, 

rather than correct the misidentification 

in proposed paragraph (a) of § 603.8, we 

have deleted the reference to 

‘‘disclosure to the IRS for HCTC 

purposes.’’

Second, revision to the final rule 

became necessary because the rule did 

not distinguish between the two types of 

informed consent disclosures 

(addressed in § 603.5(d)) as they related 

to the use of grant funds for the costs of 

such disclosures. Thus, revision to 

paragraph (a) (and to paragraph (b) of 

this section, as discussed below) became 

necessary to make explicit the fact that 

grant funds have never been allowed to 

be used for the costs of making 

disclosures to third parties (other than 

agents) on the basis of informed 

consent. Accordingly, the final rule was 

revised to explicitly state that grant 

funds may not be used to pay for the 

costs of disclosures under § 603.5(d)(2) 

(third party (other than an agent) or 

disclosures made on an ongoing basis). 

(b) Use of Grant Funds Permitted 

This paragraph of the proposed rule 

set forth the circumstances under which 

grant funds may be used to pay for the 

costs of disclosing confidential UC 

information. As discussed above, 

revision to this paragraph became 

necessary to clarify that grant funds may 

be used to pay for costs associated with 

disclosures to an agent on the basis of 

informed consent. Therefore, paragraph 

(b) of the final rule has been revised to 

make this permitted use of grant funds 

explicit. 

As discussed previously, § 603.5(i) of 

the proposed rule was changed to 

explicitly address the inapplicability of 

the confidentiality requirement to any 

disclosure for purposes of UC program 

oversight and audits. In so doing, 

revision to § 603.8(b) of the proposed 

rule was also required in order to 

properly address those costs relating to 

disclosures for UC program oversight 

and audits under § 603.5(i) of the final 

rule. Accordingly, § 603.8 (b) of the final 

rule has been revised to specifically 

provide that grant funds may be used to 

pay the costs associated with 

disclosures to the Department for 

oversight and audits. 

(d) Payment of Costs 

The proposed rule required the 

payment of costs, calculated in 

accordance with paragraph (c), to be 

paid by the recipient of the information 

either in advance or by way of 

reimbursement. If the recipient is not a 

public official, such costs, except for 

good reason, would be required to be 

paid in advance. Payment in advance 

means full payment of costs before or at 

the time the disclosed information is 

given in hand or sent to the recipient. 

The proposed rule further provided 

that the requirement for payment of 

costs is met when a State UC agency has 

in place a reciprocal data-sharing 

agreement or arrangement with another 

agency or entity. ‘‘Reciprocal’’ means 

that the relative benefits received by 

each party to the agreement or 

arrangement are approximately equal. 

Two commenters observed that the 

proposed rule appeared to prohibit 

another entity from paying costs on 

behalf of the recipient and suggested 

that the rule be amended to permit such 

payments. The purpose of requiring 

payment of costs is to assure that UC 

grant funds are not used for purposes 

unrelated to the administration of the 

UC program. Receiving payment from 

an entity other than the recipient 

accomplishes this. As a result of these 

comments, the final rule has been 

revised to recognize that costs may be 

paid by another source on behalf of the 

recipient. 

Two other commenters requested 

clarification regarding the proposed 

rule’s statement that, if the recipient is 

not a public official, ‘‘costs, except for 

good reasons (such as when the 

disclosure involves minimal cost) must 

be paid’’ in advance. These commenters 

questioned whether the reference to 

‘‘minimal costs’’ meant that the 

recipient need not pay any costs. As 

noted elsewhere in the rule, all costs 

incurred by a recipient must be paid 

except when there ‘‘is not more than an 

incidental amount of [UC agency] staff 

time and no more than nominal 

processing costs’’ are involved. 

(§ 603.8(b).) Thus, the reference to 

minimal costs only relates to the 

advance payment of costs. To avoid 

confusion, the Department has deleted 

the reference to minimal costs from the 

final rule. 

(e) Program Income 

The proposed rule provided that 

reimbursed costs and any funds 

generated by the disclosure of 

information are program income and 

may be used only as permitted by 29 

CFR 97.25(g) (on program income). It 

also provided that program income may 

not be used to benefit a State’s general 

fund or another program. 

One commenter expressed concern 

about how the cost requirements would 

impact the Wage Record Interchange 

System (WRIS), which is an interstate 

data exchange system that facilitates the 

exchange of UC wage records for 

assessing program performance under 

the WIA. Noting that the proposed rule 

provided that UC grant funds may be 

used to pay if disclosure does not result 

in ‘‘more than an incidental amount of 

staff time and no more than nominal 

processing costs are involved,’’ the 

commenter stated a belief that WRIS 


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costs are ‘‘relatively minor’’ and 

therefore should be considered 

incidental or nominal. The Department 

does not agree. By permitting the use of 

UC grants where costs of disclosure are 

incidental or nominal, we merely 

recognize that some costs are so small 

that there may be no practical purpose 

served by attempting to recover these 

costs. Generally, these will be one-time 

only, ad hoc requests from individuals 

or their agents. The Department does 

not believe that the costs of setting up 

agreements, establishing data exchange 

protocols, and exchanging data on an 

ongoing basis can be said to be 

incidental or nominal. No change in the 

final rule is made as a result of this 

comment. 

Section 603.9 What safeguards and 

security requirements apply to disclosed 

information? 

(b) Safeguards To Be Required of 

Recipients 

Paragraph (b) of the proposed rule set 

forth the safeguards that the State or 

State UC agency had to require of 

recipients. 

Paragraph (b)(1)(vii) of the proposed 

rule required States to maintain a 

tracking system sufficient to allow an 

audit of compliance with the 

requirements of this subpart. The 

purpose of maintaining this system was 

to ensure that recipients of disclosed 

information were complying with the 

required safeguards. The proposed rule 

provided that this responsibility could 

not be handed over to the recipient. It 

also provided that where recipients 

were required to pay for the costs of 

making a disclosure, the costs of 

maintaining this system should be 

reflected in the amount charged to the 

recipient. Thus, the maintenance of this 

system would not increase costs for 

State UC agencies. 

Several commenters stated that it was 

impractical or expensive to maintain a 

‘‘tracking system’’ that is ‘‘sufficient to 

allow an audit of compliance.’’ As a 

result of these comments, the 

requirement for a ‘‘tracking system’’ has 

been deleted from § 603.9(b)(1)(vii) of 

the final rule. However, the Department 

continues to believe that some system 

must exist for allowing an audit if there 

is to be any guarantee that confidential 

UC information received from a UC 

agency is not misused. Therefore, the 

final rule requires a system ‘‘sufficient 

to allow an audit of compliance.’’ While 

tracking individual transactions may be 

the most efficient means of monitoring 

certain disclosures, other methods may 

be equally effective. For example, in the 

case of wage records that are routinely 

transmitted to another governmental 

agency, it is sufficient that, prior to any 

audit, the UC agency be able to re-run 

the computer program that generated 

the wage records that were transmitted 

and use that output for the basis of its 

audit. The Department also notes that 

not all disclosures must be subject to 

this system. For example, the safeguards 

required by § 603.9 do not apply to 

disclosures made to an individual 

(§ 603.5(c)) or the individual’s agent 

(§ 603.5(d)(1)). 

Paragraph (b)(2) of the proposed rule 

specifically required the State to 

conduct, in the case of optional 

disclosures to entities on the basis of 

informed consent (§ 603.5(d)(2)), a 

periodic audit of sample transactions to 

assure that the entity receiving 

information has on file a written release 

authorizing each access. The audit was 

required to ensure that the information 

was not being used for any 

unauthorized purpose. 

