A bill to provide for the treatment and temporary financing of short-time compensation programs.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Preventing 
Unemployment Act of 2010''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Treatment of short-time compensation programs.
Sec. 3. Temporary financing of certain short-time compensation 
                            payments.
Sec. 4. Temporary Federal short-time compensation.
Sec. 5. Grants for implementation of State short-time compensation 
                            programs.
Sec. 6. Assistance and guidance in implementing programs.
Sec. 7. Reports.

SEC. 2. TREATMENT OF SHORT-TIME COMPENSATION PROGRAMS.

    (a) Definition.--
            (1) In general.--Section 3306 of the Internal Revenue Code 
        of 1986 (26 U.S.C. 3306) is amended by adding at the end the 
        following new subsection:
    ``(v) Short-Time Compensation Program.--For purposes of this 
chapter, the term `short-time compensation program' means a program 
under which--
            ``(1) the participation of an employer is voluntary;
            ``(2) an employer reduces the number of hours worked by 
        employees in lieu of temporary layoffs;
            ``(3) such employees whose workweeks have been reduced by 
        at least 10 percent, and by not more than the percentage, if 
        any, that is determined by the State to be appropriate, are 
        eligible for unemployment compensation;
            ``(4) the amount of unemployment compensation payable to 
        any such employee is a pro rata portion of the unemployment 
        compensation which would be payable to the employee if such 
        employee were totally unemployed;
            ``(5) such employees are not expected to meet the 
        availability for work or work search test requirements while 
        collecting short-time compensation benefits, but are required 
        to be available for their normal workweek;
            ``(6) eligible employees may participate, as appropriate, 
        in an employer-sponsored training program to enhance job skills 
        if such program has been approved by the State agency;
            ``(7) the State agency shall require an employer to certify 
        that the employer will continue to provide health benefits and 
        retirement benefits under a defined benefit plan (as defined in 
        section 414(j)) and contributions under a defined contribution 
        plan (as defined in section 414(i)) to any employee whose 
        workweek is reduced under the program under the same terms and 
        conditions as though the workweek of such employee had not been 
        reduced;
            ``(8) the State agency shall require an employer (or an 
        employer's association which is party to a collective 
        bargaining agreement) to submit a written plan describing the 
        manner in which the requirements of this subsection will be 
        implemented and containing such other information as the 
        Secretary of Labor determines is appropriate;
            ``(9) in the case of employees represented by a union, the 
        appropriate official of the union has agreed to the terms of 
        the employer's written plan and implementation is consistent 
        with employer obligations under the National Labor Relations 
        Act; and
            ``(10) only such other provisions are included in the State 
        law as the Secretary of Labor determines appropriate for 
        purposes of a short-term compensation program.''.
            (2) Effective date.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendment made by paragraph (1) shall take 
                effect on the date of the enactment of this Act.
                    (B) Delay permitted.--In the case of a State that 
                is administering a short-time compensation program as 
                of the date of the enactment of this Act and the State 
                law cannot be administered consistent with the 
                amendment made by paragraph (1), such amendment shall 
                take effect on the earlier of--
                            (i) the date the State changes its State 
                        law in order to be consistent with such 
                        amendment; or
                            (ii) the date that is 2 years after the 
                        date of the enactment of this Act.
    (b) Conforming Amendments.--
            (1) Internal revenue code of 1986.--
                    (A) Subparagraph (E) of section 3304(a)(4) of the 
                Internal Revenue Code of 1986 is amended to read as 
                follows:
                    ``(E) amounts may be withdrawn for the payment of 
                short-time compensation under a short-time compensation 
                program (as defined under section 3306(v));''.
                    (B) Subsection (f) of section 3306 of the Internal 
                Revenue Code of 1986 is amended--
                            (i) by striking paragraph (5) (relating to 
                        short-term compensation) and inserting the 
                        following new paragraph:
            ``(5) amounts may be withdrawn for the payment of short-
        time compensation under a short-time compensation program (as 
        defined in subsection (v)); and''; and
                            (ii) by redesignating paragraph (5) 
                        (relating to self-employment assistance 
                        program) as paragraph (6).
            (2) Social security act.--Section 303(a)(5) of the Social 
        Security Act is amended by striking ``the payment of short-time 
        compensation under a plan approved by the Secretary of Labor'' 
        and inserting ``the payment of short-time compensation under a 
        short-time compensation program (as defined in section 3306(v) 
        of the Internal Revenue Code of 1986)''.
            (3) Unemployment compensation amendments of 1992.--
        Subsections (b) through (d) of section 401 of the Unemployment 
        Compensation Amendments of 1992 (26 U.S.C. 3304 note) are 
        repealed.

