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NO.153 P001/019
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CENTER ON BUDGET
AND POLICY PRIORITIES
CENTER ON BUDGET AND POLICY PRIORITIES
Telephone: 202/408-11
820 First Street, NE, Suite 510
Fax: 202/408-10
Washington, DC 20002
FAX COVER SHEET
If there are any problems with the transmission of this document,
please call 202/408-1080.
DATE:
TO:
Jan Orzuz
FAX NUMBER:
456-2223
FROM:
Issac
NO. OF PAGES
21
(including cover)
Comments:
Marrice Emgellon 212-285-3025 x106
Cover leave under UI
Jen-
Have to me available for
work? work ?
This is and at
But # of states have
discussed.
I made
Ded this.
a copy.
VT, Mass, WA, NY, NJ
Ja.
2
/
TOI
UI
KIHY Higgins
Grace kibune
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American Federation of Labor and Congress of Industrial Organizations
EXECUTIVE COUNCIL
AMERICAN FEDERATION & LACK
815 Sixteenth Street, N.W.
JOHN J. SWEENEV
RICHARD L TRUMKA
LINDA CHAVEZ/THOMPSON
Washington. D.C. 20006
PRESIDENT
SECRETARY-TREASURER
EXECUTIVE VICE PRESIDENT
(202) 637-5000
Edward T. Mantey
Wayne E. Glann
Vincent A. Sembratto
Gerate W. McEntes
CONGRESS AFL OF INDUSTRIAL
John T. Joyce
Morton Bahr
Robert A Georgine
Gene upshaw
Jay Mazur
Lenore Miller
John d Barry
Moe Biller
George J. Kourplas
John N. Studivent
Frank Hardey
James 1. Narton
Michael Sacco
Ron Carey
Arthur A. Cos
Frank Mun
Gloria T. Johnson
Dauglas H. Dorily
George F. Backer
Stephen P. Yekich
J. Randolph Babbin
Clayole Brown
M.A. "Mac" Fleming
Carolyn Forrest
Pat Friend
Michael Goodwin
JOB be Greene
Sonny Mail
Sum Herv
Carroll Haynes
James LeSale
William Lucy
Laon Lynch
Doug McCarron
Andrew McKenzie
ALL "Mike" Manros
Arthur Moore
Arguro 5. Roanguax
Robert A. Boardelletti
Robert E Wages
Jake West
Alfred K Whitehead
Andrew L. Stem
Edward L File
Maran d Maddators
John M. Bowers
Sandra Faidman
January 22, 1998
The Honorable Alexis Herman
Secretary of Labor
U.S. Department of Labor
200 Constitution Ave., N.W.
Washington, D.C. 20210
Re:
Vermont Authority to Enact Unemployment Compensation Legislation
Expanding Family Leave
Dear Secretary Herman:
We are writing regarding Vermont's effort to enact unemployment compensation
legislation that would provide a modest measure of income support to families who are
temporarily separated from work under circumstances that qualify for coverage under the state's
family leave law. Consistent with your long-standing commitment to working families, we urge
you to authorize Vermont to move forward with the proposed law (SB 143), which has been held
up due to objections lodged by Acting Assistant Secretary for Employment and Training,
Raymond Uhalde in response to the attached inquiry by Senator Leahy. As set forth below, the
federal unemployment compensation laws, enacted in 1935 to provide the states with maximum
flexibility to set eligibility standards, require the Department of Labor (DOL) to defer to
Vermont's authority to enact the proposed law.