Several commenters expressed 

concern regarding this requirement, 

stating that such audits are costly and 

burdensome. As the Department noted 

in the general comments regarding 

increased costs and burden, this audit 

requirement is applicable only to 

disclosure made under § 603.5(d)(2) 

pertaining to a third party (other than an 

agent) or disclosures made on an 

ongoing basis. (The Department notes 

that, in cases involving governmental 

entities receiving information under 

§§ 603.5(e) or 603.6, the recipient is 

merely required to provide for ‘‘on-site 

inspections.’’ The final rule does not 

mandate audits in these cases given the 

nature of the governmental entities, 

which are also subject to their own 

confidentiality laws; however, the 

Department believes it is important to 

maintain the right to perform ‘‘on-site 

inspections’’ in the event any allegation 

of misuse arises.) 

The Department believes States must 

take reasonable actions to periodically 

audit these third parties. As discussed 

previously, the Department is concerned 

that such disclosures have a greater 

potential threat to employer or 

individual privacy. As such, we do not 

believe it is responsible to provide 

confidential UC information to such 

third parties without some requirement 

for auditing. Therefore, no change is 

made to the final rule. 

The proposed rule did not, as 

commenters appeared to assume, dictate 

when audits must occur, nor did it 

dictate the nature and the extent of the 

audit. The Department believes these 

matters are best left to the States, which 

are in the best position to determine 

how often a particular recipient should 

be audited, taking into account volume, 

any past audit exceptions, and the 

nature of the recipient, such as whether 

the recipient is in the business of 

disclosing information for profit. What 

is important is that any audit process be 

sufficient to assure that no misuse of 

confidential UC information is taking 

place. The Department also notes that 

the costs of performing any such audits 

must be built into the agreement that 

authorizes disclosure of confidential UC 

information to the recipient. Thus, for 

example, the costs of auditing a private 

business that receives confidential UC 

information under an informed consent 

agreement are to be built into the 

disclosure agreement. No change is 

made in the final rule as a result of these 

comments. 

Paragraph (b)(2) of the proposed rule 

also required that all employees of 

entities receiving access to information 

under § 603.5(d)(2) be subject to the 

same confidentiality requirements, and 

State criminal penalties for violation of 

those requirements, as are employees of 

the State UC agency. 

The National Association of State 

Workforce Agencies questioned how 

penalties would be assessed for 

information that is sent from one State 

to another State, particularly in regard 

to the WRIS. The specific question was 

whether the law of the sending or 

receiving State would apply in the case 

of unauthorized disclosures. The 

Department believes that no State 

should disclose confidential UC 

information to another entity—

including another State—unless it 

retains the authority to apply its legal 

sanctions for unauthorized uses. This is 

reflected in § 603.9(b)(1), regarding 

safeguards to be required of recipients, 

which provides that ‘‘The State or State 

UC agency must * * * (v) Require each 

recipient agency or entity to (A) Instruct 

all personnel having access to the 

disclosed information about * * * the 

sanctions specified in the State law for 

unauthorized disclosure of information 

* * * ’’. 

As a practical matter, the Department 

recognizes that a receiving State is in a 

better position to apply sanctions on 

violators who reside in that State, 

provided its confidentiality law is 

applicable to such violation. As such, in 

the case of interstate data sharing 

arrangements such as WRIS, a wise 

additional step is to require the 

receiving State to take the lead in 

applying legal sanctions. Although no 

change to the rule is made as a result of 

this comment, a State must make certain 

that prior to the release of confidential 

UC information to an entity outside the 

State, some provision exists to protect 


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such information, either by the 

disclosing State or by the law of the 

receiving State within which the entity 

exists. 

Section 603.11 How do States notify 

claimants and employers about the uses 

of their information? 

(a) Claimants 

This section of the proposed rule 

required State UC agencies to notify 

claimants and employers how 

confidential UC information about them 

may be requested and utilized. This 

section was derived from the current 20 

CFR 603.4 (revised by this rule) but, 

unlike the current 20 CFR 603.4, it 

applied to employers as well as 

claimants. State privacy law may 

require more detailed notification. 

(b) Employers 

The proposed rule provided that 

current Part 603 (specifically, § 603.4 of 

that Part) implemented the notification 

requirement applicable to the IEVS of 

Section 1137(a)(6), SSA. The proposed 

rule restated the notification 

requirement of Section 1137(a)(6), SSA, 

as a general requirement of Section 

303(a)(1), SSA. It further explained that 

notifying claimants and employers what 

use may be made of UC information is 

necessary to maintaining their 

confidence in the Federal-State UC 

system, which is critical to its proper 

and efficient administration. 

With regard to claimant notification, 

several State UC agencies questioned 

the proposed requirement that claimants 

be notified ‘‘at the time of application, 

and periodically thereafter, in what 

situations confidential UC information 

pertaining to the claimant may be 

requested and utilized’’ and the similar 

requirement for employers. Some 

requested more detail about when the 

notification is provided, what is meant 

by ‘‘periodically thereafter,’’ and the 

contents of the notice, specifically with 

respect to the details of the ‘‘situations’’

the notice must cover. One commenter 

objected to orally informing claimants at 

the time of ‘‘initial claim intake’’

because of the costs involved. Others 

suggested that notification ‘‘at the time 

an initial claim is filed by an 

individual’’ would be adequate. 

The requirement that claimants be 

notified ‘‘at the time of filing [a claim] 

and periodically thereafter’’ has been a 

requirement of Section 1137(a)(6), SSA, 

pertaining to the IEVS program, since 

1984. As such, it became a part of the 

Department’s implementation of the 

IEVS program, currently found at 20 

CFR 603.4 (revised by this rule). Thus, 

State UC agencies should already be 

notifying claimants concerning sharing 

of confidential UC information under 

IEVS. This final rule merely expands 

this claimant notification requirement 

so that the notice refers to uses beyond 

the IEVS program. It also extends 

notification to employers as well as 

claimants. 

Since the requirement that claimants 

be notified ‘‘periodically thereafter’’ is a 

statutory requirement, States must 

periodically notify claimants. The 

Department recognizes that ‘‘periodic’’

notice to UC claimants is not always 

necessary due to the relatively short 

duration of UC claims. Although some 

commenters asked for clarification as to 

how this ‘‘periodic’’ requirement could 

be met, we believe that the rule is clear 

that ‘‘notice on or attached to 

subsequent additional claims will 

satisfy the requirements for periodic 

notice thereafter.’’ States are not 

required to offer other forms of periodic 

notice to claimants if they offer such 

notice as part of taking an additional 

claim. 

The content of the notice to claimants 

need not be complex or lengthy. It 

could, for example, simply state that 

confidential UC information will be 

used for other governmental purposes, 

including verifying an individual’s 

eligibility for other governmental 

programs. Although the statutory 

requirement appears to permit oral 

notice, the Department prefers, but does 

not require, that notice be written. Such 

written notification may be, for 

example, in the form of a benefit rights 

pamphlet or a special enclosure in a 

routine mailing to the claimant that is 

associated with the initial application. 

In the case of Internet claims, a special 

screen may advise the claimant of the 

uses of confidential UC information. 

The notice need not say that UC 

information will be used for UC 

purposes, or address any releases that 

may be authorized by the claimant. At 

the same time, this rule does not 

prohibit States from providing such 

information. 

Concerns relating to the content of the 

notification may have been a result of 

the language in the proposed rule 

referring to identifying the ‘‘situations’’

within which confidential UC 

information may be requested and 

utilized. The use of the word 

‘‘situations’’ was not intended to require 

that the notice contain an exhaustive 

listing of all potential recipients of 

confidential UC information. In 

response to any misperception and to 

provide more guidance on the actual 

contents of the notice (including 

assuring any notice meets the IEVS 

requirement), § 603.11(a) is revised to 

provide that claimants must be notified 

‘‘at the time of application, and 

periodically thereafter, that confidential 

UC information pertaining to the 

claimant may be requested and utilized 

for other governmental purposes, 

including, but not limited to, 

verification of eligibility under other 

government programs.’’