SEC. 3. TEMPORARY FINANCING OF CERTAIN SHORT-TIME COMPENSATION 
              PAYMENTS.

    (a) Payments to States.--
            (1) In general.--Subject to paragraph (3), there shall be 
        paid to a State an amount equal to 100 percent of the amount of 
        short-time compensation paid under a short-time compensation 
        program (as defined in section 3306(v) of the Internal Revenue 
        Code of 1986, as added by section 2(a)) under the provisions of 
        the State law. Notwithstanding section 2(a)(2), a State 
        administering a short-term compensation program as of the date 
        of the enactment of this Act shall not be eligible to receive 
        payments under this section until the program administered by 
        such State meets the requirements of section 3306(v) of the 
        Internal Revenue Code of 1986 (as so added). Payments shall 
        also be made for additional State administrative expenses 
        incurred (as determined by the Secretary).
            (2) Terms of payments.--Payments made to a State under 
        paragraph (1) shall be payable by way of reimbursement in such 
        amounts as the Secretary estimates the State will be entitled 
        to receive under this section for each calendar month, reduced 
        or increased, as the case may be, by any amount by which the 
        Secretary finds that the Secretary's estimates for any prior 
        calendar month were greater or less than the amounts which 
        should have been paid to the State. Such estimates may be made 
        on the basis of such statistical, sampling, or other method as 
        may be agreed upon by the Secretary and the State agency of the 
        State involved.
            (3) Limitations on payments.--
                    (A) General payment limitations.--No payments shall 
                be made to a State under this section for benefits paid 
                to an individual by the State in excess of 26 weeks of 
                benefits.
                    (B) Employer limitations.--No payments shall be 
                made to a State under this section for benefits paid to 
                an individual by the State under a short-time 
                compensation program if such individual is employed by 
                an employer--
                            (i) whose workforce during the 3 months 
                        preceding the date of the submission of the 
                        employer's short-time compensation plan has 
                        been reduced by temporary layoffs of more than 
                        20 percent; or
                            (ii) on a seasonal, temporary, or 
                        intermittent basis.
    (b) Applicability.--Payments to a State under subsection (a) shall 
be available for weeks of unemployment--
            (1) beginning on or after the date of the enactment of this 
        Act; and
            (2) ending on or before the date that is 3 years after the 
        date of the enactment of this Act.
    (c) Funding and Certifications.--
            (1) Funding.--There are appropriated, out of moneys in the 
        Treasury not otherwise appropriated, such sums as may be 
        necessary for purposes of carrying out this section.
            (2) Certifications.--The Secretary shall from time to time 
        certify to the Secretary of the Treasury for payment to each 
        State the sums payable to such State under this section.
    (d) Definitions.--In this section:
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of Labor.
            (2) State; state agency; state law.--The terms ``State'', 
        ``State agency'', and ``State law'' have the meanings given 
        those terms in section 205 of the Federal-State Extended 
        Unemployment Compensation Act of 1970 (26 U.S.C. 3304 note).

SEC. 4. TEMPORARY FEDERAL SHORT-TIME COMPENSATION.