The attached legal memorandum prepared in support of the proposed Vermont legislation
outlines the history of the shared federal-state unemployment compensation system focusing on
the broad role of the states in setting eligibility and disqualification standards. As stated by
Edwin White, the Executive Director of the Committee on Economic Security, which President
Roosevelt appointed to draft the Social Security Act: "At the very outset of its final
deliberations, the committee decided against federal dictation regarding the content of state
unemployment compensation laws. It reached the conclusion that the federal bill should contain
only a few necessary standards
11-, Edwin White, The Development of the Social Security Act
.
a
2
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The Honorable Alexis Herman
-2-
January 22, 1998
(University of Wisconsin Press: 1962), p. 125. This is the essential starting point from which to
evaluate whether the proposed Vermont law interferes with the limited federal role in setting
eligibility and disqualification standards for unemployment benefits.
On several threshold issues discussed in our legal memorandum, the Assistant Secretary
agrees that the Vermont law, if enacted, would not raise federal issues. First, Vermont is free to
determine that claimants who leave work for reasons associated with family leave are exempt
from the state's "voluntary quit" disqualification. In response to our legal memorandum, Mr.
Uhalde acknowledges, "States are free to determine if any ineligibility arising from the voluntary
quit is applied beyond the week the quit occurred. Since SB 143 modifies the disqualification
provision for weeks beyond the quit, this aspect raises no Federal issue." (Uhalde letter to
Senator Leahy, attachment entitled "Federal Issues Raised in Legal Memorandum.")
Second, as Mr. Uhalde's letter states, there is "no Federal requirement that an
employment relationship must be severed before UI is paid." Therefore, as proposed by the
Vermont bill, there is no dispute that an individual can be temporarily separated from her work
for reasons deemed appropriate by the state, but not necessarily totally unemployed. In fact,
there are many situations where individuals recover unemployment benefits while still employed.
For example, many workers receive short-term compensation when their hours are reduced to
avoid layoff, workers recover partial unemployment benefits when they lose work with one
employer but remain employed with another employer part-time; workers in the public school
system who do not receive pay while taking mandatory recess vacations during the holidays have
been held eligible (Donahue V. Dept. of Employment Security. 142 Vt. 351 (1982)); workers on
unpaid sick leave who maintain life insurance and hospitalization coverage have received
unemployment benefits (Pennsylvania Electric Company V. Board of Review, 450 A. 2d 779 (Pa.
Cmwlth 1982)); and the list goes on.
The only remaining issue on which we differ with the Assistant Secretary is whether
Vermont has the authority under federal law to determine that a claimant may be exempt from
the requirement that she be "able and available" for work at the time she applies for
unemployment benefits. The Assistant Secretary apparently does not dispute that the states have
the authority to exempt claimants from the availability requirement in cases where the law
applies to circumstances that arose immediately after the claimant applied for benefits. Indeed,
many states have enacted such laws. For example, in eleven states, including Vermont,
claimants who become ill or disabled after applying for unemployment benefits may continue to
receive their benefits although they are not available to work. The Vermont proposed law would
simply go a small step further by applying the availability exemption to a limited class of
claimants at the time they apply for benefits, thus accommodating their separation from work due
to family leave.
Unfortunately, Mr. Uhalde's letter takes issue with this approach, as follows: "To operate
an acceptable UI program a State must, therefore, establish a genuine test to determine if an
3
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The Honorable Alexis Herman
3
January 22, 1998
individual is unemployed due to lack of work. The able and available requirement is a
longstanding, accepted test for determining this." This position, which suggests that federal law
preempts a state from defining the scope of its availability requirement, is simply not supported
by a fair reading of the federal law. Most important, the federal statute does not on its face
require that claimants be "able and available" for work to recover unemployment benefits. The
Committee on Economic Security merely devised a model state unemployment compensation
bill which contained a "willingness-to-work test" an approach intended to provide the states
with "wide latitude" to determine the content of their state laws. See Report of the Committee on
Economic Security in the Senate Hearings Record, dated January 22 to February 20, 1935
("Senate Committee Report"), p. 1314.