With regard to employer notification, 

the content of such notice may be as 

simple as that which is given to the 

claimant. It is sufficient that employers 

be notified annually with their yearly 

contribution rate notices (although 

special provision would need to be 

made for reimbursing employers since 

they do not receive annual rate notices), 

through any agency UC letter sent to all 

employers, or a statement on the 

quarterly wage report form. To parallel 

the revision to § 603.11(a) (concerning 

claimant notification), § 603.11(b) is 

revised to provide that employers must 

be notified ‘‘that wage information and 

other confidential UC information may 

be requested and utilized for other 

governmental purposes, including, but 

not limited to, verification of an 

individual’s eligibility for other 

government programs.’’

Executive Order 12866 

This final rule is a ‘‘significant 

regulatory action’’ within the meaning 

of Executive Order 12866 because it 

meets the criteria of Section 3(f)(4) of 

that Order in that it raises novel or legal 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. Accordingly, the final rule has 

been submitted to, and reviewed by, the 

Office of Management and Budget 

(OMB). 

However, the final rule is not 

‘‘economically significant’’ because it 

does not have an annual effect on the 

economy of $100 million or more. The 

Department has also determined that the 

final rule has no adverse material 

impact upon the economy and that it 

does not materially alter the budgeting 

impact of entitlement, grants, user fees 

or loan programs, or the rights and 

obligations of recipients thereof. 

Further, the Department has evaluated 

the final rule and found it consistent 

with the regulatory philosophy and 

principles set forth in Executive Order 

12866, which governs agency 

rulemaking. Although it impacts States 

and State UC agencies, it does not 

adversely affect them in a material way. 

The final rule protects State UC agencies 

from becoming clearinghouses of 

confidential UC information and 

preserves UC grant funds for program 

purposes. In addition, the final rule 


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maintains State flexibility in deciding 

whether to permit certain disclosures of 

confidential UC information for 

purposes other than the administration 

of the UC program so long as certain 

safeguards are followed. 

Executive Order 13132 

This rule was reviewed in accordance 

with Executive Order 13132. It was 

determined that the rule may have 

federalism implications. During an 

earlier stage in this rulemaking process, 

a federalism consultation with 

organizations representing State elected 

officials was held at the Department on 

October 19, 2000. These organizations 

expressed no concerns at that time or in 

the following months. Twenty-five 

States submitted comments on the 1992 

proposed regulation, and these 

comments were considered in the 

development of the most recent 

proposed rule published in the Federal 

Register on August 12, 2004 (69 FR 

50022). 

In connection with the most recent 

proposed rule, federalism consultations 

with organizations representing State 

elected officials occurred on October 4 

and 5, 2004. Again, these organizations 

expressed no concerns during the 

consultation process. The majority of 

comments received were from 

individual State agencies. The 

Department believes this final rule 

adequately addresses the concerns 

expressed in those comments. 

Executive Order 12988 

The Department drafted and reviewed 

this final regulation in accordance with 

Executive Order 12988, Civil Justice 

Reform, and it does not unduly burden 

the Federal court system. The final rule 

was written to minimize litigation and 

provide a clear legal standard for 

affected conduct, and was reviewed 

carefully to eliminate drafting errors and 

ambiguities. 

Unfunded Mandates Reform Act of 

1995 and Executive Order 12875 

This final rule was reviewed in 

accordance with the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(2 U.S.C. 1501 et. seq.) and Executive 

Order 12875. The Department has 

determined that this final rule does not 

include any Federal mandate that may 

result in increased expenditures by 

State, local, or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any one year. 

Accordingly, we have not prepared a 

budgetary impact statement. 

Paperwork Reduction Act 

The following sections of this final 

rule contain information collection 

requirements or revises information 

collection requirements in current 20 

CFR part 603: §§ 603.5, 603.6, 603.7, 

603.8, 603.9, 603.10, 603.11, 603.22, and 

603.23. As required by the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

3507(d)), the information collection 

requirements in this final rule were 

submitted to the OMB for approval 

during the NPRM stage. This collection 

of information was approved under 

OMB control number 1205–0238 

through August 31, 2007. 

The annual burden associated with 

this final rule for all States combined is 

approximately 25,810 hours. 

Regulatory Flexibility Act 

This final rule does not have a 

‘‘significant economic impact on a 

substantial number of small entities.’’

The final rule affects States and State 

agencies, which are not within the 

definition of ‘‘small entity’’ under 5 

U.S.C. 601(6). Under 5 U.S.C. 605(b), the 

Secretary has certified to the Chief 

Counsel for Advocacy of the Small 

Business Administration to this effect. 

Accordingly, no regulatory flexibility 

analysis is required. 

Congressional Review Act 

This final rule is not a ‘‘major rule’’

as defined by Section 804 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996. This final rule 

does not result in an annual effect on 

the economy of $100 million or more; a 

major increase in costs or prices; or 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or the ability 

of United States-based companies to 

compete with foreign-based companies 

in domestic and export markets. 

Effect on Family Life 

The Department certifies that this 

final rule was assessed in accordance 

with Pub. L. 105–277, 112 Stat. 2681, 

and that the final rule does not 

adversely affect the well-being of the 

nation’s families. 

List of Subjects in 20 CFR Part 603 

Employment and Training 

Administration, Labor, and 

Unemployment Compensation. 

Catalogue of Federal Domestic 

Assistance Number 

This program is listed in the 

Catalogue of Federal Domestic 

Assistance at No. 17.225, 

Unemployment Insurance. 

Signed at Washington, DC on September 

18, 2006. 

Emily Stover DeRocco, 

Assistant Secretary of Labor, Employment 

and Training Administration. 

Words of Issuance 

■ For the reasons set forth in the 

preamble, part 603 of Title 20, Code of 

Federal Regulations is revised as set 

forth below: 

PART 603—FEDERAL-STATE 

UNEMPLOYMENT COMPENSATION 

(UC) PROGRAM; CONFIDENTIALITY 

AND DISCLOSURE OF STATE UC 

INFORMATION 

Subpart A—In General 

Sec. 

603.1 What are the purpose and scope of 

this part? 

603.2 What definitions apply to this part? 

Subpart B—Confidentiality and Disclosure 

Requirements 

603.3 What is the purpose and scope of this 

subpart? 

603.4 What is the confidentiality 

requirement of Federal UC law? 

603.5 What are the exceptions to the 

confidentiality requirement? 

603.6 What disclosures are required by this 

subpart? 

603.7 What requirements apply to 

subpoenas, other compulsory processes, 

and disclosure to officials with subpoena 

authority? 

603.8 What are the requirements for 

payment of costs and program income? 

603.9 What safeguards and security 

requirements apply to disclosed 

information? 

603.10 What are the requirements for 

agreements? 

603.11 How do States notify claimants and 

employers about the uses of their 

information? 

603.12 How are the requirements of this 

part enforced? 

Subpart C—Mandatory Disclosure for 

Income and Eligibility Verification System 

(IEVS) 

603.20 What is the purpose and scope of 

this subpart? 

603.21 What is a requesting agency? 

603.22 What information must State UC 

agencies disclose for purposes of an 

IEVS? 

603.23 What information must State UC 

agencies obtain from other agencies, and 

crossmatch with wage information, for 

purposes of an IEVS? 

Authority: 42 U.S.C. 1302(a); Secretary’s 

Order No. 4–75 (40 FR 18515) and Secretary’s 

Order No. 14–75 (November 12, 1975). 