    (a) Federal-State Agreements.--
            (1) In general.--Any State which desires to do so may enter 
        into, and participate in, an agreement under this section with 
        the Secretary provided that such State's law does not provide 
        for the payment of short-time compensation under--
                    (A) a short-time compensation program (as defined 
                in section 3306(v) of the Internal Revenue Code of 
                1986, as added by section 2(a)); or
                    (B) subsections (b) through (d) of section 401 of 
                the Unemployment Compensation Amendments Act of 1992, 
                as in effect on the day before the date of the 
                enactment of this Act.
            (2) Ability to terminate.--Any State which is a party to an 
        agreement under this section may, upon providing 30 days' 
        written notice to the Secretary, terminate such agreement.
    (b) Provisions of Federal-State Agreement.--
            (1) In general.--Any agreement under this section shall 
        provide that the State agency of the State will make payments 
        of short-time compensation under a plan approved by the State. 
        Such plan shall provide that payments are made in accordance 
        with the requirements under section 3306(v) of the Internal 
        Revenue Code of 1986, as added by section 2(a).
            (2) Limitations on plans.--
                    (A) General payment limitations.--A short-time 
                compensation plan approved by a State shall not permit 
                the payment of short-time compensation in excess of 26 
                weeks.
                    (B) Employer limitations.--A short-time 
                compensation plan approved by a State shall not provide 
                payments to an individual if such individual is 
                employed by an employer--
                            (i) whose workforce during the 3 months 
                        preceding the date of the submission of the 
                        employer's short-time compensation plan has 
                        been reduced by temporary layoffs of more than 
                        20 percent; or
                            (ii) on a seasonal, temporary, or 
                        intermittent basis.
            (3) Employer payment of costs.--Any short-time compensation 
        plan entered into by an employer must provide that the employer 
        will pay the State an amount equal to one-half of the amount of 
        short-time compensation paid under such plan. Such amount shall 
        be deposited in the State's unemployment fund and shall not be 
        used for purposes of calculating an employer's contribution 
        rate under section 3303(a)(1) of the Internal Revenue Code of 
        1986.
    (c) Payments to States.--
            (1) In general.--There shall be paid to each State with an 
        agreement under this section an amount equal to--
                    (A) one-half of the amount of short-time 
                compensation paid to individuals by the State pursuant 
                to such agreement; and
                    (B) any additional administrative expenses incurred 
                by the State by reason of such agreement (as determined 
                by the Secretary).
            (2) Terms of payments.--Payments made to a State under 
        paragraph (1) shall be payable by way of reimbursement in such 
        amounts as the Secretary estimates the State will be entitled 
        to receive under this section for each calendar month, reduced 
        or increased, as the case may be, by any amount by which the 
        Secretary finds that the Secretary's estimates for any prior 
        calendar month were greater or less than the amounts which 
        should have been paid to the State. Such estimates may be made 
        on the basis of such statistical, sampling, or other method as 
        may be agreed upon by the Secretary and the State agency of the 
        State involved.
            (3) Funding.--There are appropriated, out of moneys in the 
        Treasury not otherwise appropriated, such sums as may be 
        necessary for purposes of carrying out this section.
            (4) Certifications.--The Secretary shall from time to time 
        certify to the Secretary of the Treasury for payment to each 
        State the sums payable to such State under this section.
    (d) Applicability.--An agreement entered into under this section 
shall apply to weeks of unemployment--
            (1) beginning on or after the date on which such agreement 
        is entered into; and
            (2) ending on or before the date that is 2 years after the 
        date of the enactment of this Act.
    (e) Transition Rule.--If a State has entered into an agreement 
under this section and subsequently enacts a State law providing for 
the payment of short-time compensation under a short-time compensation 
program (as defined in section 3306(v) of the Internal Revenue Code of 
1986, as added by section 2(a)), the State shall not be eligible for 
payments under this section for weeks of unemployment beginning after 
the effective date of such State law.
    (f) Definitions.--In this section:
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of Labor.
            (2) State; state agency; state law.--The terms ``State'', 
        ``State agency'', and ``State law'' have the meanings given 
        those terms in section 205 of the Federal-State Extended 
        Unemployment Compensation Act of 1970 (26 U.S.C. 3304 note).

SEC. 5. GRANTS FOR IMPLEMENTATION OF STATE SHORT-TIME COMPENSATION 
              PROGRAMS.