Subpart A—In General 

§ 603.1 What are the purpose and scope of 

this part? 

The purpose of this part is to 

implement the requirements of Federal 


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UC law concerning confidentiality and 

disclosure of UC information. This part 

applies to States and State UC agencies, 

as defined in § 603.2(f) and (g). 

§ 603.2 What definitions apply to this part? 

For the purposes of this part: 

(a)(1) Claim information means 

information about: 

(i) Whether an individual is receiving, 

has received, or has applied for UC; 

(ii) The amount of compensation the 

individual is receiving or is entitled to 

receive; and 

(iii) The individual’s current (or most 

recent) home address. 

(2) For purposes of subpart C (IEVS), 

claim information also includes: 

(i) Whether the individual has refused 

an offer of work and, if so, a description 

of the job offered including the terms, 

conditions, and rate of pay; and 

(ii) Any other information contained 

in the records of the State UC agency 

that is needed by the requesting agency 

to verify eligibility for, and the amount 

of, benefits. 

(b) Confidential UC information and 

confidential information mean any UC 

information, as defined in paragraph (j) 

of this section, required to be kept 

confidential under § 603.4. 

(c) Public domain information 

means—

(1) Information about the organization 

of the State and the State UC agency and 

appellate authorities, including the 

names and positions of officials and 

employees thereof; 

(2) Information about the State UC 

law (and applicable Federal law) 

provisions, rules, regulations, and 

interpretations thereof, including 

statements of general policy and 

interpretations of general applicability; 

and 

(3) Any agreement of whatever kind 

or nature, including interstate 

arrangements and reciprocal agreements 

and any agreement with the Department 

of Labor or the Secretary, relating to the 

administration of the State UC law. 

(d) Public official means an official, 

agency, or public entity within the 

executive branch of Federal, State, or 

local government who (or which) has 

responsibility for administering or 

enforcing a law, or an elected official in 

the Federal, State, or local government. 

(e) Secretary and Secretary of Labor 

mean the cabinet officer heading the 

United States Department of Labor, or 

his or her designee. 

(f) State means a State of the United 

States of America, the District of 

Columbia, the Commonwealth of Puerto 

Rico, and the United States Virgin 

Islands. 

(g) State UC agency means an agency 

charged with the administration of the 

State UC law. 

(h) State UC law means the law of a 

State approved under Section 3304(a) of 

the Internal Revenue Code of 1986 (26 

U.S.C. 3304(a)). 

(i) Unemployment compensation (UC) 

means cash benefits payable to 

individuals with respect to their 

unemployment. 

(j) UC information and State UC 

information means information in the 

records of a State or State UC agency 

that pertains to the administration of the 

State UC law. This term includes those 

State wage reports collected under the 

IEVS (Section 1137 of the Social 

Security Act (SSA)) that are obtained by 

the State UC agency for determining UC 

monetary eligibility or are downloaded 

to the State UC agency’s files as a result 

of a crossmatch but does not otherwise 

include those wage reports. It does not 

include information in a State’s 

Directory of New Hires, but does 

include any such information that has 

been disclosed to the State UC agency 

for use in the UC program. It also does 

not include the personnel or fiscal 

information of a State UC agency. 

(k) Wage information means 

information in the records of a State UC 

agency (and, for purposes of § 603.23 

(IEVS)), information reported under 

provisions of State law which fulfill the 

requirements of Section 1137, SSA) 

about the—

(1) Wages paid to an individual, 

(2) Social security account number (or 

numbers, if more than one) of such 

individual, and 

(3) Name, address, State, and the 

Federal employer identification number 

of the employer who paid such wages to 

such individual. 

Subpart B—Confidentiality and 

Disclosure Requirements 

§ 603.3 What is the purpose and scope of 

this subpart? 

This subpart implements the basic 

confidentiality requirement derived 

from Section 303(a)(1), SSA, and the 

disclosure requirements of Sections 

303(a)(7), (c)(1), (d), (e), (h), and (i), 

SSA, and Section 3304(a)(16), Federal 

Unemployment Tax Act (FUTA). This 

subpart also establishes uniform 

minimum requirements for the payment 

of costs, safeguards, and data-sharing 

agreements when UC information is 

disclosed, and for conformity and 

substantial compliance with this 

proposed rule. This subpart applies to 

States and State UC agencies, as defined 

in § 603.2(f) and (g), respectively. 

§ 603.4 What is the confidentiality 

requirement of Federal UC law? 

(a) Statute. Section 303(a)(1) of the 

SSA (42 U.S.C. 503(a)(1)) provides that, 

for the purposes of certification of 

payment of granted funds to a State 

under Section 302(a) (42 U.S.C. 502(a)), 

State law must include provision for 

such methods of administration as are 

found by the Secretary of Labor to be 

reasonably calculated to insure full 

payment of unemployment 

compensation when due. 

(b) Interpretation. The Department of 

Labor interprets Section 303(a)(1), SSA, 

to mean that ‘‘methods of 

administration’’ that are reasonably 

calculated to insure the full payment of 

UC when due must include provision 

for maintaining the confidentiality of 

any UC information which reveals the 

name or any identifying particular about 

any individual or any past or present 

employer or employing unit, or which 

could foreseeably be combined with 

other publicly available information to 

reveal any such particulars, and must 

include provision for barring the 

disclosure of any such information, 

except as provided in this part. 

(c) Application. Each State law must 

contain provisions that are interpreted 

and applied consistently with the 

interpretation in paragraph (b) of this 

section and with this subpart, and must 

provide penalties for any disclosure of 

confidential UC information that is 

inconsistent with any provision of this 

subpart. 

§ 603.5 What are the exceptions to the 

confidentiality requirement? 

The following are exceptions to the 

confidentiality requirement. Disclosure 

of confidential UC information is 

permissible under the exceptions in 

paragraphs (a) through (g) of this section 

only if authorized by State law and if 

such disclosure does not interfere with 

the efficient administration of the State 

UC law. Disclosure of confidential UC 

information is permissible under the 

exceptions in paragraphs (h) and (i) of 

this section without such restrictions. 

(a) Public domain information. The 

confidentiality requirement of § 603.4 

does not apply to public domain 

information, as defined at § 603.2(c). 

(b) UC appeals records. Disclosure of 

appeals records and decisions, and 

precedential determinations on coverage 

of employers, employment, and wages, 

is permissible provided all social 

security account numbers have been 

removed and such disclosure is 

otherwise consistent with Federal and 

State law. 

(c) Individual or employer. Disclosure 

for non-UC purposes, of confidential UC 


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information about an individual to that 

individual, or of confidential UC 

information about an employer to that 

employer, is permissible. 

(d) Informed consent. Disclosure of 

confidential UC information on the 

basis of informed consent is permissible 

in the following circumstances—

(1) Agent—to one who acts for or in 

the place of an individual or an 

employer by the authority of that 

individual or employer if—

(i) In general—

(A) The agent presents a written 

release (which may include an 

electronically submitted release that the 

State determines is authentic) from the 

individual or employer being 

represented; 

(B) When a written release is 

impossible or impracticable to obtain, 

the agent presents such other form of 

consent as is permitted by the State UC 

agency in accordance with State law; 

(ii) In the case of an elected official 

performing constituent services, the 

official presents reasonable evidence 

(such as a letter from the individual or 

employer requesting assistance or a 

written record of a telephone request 

from the individual or employer) that 

the individual or employer has 

authorized such disclosure; or 

(iii) In the case of an attorney retained 

for purposes related to the State’s UC 

law, the attorney asserts that he or she 

is representing the individual or 

employer. 

(2) Third party (other than an agent) 

or disclosure made on an ongoing 

basis—to a third party that is not acting 

as an agent or that receives confidential 

information following an informed 

consent disclosure on an ongoing basis 

(even if such entity is an agent), but 

only if that entity obtains a written 

release from the individual or employer 

to whom the information pertains. 

(i) The release must be signed and 

must include a statement—

(A) Specifically identifying the 

information that is to be disclosed; 

(B) That State government files will be 

accessed to obtain that information; 

(C) Of the specific purpose or 

purposes for which the information is 

sought and a statement that information 

obtained under the release will only be 

used for that purpose or purposes; and 

(D) Indicating all the parties who may 

receive the information disclosed. 

(ii) The purpose specified in the 

release must be limited to—

(A) Providing a service or benefit to 

the individual signing the release that 

such individual expects to receive as a 

result of signing the release; or 

(B) Carrying out administration or 

evaluation of a public program to which 

the release pertains. 

Note to paragraph (d): The Electronic 

Signatures in Global and National Commerce 

Act of 2000 (E-Sign), Pub. L. 106–229, may 

apply where a party wishes to effectuate 

electronically an informed consent release 

(§ 603.5(d)(2)) or a disclosure agreement 

(§ 603.10(a)) with an entity that uses 

informed consent releases. E-Sign, among 

other things, sets forth the circumstances 

under which electronic signatures, contracts, 

and other records relating to such 

transactions (in lieu of paper documents) are 

legally binding. Thus, an electronic 

communication may suffice under E-Sign to 

establish a legally binding contract. The 

States will need to consider E-Sign’s 

application to these informed consent 

releases and disclosure agreements. In 

particular, a State must, to conform and 

substantially comply with this regulation, 

assure that these informed consent releases 

and disclosure agreements are legally 

enforceable. If an informed consent release or 

disclosure agreement is to be effectuated 

electronically, the State must determine 

whether E-Sign applies to that transaction, 

and, if so, make certain that the transaction 

satisfies the conditions imposed by E-Sign. 

The State must also make certain that the 

electronic transaction complies with every 

other condition necessary to make it legally 

enforceable. 

(e) Public official. Disclosure of 

confidential UC information to a public 

official for use in the performance of his 

or her official duties is permissible. 

‘‘Performance of official duties’’ means 

administration or enforcement of law or 

the execution of the official 

responsibilities of a Federal, State, or 

local elected official. Administration of 

law includes research related to the law 

administered by the public official. 

Execution of official responsibilities 

does not include solicitation of 

contributions or expenditures to or on 

behalf of a candidate for public or 

political office or a political party. 

(f) Agent or contractor of public 

official. Disclosure of confidential UC 

information to an agent or contractor of 

a public official to whom disclosure is 

permissible under paragraph (e) of this 

section. 

(g) Bureau of Labor Statistics. The 

confidentiality requirement does not 

apply to information collected 

exclusively for statistical purposes 

under a cooperative agreement with the 

Bureau of Labor Statistics (BLS). 

Further, this part does not restrict or 

impose any condition on the transfer of 

any other information to the BLS under 

an agreement, or the BLS’s disclosure or 

use of such information. 

(h) Court order; official with subpoena 

authority. Disclosure of confidential UC 

information in response to a court order 

or to an official with subpoena authority 

is permissible as specified in § 603.7(b). 

(i) UC Program Oversight and Audits. 

The confidentiality requirement does 

not apply to any disclosure to a Federal 

official for purposes of UC program 

oversight and audits, including 

disclosures under 20 CFR part 601 and 

29 CFR parts 96 and 97. 

§ 603.6 What disclosures are required by 

this subpart? 

(a) The confidentiality requirement of 

303(a)(1), SSA, and § 603.4 are not 

applicable to this paragraph (a) and the 

Department of Labor interprets Section 

303(a)(1), SSA, as requiring disclosure 

of all information necessary for the 

proper administration of the UC 

program. This includes disclosures to 

claimants, employers, the Internal 

Revenue Service (for purposes of UC tax 

administration), and the U.S. 

Citizenship and Immigration Services 

(for purposes of verifying a claimant’s 

immigration status). 

(b) In addition to Section 303(f), SSA 

(concerning an IEVS), which is 

addressed in subpart C, the following 

provisions of Federal UC law also 

specifically require disclosure of State 

UC information and State-held 

information pertaining to the Federal 

UC and benefit programs of 

Unemployment Compensation for 

Federal Employees (UCFE), 

Unemployment Compensation for ExServicemembers (UCX), Trade 

Adjustment Assistance (TAA) (except 

for confidential business information 

collected by States), Disaster 

Unemployment Assistance (DUA), and 

any Federal UC benefit extension 

program: 

(1) Section 303(a)(7), SSA, requires 

State law to provide for making 

available, upon request, to any agency of 

the United States charged with the 

administration of public works or 

assistance through public employment, 

disclosure of the following information 

with respect to each recipient of UC—

(i) Name; 

(ii) Address; 

(iii) Ordinary occupation; 

(iv) Employment status; and 

(v) A statement of such recipient’s 

rights to further compensation under the 

State law. 

(2) Section 303(c)(1), SSA, requires 

each State to make its UC records 

available to the Railroad Retirement 

Board, and to furnish such copies of its 

UC records to the Railroad Retirement 

Board as the Board deems necessary for 

its purposes. 

(3) Section 303(d)(1), SSA, requires 

each State UC agency, for purposes of 

determining an individual’s eligibility 

benefits, or the amount of benefits, 

under a food stamp program established 

under the Food Stamp Act of 1977, to 

disclose, upon request, to officers and 


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employees of the Department of 

Agriculture, and to officers or 

employees of any State food stamp 

agency, any of the following information 

contained in the records of the State UC 

agency—

(i) Wage information, 

(ii) Whether an individual is 

receiving, has received, or has made 

application for, UC, and the amount of 

any such compensation being received, 

or to be received, by such individual, 

(iii) The current (or most recent) home 

address of such individual, and 

(iv) Whether an individual has 

refused an offer of employment and, if 

so, a description of the employment so 

offered and the terms, conditions, and 

rate of pay therefore. 

(4) Section 303(e)(1), SSA, requires 

each State UC agency to disclose, upon 

request, directly to officers or employees 

of any State or local child support 

enforcement agency, any wage 

information contained in the records of 

the State UC agency for purposes of 

establishing and collecting child 

support obligations (not to include 

custodial parent support obligations) 

from, and locating, individuals owing 

such obligations. 

(5) Section 303(h), SSA, requires each 

State UC agency to disclose quarterly, to 

the Secretary of Health and Human 

Services (HHS), wage information and 

claim information as required under 

Section 453(i)(1) of the SSA 

(establishing the National Directory of 

New Hires), contained in the records of 

such agency, for purposes of 

Subsections (i)(1), (i)(3), and (j) of 

Section 453, SSA (establishing the 

National Directory of New Hires and its 

uses for purposes of child support 

enforcement, Temporary Assistance to 

Needy Families (TANF), TANF 

research, administration of the earned 

income tax credit, and use by the Social 

Security Administration). 

(6) Section 303(i), SSA, requires each 

State UC agency to disclose, upon 

request, to officers or employees of the 

Department of Housing and Urban 

Development (HUD) and to 

representatives of a public housing 

agency, for purposes of determining an 

individual’s eligibility for benefits, or 

the amount of benefits, under a housing 

assistance program of HUD, any of the 

following information contained in the 

records of such State agency about any 

individual applying for or participating 

in any housing assistance program 

administered by HUD who has signed a 

consent form approved by the Secretary 

of HUD—

(i) Wage information, and 

(ii) Whether the individual is 

receiving, has received, or has made 

application for, UC, and the amount of 

any such compensation being received 

(or to be received) by such individual. 