    (a) Grants.--
            (1) In general.--The Secretary shall award start-up grants 
        to State agencies--
                    (A) in States that enact short-time compensation 
                programs (as defined in section 3306(v) of the Internal 
                Revenue Code of 1986, as added by section 2(a)) on or 
                after May 1, 2010, for the purpose of creating such 
                programs; and
                    (B) that apply for such grants not later than 
                September 30, 2012.
            (2) Amount.--The amount of a grant awarded under paragraph 
        (1) shall be an amount determined by the Secretary based on the 
        costs of implementing a short-time compensation program.
            (3) Only 1 grant per state.--A State agency is only 
        eligible to receive 1 grant under this section.
    (b) Funding.--There are appropriated, out of moneys in the Treasury 
not otherwise appropriated, such sums as may be necessary for purposes 
of carrying out this section.
    (c) Reporting.--The Secretary may establish reporting requirements 
for State agencies receiving a grant under this section in order to 
provide oversight of grant funds used by States for the creation of the 
short-time compensation programs.
    (d) Definitions.--In this section:
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of Labor.
            (2) State; state agency.--The terms ``State'' and ``State 
        agency'' have the meanings given those terms in section 205 of 
        the Federal-State Extended Unemployment Compensation Act of 
        1970 (26 U.S.C. 3304 note).

SEC. 6. ASSISTANCE AND GUIDANCE IN IMPLEMENTING PROGRAMS.

    In order to assist States in establishing, qualifying, and 
implementing short-time compensation programs (as defined in section 
3306(v) of the Internal Revenue Code of 1986, as added by section 
2(a)), the Secretary of Labor shall--
            (1) develop model legislative language which may be used by 
        States in developing and enacting such programs and 
        periodically review and revise such model legislative language;
            (2) provide technical assistance and guidance in 
        developing, enacting, and implementing such programs;
            (3) establish reporting requirements for States, including 
        reporting on--
                    (A) the number of averted layoffs;
                    (B) the number of participating companies and 
                workers; and
                    (C) such other items as the Secretary of Labor 
                determines are appropriate.

SEC. 7. REPORTS.

    (a) Initial Report.--Not later than 4 years after the date of the 
enactment of this Act, the Secretary of Labor shall submit to Congress 
and to the President a report or reports on the implementation of the 
provisions of this Act, including an analysis of the significant 
impediments to State enactment and implementation of short-time 
compensation programs (as defined in section 3306(v) of the Internal 
Revenue Code of 1986, as added by section 2(a)).
    (b) Subsequent Reports.--After the submission of the report under 
subsection (a), the Secretary of Labor may submit such additional 
reports on the implementation of short-time compensation programs as 
the Secretary deems appropriate.
    (c) Funding.--There are appropriated, out of any moneys in the 
Treasury not otherwise appropriated, to the Secretary of Labor, 
$1,500,000 to carry out this section, to remain available without 
fiscal year limitation.

Summary: Preventing Unemployment Act of 2010 - Amends the Federal Unemployment Tax Act (FUTA), the Internal Revenue Code, and the Unemployment Compensation Amendments of 1992 to prescribe requirements for the treatment and temporary financing of voluntary short-time compensation (STC) programs, under which: (1) an employer reduces the number of hours worked by employees in lieu of temporary layoffs; and (2) such employees are eligible for pro-rata unemployment compensation if their workweeks are reduced by between 10% and an appropriate state-determined percentage.

Requires payments to states meeting the requirements of this Act in an amount equal to 100% of the STC paid to individuals.

Prohibits such STC payments: (1) for more than 26 weeks; or (2) for an employee whose employer's workforce during the three months preceding submission of the employer's STC plan has been reduced by temporary layoffs of more than 20%, or on a seasonal, temporary, or intermittent basis.

Authorizes temporary federal-state agreements for STC programs if a state does not currently provide for STC payments under an existing program.

Requires employers under an STC plan to pay the state one-half of the amount of STC paid under the plan.

Requires federal payments to states in an amount equal to: (1) one-half of the amount of STC paid to individuals by the state; and (2) any additional related administrative expenses incurred by the state.

Requires the Secretary of Labor to award one start-up grant to state agencies: (1) in states that enact STC programs on or after May 1, 2010; and (2) that apply for such grants before FY2013.

Specifies assistance and guidance the Secretary shall give states in establishing and implementing STC programs.