(7) Section 3304(a)(16), FUTA 

requires each State UC agency—

(i) To disclose, upon request, to any 

State or political subdivision thereof 

administering a Temporary Assistance 

to Needy Families Agency (TANF) 

program funded under part A of Title IV 

of the SSA, wage information contained 

in the records of the State UC agency 

which is necessary (as determined by 

the Secretary of HHS in regulations) for 

purposes of determining an individual’s 

eligibility for TANF assistance or the 

amount of TANF assistance; and 

(ii) To furnish to the Secretary of 

HHS, in accordance with that 

Secretary’s regulations at 45 CFR 

303.108, wage information (as defined at 

45 CFR 303.108(a)(2)) and UC 

information (as defined at 45 CFR 

303.108(a)(3)) contained in the records 

of such agency for the purposes of the 

National Directory of New Hires 

established under Section 453(i) of the 

SSA. 

(c) Each State law must contain 

provisions that are interpreted and 

applied consistently with the 

requirements listed in this section. 

§ 603.7 What requirements apply to 

subpoenas, other compulsory processes, 

and disclosure to officials with subpoena 

authority? 

(a) In general. Except as provided in 

paragraph (b) of this section, when a 

subpoena or other compulsory process 

is served upon a State UC agency or the 

State, any official or employee thereof, 

or any recipient of confidential UC 

information, which requires the 

production of confidential UC 

information or appearance for testimony 

upon any matter concerning such 

information, the State or State UC 

agency or recipient must file and 

diligently pursue a motion to quash the 

subpoena or other compulsory process if 

other means of avoiding the disclosure 

of confidential UC information are not 

successful or if the court has not already 

ruled on the disclosure. Only if such 

motion is denied by the court or other 

forum may the requested confidential 

UC information be disclosed, and only 

upon such terms as the court or forum 

may order, such as that the recipient 

protect the disclosed information and 

pay the State’s or State UC agency’s 

costs of disclosure. 

(b) Exceptions. The requirement of 

paragraph (a) of this section to move to 

quash subpoenas shall not be 

applicable, so that disclosure is 

permissible, where—

(1) Court Decision—a subpoena or 

other compulsory legal process has been 

served and a court has previously issued 

a binding precedential decision that 

requires disclosures of this type, or a 

well-established pattern of prior court 

decisions have required disclosures of 

this type, or 

(2) Official with Subpoena 

Authority—Confidential UC information 

has been subpoenaed, by a local, State 

or Federal governmental official, other 

than a clerk of court on behalf of a 

litigant, with authority to obtain such 

information by subpoena under State or 

Federal law. The State or State UC 

agency may choose to disclose such 

confidential UC information to these 

officials without the actual issuance of 

a subpoena. 

§ 603.8 What are the requirements for 

payment of costs and program income? 

(a) In general. Except as provided in 

paragraph (b) of this section, grant funds 

must not be used to pay any of the costs 

of making any disclosure of UC 

information. Grant funds may not be 

used to pay any of the costs of making 

any disclosures under § 603.5(d)(2) 

(third party (other than an agent) or 

disclosure made on an ongoing basis), 

§ 603.5(e) (optional disclosure to a 

public official), § 603.5(f) (optional 

disclosure to an agent or contractor of a 

public official), and § 603.5(g) (optional 

disclosure to BLS), § 603.6(b) 

(mandatory disclosures for non-UC 

purposes), or § 603.22 (mandatory 

disclosure for purposes of an IEVS). 

(b) Use of grant funds permitted. 

Grant funds paid to a State under 

Section 302(a), SSA, may be used to pay 

the costs of only those disclosures 

necessary for proper administration of 

the UC program. (This may include 

some disclosures under § 603.5(a) 

(concerning public domain 

information), § 603.5(c) (to an 

individual or employer), and 

§ 603.5(d)(1) (to an agent).) In addition, 

grant funds may be used to pay costs of 

disclosures under § 603.5(i) (for UC 

Program Oversight and Audits) and 

§ 603.6(a) (for the proper administration 

of the UC program). Grant funds may 

also be used to pay costs associated with 

disclosures under § 603.7(b)(1) 

(concerning court-ordered compliance 

with subpoenas) if a court has denied 

recovery of costs, or to pay costs 

associated with disclosures under 

§ 603.7(b)(2) (to officials with subpoena 

authority) if the State UC agency has 

attempted but not been successful in 

obtaining reimbursement of costs. 

Finally, grant funds may be used to pay 

costs associated with any disclosure of 

UC information if not more than an 


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incidental amount of staff time and no 

more than nominal processing costs are 

involved in making the disclosure. 

(c) Calculation of costs. The costs to 

a State or State UC agency of processing 

and handling a request for disclosure of 

information must be calculated in 

accordance with the cost principles and 

administrative requirements of 29 CFR 

part 97 and Office of Management and 

Budget Circular No. A–87 (Revised). For 

the purpose of calculating such costs, 

any initial start-up costs incurred by the 

State UC agency in preparation for 

making the requested disclosure(s), such 

as computer reprogramming necessary 

to respond to the request, and the costs 

of implementing safeguards and 

agreements required by §§ 603.9 and 

603.10, must be charged to and paid by 

the recipient. (Start-up costs do not 

include the costs to the State UC agency 

of obtaining, compiling, or maintaining 

information for its own purposes.) 

Postage or other delivery costs incurred 

in making any disclosure are part of the 

costs of making the disclosure. Penalty 

mail, as defined in 39 U.S.C. 3201(1), 

must not be used to transmit 

information being disclosed, except 

information disclosed for purposes of 

administration of State UC law. As 

provided in Sections 453(e)(2) and 

453(g) of the SSA, the Secretary of HHS 

has the authority to determine what 

constitutes a reasonable amount for the 

reimbursement for disclosures under 

Section 303(h), SSA, and Section 

3304(a)(16)(B), FUTA. 

(d) Payment of costs. The costs to a 

State or State UC agency of making a 

disclosure of UC information, calculated 

in accordance with paragraph (c) of this 

section, must be paid by the recipient of 

the information or another source 

paying on behalf of the recipient, either 

in advance or by way of reimbursement. 

If the recipient is not a public official, 

such costs, except for good reason must 

be paid in advance. For the purposes of 

this paragraph (d), payment in advance 

means full payment of all costs before 

or at the time the disclosed information 

is given in hand or sent to the recipient. 

The requirement of payment of costs in 

this paragraph is met when a State UC 

agency has in place a reciprocal cost 

agreement or arrangement with the 

recipient. As used in this section, 

reciprocal means that the relative 

benefits received by each are 

approximately equal. Payment or 

reimbursement of costs must include 

any initial start-up costs associated with 

making the disclosure. 

(e) Program income. Costs paid as 

required by this section, and any funds 

generated by the disclosure of UC 

information under this part, are program 

income and may be used only as 

permitted by 29 CFR 97.25(g) (on 

program income). Such income may not 

be used to benefit a State’s general fund 

or other program. 

§ 603.9 What safeguards and security 

requirements apply to disclosed 

information? 

(a) In general. For disclosures of 

confidential UC information under 

§ 603.5(d)(2) (to a third party (other than 

an agent) or disclosures made on an 

ongoing basis); § 603.5(e) (to a public 

official), except as provided in 

paragraph (d) of this section; § 603.5(f) 

(to an agent or contractor of a public 

official); § 603.6(b)(1) through (4), (6), 

and (7)(i) (as required by Federal UC 

law); and § 603.22 (to a requesting 

agency for purposes of an IEVS), a State 

or State UC agency must require the 

recipient to safeguard the information 

disclosed against unauthorized access or 

redisclosure, as provided in paragraphs 

(b) and (c) of this section, and must 

subject the recipient to penalties 

provided by the State law for 

unauthorized disclosure of confidential 

UC information. 

(b) Safeguards to be required of 

recipients. (1) The State or State UC 

agency must: 

(i) Require the recipient to use the 

disclosed information only for purposes 

authorized by law and consistent with 

an agreement that meets the 

requirements of § 603.10; 

(ii) Require the recipient to store the 

disclosed information in a place 

physically secure from access by 

unauthorized persons; 

(iii) Require the recipient to store and 

process disclosed information 

maintained in electronic format, such as 

magnetic tapes or discs, in such a way 

that unauthorized persons cannot obtain 

the information by any means; 

(iv) Require the recipient to undertake 

precautions to ensure that only 

authorized personnel are given access to 

disclosed information stored in 

computer systems; 

(v) Require each recipient agency or 

entity to: 

(A) Instruct all personnel having 

access to the disclosed information 

about confidentiality requirements, the 

requirements of this subpart B, and the 

sanctions specified in the State law for 

unauthorized disclosure of information, 

and 

(B) Sign an acknowledgment that all 

personnel having access to the disclosed 

information have been instructed in 

accordance with paragraph (b)(1)(v)(A) 

of this section and will adhere to the 

State’s or State UC agency’s 

confidentiality requirements and 

procedures which are consistent with 

this subpart B and the agreement 

required by § 603.10, and agreeing to 

report any infraction of these rules to 

the State UC agency fully and promptly, 

(vi) Require the recipient to dispose of 

information disclosed or obtained, and 

any copies thereof made by the recipient 

agency, entity, or contractor, after the 

purpose for which the information is 

disclosed is served, except for disclosed 

information possessed by any court. 

Disposal means return of the 

information to the disclosing State or 

State UC agency or destruction of the 

information, as directed by the State or 

State UC agency. Disposal includes 

deletion of personal identifiers by the 

State or State UC agency in lieu of 

destruction. In any case, the information 

disclosed must not be retained with 

personal identifiers for longer than such 

period of time as the State or State UC 

agency deems appropriate on a case-bycase basis; and 

(vii) Maintain a system sufficient to 

allow an audit of compliance with the 

requirements of this part. 

(2) In the case of disclosures made 

under § 603.5(d)(2) (to a third party 

(other than an agent) or disclosures 

made on an ongoing basis), the State or 

State UC agency must also—

(i) Periodically audit a sample of 

transactions accessing information 

disclosed under that section to assure 

that the entity receiving disclosed 

information has on file a written release 

authorizing each access. The audit must 

ensure that the information is not being 

used for any unauthorized purpose; 

(ii) Ensure that all employees of 

entities receiving access to information 

disclosed under § 603.5(d)(2) are subject 

to the same confidentiality 

requirements, and State criminal 

penalties for violation of those 

requirements, as are employees of the 

State UC agency. 

(c) Redisclosure of confidential UC 

information. (1) A State or State UC 

agency may authorize any recipient of 

confidential UC information under 

paragraph (a) of this section to 

redisclose information only as follows: 

(i) To the individual or employer who 

is the subject of the information; 

(ii) To an attorney or other duly 

authorized agent representing the 

individual or employer; 

(iii) In any civil or criminal 

proceedings for or on behalf of a 

recipient agency or entity; 

(iv) In response to a subpoena only as 

provided in § 603.7; 

(v) To an agent or contractor of a 

public official only if the person 

redisclosing is a public official, if the 

redisclosure is authorized by the State 


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law, and if the public official retains 

responsibility for the uses of the 

confidential UC information by the 

agent or contractor; 

(vi) From one public official to 

another if the redisclosure is authorized 

by the State law; 

(vii) When so authorized by Section 

303(e)(5), SSA, (redisclosure of wage 

information by a State or local child 

support enforcement agency to an agent 

under contract with such agency for 

purposes of carrying out child support 

enforcement) and by State law; or 

(viii) When specifically authorized by 

a written release that meets the 

requirements of § 603.5(d) (to a third 

party with informed consent). 

(2) Information redisclosed under 

paragraphs (c)(1)(v) and (vi) of this 

section must be subject to the safeguards 

in paragraph (b) of this section. 

(d) The requirements of this section 

do not apply to disclosures of UC 

information to a Federal agency which 

the Department has determined, by 

notice published in the Federal 

Register, to have in place safeguards 

adequate to satisfy the confidentiality 

requirement of Section 303(a)(1), SSA. 

§ 603.10 What are the requirements for 

agreements? 

(a) Requirements. (1) For disclosures 

of confidential UC information under 

§ 603.5(d)(2) (to a third party (other than 

an agent) or disclosures made on an 

ongoing basis); § 603.5(e) (to a public 

official), except as provided in 

paragraph (d) of this section; § 603.5(f) 

(to an agent or contractor of a public 

official); § 603.6(b)(1) through (4), (6), 

and (7)(i) (as required by Federal UC 

law); and § 603.22 (to a requesting 

agency for purposes of an IEVS), a State 

or State UC agency must enter into a 

written, enforceable agreement with any 

agency or entity requesting disclosure(s) 

of such information. The agreement 

must be terminable if the State or State 

UC agency determines that the 

safeguards in the agreement are not 

adhered to. 

(2) For disclosures referred to in 

§ 603.5(f) (to an agent or contractor of a 

public official), the State or State UC 

agency must enter into a written, 

enforceable agreement with the public 

official on whose behalf the agent or 

contractor will obtain information. The 

agreement must hold the public official 

responsible for ensuring that the agent 

or contractor complies with the 

safeguards of § 603.9. The agreement 

must be terminable if the State or State 

UC agency determines that the 

safeguards in the agreement are not 

adhered to. 

(b) Contents of agreement. (1) In 

general. Any agreement required by 

paragraph (a) of this section must 

include, but need not be limited to, the 

following terms and conditions: 

(i) A description of the specific 

information to be furnished and the 

purposes for which the information is 

sought; 

(ii) A statement that those who 

request or receive information under the 

agreement will be limited to those with 

a need to access it for purposes listed in 

the agreement; 

(iii) The methods and timing of 

requests for information and responses 

to those requests, including the format 

to be used; 

(iv) Provision for paying the State or 

State UC agency for any costs of 

furnishing information, as required by 

§ 603.8 (on costs); 

(v) Provision for safeguarding the 

information disclosed, as required by 

§ 603.9 (on safeguards); and 

(vi) Provision for on-site inspections 

of the agency, entity, or contractor, to 

assure that the requirements of the 

State’s law and the agreement or 

contract required by this section are 

being met. 

(2) In the case of disclosures under 

§ 603.5(d)(2) (to a third party (other than 

an agent) or disclosures made on an 

ongoing basis), the agreement required 

by paragraph (a) of this section must 

assure that the information will be 

accessed by only those entities with 

authorization under the individual’s or 

employer’s release, and that it may be 

used only for the specific purposes 

authorized in that release. 

(c) Breach of agreement. (1) In 

general. If an agency, entity, or 

contractor, or any official, employee, or 

agent thereof, fails to comply with any 

provision of an agreement required by 

this section, including timely payment 

of the state’s or state UC agency’s costs 

billed to the agency, entity, or 

contractor, the agreement must be 

suspended, and further disclosure of 

information (including any disclosure 

being processed) to such agency, entity, 

or contractor is prohibited, until the 

State or State UC agency is satisfied that 

corrective action has been taken and 

there will be no further breach. In the 

absence of prompt and satisfactory 

corrective action, the agreement must be 

canceled, and the agency, entity, or 

contractor must be required to surrender 

to the state or state UC agency all 

confidential UC information (and copies 

thereof) obtained under the agreement 

which has not previously been returned 

to the state or state UC agency, and any 

other information relevant to the 

agreement. 

(2) Enforcement. In addition to the 

actions required to be taken by 

paragraph (c)(1) of this section, the state 

or state UC agency must undertake any 

other action under the agreement, or 

under any law of the State or of the 

United States, to enforce the agreement 

and secure satisfactory corrective action 

or surrender of the information, and 

must take other remedial actions 

permitted under State or Federal law to 

effect adherence to the requirements of 

this subpart B, including seeking 

damages, penalties, and restitution as 

permitted under such law for any 

charges to granted funds and all costs 

incurred by the state or the state UC 

agency in pursuing the breach of the 

agreement and enforcement as required 

by this paragraph (c). 

(d) The requirements of this section 

do not apply to disclosures of UC 

information to a Federal agency which 

the Department has determined, by 

notice published in the Federal 

Register, to have in place safeguards 

adequate to satisfy the confidentiality 

requirement of Section 303(a)(1), SSA, 

and an appropriate method of paying or 

reimbursing the State UC agency (which 

may involve a reciprocal cost 

arrangement) for costs involved in such 

disclosures. These determinations will 

be published in the Federal Register. 

§ 603.11 How do States notify claimants 

and employers about the uses of their 

information? 

(a) Claimants. Every claimant for 

compensation must be notified, at the 

time of application, and periodically 

thereafter, that confidential UC 

information pertaining to the claimant 

may be requested and utilized for other 

governmental purposes, including, but 

not limited to, verification of eligibility 

under other government programs. 

Notice on or attached to subsequent 

additional claims will satisfy the 

requirement for periodic notice 

thereafter. 

(b) Employers. Every employer subject 

to a State’s law must be notified that 

wage information and other confidential 

UC information may be requested and 

utilized for other governmental 

purposes, including, but not limited to, 

verification of an individual’s eligibility 

for other government programs. 

§ 603.12 How are the requirements of this 

part enforced? 

(a) Resolving conformity and 

compliance issues. For the purposes of 

resolving issues of conformity and 

substantial compliance with the 

requirements set forth in subparts B and 

C, the provisions of 20 CFR 601.5(b) 

(informal discussions with the 


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56848 Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / Rules and Regulations 

Department of Labor to resolve 

conformity and substantial compliance 

issues), and 20 CFR 601.5(d) (Secretary 

of Labor’s hearing and decision on 

conformity and substantial compliance) 

apply. 

(b) Conformity and substantial 

compliance. Whenever the Secretary of 

Labor, after reasonable notice and 

opportunity for a hearing to the State 

UC agency of a State, finds that the State 

law fails to conform, or that the State or 

State UC agency fails to comply 

substantially, with: 

(1) The requirements of Title III, SSA, 

implemented in subparts B and C of this 

part, the Secretary of Labor shall notify 

the Governor of the State and such State 

UC agency that further payments for the 

administration of the State UC law will 

not be made to the State until the 

Secretary of Labor is satisfied that there 

is no longer any such failure. Until the 

Secretary of Labor is so satisfied, the 

Department of Labor shall make no 

further payments to such State. 

(2) The FUTA requirements 

implemented in this subpart B, the 

Secretary of Labor shall make no 

certification under that section to the 

Secretary of the Treasury for such State 

as of October 31 of the 12-month period 

for which such finding is made. 

Subpart C—Mandatory Disclosure for 

Income and Eligibility Verification 

System (IEVS) 

§ 603.20 What is the purpose and scope of 

this subpart? 

(a) Purpose. Subpart C implements 

Section 303(f), SSA. Section 303(f) 

requires States to have in effect an 

income and eligibility verification 

system, which meets the requirements 

of Section 1137, SSA, under which 

information is requested and exchanged 

for the purpose of verifying eligibility 

for, and the amount of, benefits 

available under several federally 

assisted programs, including the 

Federal-State UC program. 

(b) Scope. This subpart C applies only 

to a State UC agency. 

Note to paragraph (b): Although not 

implemented in this part 603, Section 

1137(a)(1), SSA, provides that each State 

must require claimants for compensation to 

furnish to the State UC agency their social 

security account numbers, as a condition of 

eligibility for compensation, and further 

requires States to utilize such account 

numbers in the administration of the State 

UC laws. Section 1137(a)(3), SSA, further 

provides that employers must make quarterly 

wage reports to a State UC agency, or an 

alternative agency, for use in verifying 

eligibility for, and the amount of, benefits. 

Section 1137(d)(1), SSA, provides that each 

State must require claimants for 

compensation, as a condition of eligibility, to 

declare in writing, under penalty of perjury, 

whether the individual is a citizen or 

national of the United States, and, if not, that 

the individual is in a satisfactory 

immigration status. Other provisions of 

Section 1137(d), SSA, not implemented in 

this regulation require the States to obtain, 

and individuals to furnish, information 

which shows immigration status, and require 

the States to verify immigration status with 

the Bureau of Citizenship and Immigration 

Services. 

§ 603.21 What is a requesting agency? 

For the purposes of this subpart C, 

requesting agency means: 

(a) Temporary Assistance to Needy 

Families Agency—Any State or local 

agency charged with the responsibility 

of administering a program funded 

under part A of Title IV of the SSA. 

(b) Medicaid Agency—Any State or 

local agency charged with the 

responsibility of administering the 

provisions of the Medicaid program 

under a State plan approved under Title 

XIX of the SSA. 

(c) Food Stamp Agency—Any State or 

local agency charged with the 

responsibility of administering the 

provisions of the Food Stamp Program 

under the Food Stamp Act of 1977. 

(d) Other SSA Programs Agency—Any 

State or local agency charged with the 

responsibility of administering a 

program under a State plan approved 

under Title I, X, XIV, or XVI 

(Supplemental Security Income for the 

Aged, Blind, and Disabled) of the SSA. 

(e) Child Support Enforcement 

Agency—Any State or local child 

support enforcement agency charged 

with the responsibility of enforcing 

child support obligations under a plan 

approved under part D of Title IV of the 

SSA. 

(f) Social Security Administration—

Commissioner of the Social Security 

Administration in establishing or 

verifying eligibility or benefit amounts 

under Titles II (Old-Age, Survivors, and 

Disability Insurance Benefits) and XVI 

(Supplemental Security Income for the 

Aged, Blind, and Disabled) of the SSA. 

§ 603.22 What information must State UC 

agencies disclose for purposes of an IEVS? 

(a) Disclosure of information. Each 

State UC agency must disclose, upon 

request, to any requesting agency, as 

defined in § 603.21, that has entered 

into an agreement required by § 603.10, 

wage information (as defined at 

§ 603.2(k)) and claim information (as 

defined at § 603.2(a)) contained in the 

records of such State UC agency. 

(b) Format. The State UC agency must 

adhere to standardized formats 

established by the Secretary of HHS (in 

consultation with the Secretary of 

Agriculture) and set forth in 42 CFR 

435.960 (concerning standardized 

formats for furnishing and obtaining 

information to verify income and 

eligibility). 

§ 603.23 What information must State UC 

agencies obtain from other agencies, and 

crossmatch with wage information, for 

purposes of an IEVS? 

(a) Crossmatch with information from 

requesting agencies. Each State UC 

agency must obtain such information 

from the Social Security Administration 

and any requesting agency as may be 

needed in verifying eligibility for, and 

the amount of, compensation payable 

under the State UC law. 

(b) Crossmatch of wage and benefit 

information. The State UC agency must 

crossmatch quarterly wage information 

with UC payment information to the 

extent that such information is likely, as 

determined by the Secretary of Labor, to 

be productive in identifying ineligibility 

for benefits and preventing or 

discovering incorrect payments. 

[FR Doc. 06–8185 Filed 9–26–06; 8:45 am] 

BILLING CODE 4510–30–P 


rwilkins on PROD1PC63 with RULES_4