Given the conspicuous absence of express statutory authority for his position, Mr. Uhalde
relies instead on general language in the statute and legislative history for the proposition that
federal law requires the states to have an "availability" requirement that does not exempt family
leave. The federal statutes cited in support of this proposition contain extraneous references to
"unemployment" in relation to experience rating standards and conditions on the withdrawal of
state unemployment trust funds. For example, Mr. Uhalde cites 26 U.S.C. § 3306(h), which is
the section of the Federal Unemployment Tax Act (FUTA) that defines "compensation" as "cash
benefits payable to individuals with respect to their unemployment" (emphasis added). To
impose a federal "availability" requirement on the basis of this language reaches far beyond
DOL's authority. Indeed, these references to "unemployment" in the federal law provide
compelling support for Vermont's position given the state's authority to define "unemployment"
under state law. For example, as the Assistant Secretary apparently concedes, the states are free
to cover situations where an individual is temporarily separated from work as proposed under the
Vermont law.
The Assistant Secretary erroneously relies on a statement in the Act's legislative history,
namely, a section of the Report of the Committee on Economic Security to the Senate entitled
"Suggestions for State Legislation." This describes elements of the model state unemployment
compensation bill, not federal law mandates. It is in this section of the report, which covers the
"willingness-to-work test" found in the model state law, that the Committee included the
following statement quoted in Mr. Uhalde's letter: "The employees compensated must be both
able and willing to work and must be denied benefits if they refuse to accept other suitable
work."
See Senate Committee Report, p.1328. As indicated, this language is merely a
description of the model state law recommendations or "suggestions," as the heading to this
section of the report states. It is not a description of a federally required constraint on state law.
Moreover, there are numerous statements in the legislative history that make clear that the
states retain significant latitude in defining their state eligibility requirements. Most notably.
the Committee's report states: "The plan for unemployment compensation that we suggest
contemplates that the States shall have broad freedom to set up the type of unemployment
compensation they wish. We believe that all matters in which uniformity is not absolutely
4
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The Honorable Alexis Herman
- 4 -
January 22, 1998
essential should be left to the States to decide." See Senate Committee Report, p. 1326.
Finally, and perhaps most important, there is no debate that the Vermont proposed law
still retains an "able and available" requirement. It simply makes adjustments to cover certain
specific situations just as numerous other states have done, without interfering with federal law
by exempting those who become ill or disabled while receiving unemployment benefits. Thus,
even assuming arguendo that federal law could be interpreted to impose an "availability"
requirement on the states, Vermont's proposed law falls well within any such federal mandate.
All over the country, states are returning trust fund dollars to employers or cutting
benefits even as only one-third of the unemployed receive UI. Unlike this debilitating national
trend, the Vermont proposal would make a modest step toward spending state funds on state
residents who must leave work through no fault of their own - the primary purpose of
unemployment compensation. Indeed, as described in DOL's recent draft program letter entitled
"Equity and Access - Unemployment Compensation Program", including "compelling personal
reason as 'good cause' reflects the concept of family values as implemented by the Family [and
Medical] Leave Act." Similarly, here, availability standards should be interpreted to promote the
goals of balancing work and family.
If Vermont citizens, businesses, and state agencies can agree to spend their
unemployment funds on FMLA-covered workers, the least the Department of.Labor should do is
allow their desires to be carried out. We appreciate your consideration and look forward to your
response.
Sincerely,
Jonathan full P. Hiatt
Donna Lenholl
Donna Lenhoff
General Counsel
General Counsel
AFL-CIO
Women's Legal Defense Fund
815 16th Street, N.W.
1875 Connecticut Avenue, N.W.
Washington, D.C. 20006
Washington, D.C. 20009
Ron
Mausium
Ron Pickering
Maurice Emsellem
President
Staff Attorney
Vermont AFL-CIO
National Employment Law Project
149 State Street
55 John Street, 7th Floor
Montpelier, VT 05602
New York, NY 10038
5
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The Honorable Alexis Herman
- S- -
January 22, 1998
encls: Letter of Raymond Uhalde to the Honorable Patrick Leahy
Memorandum in Support of Vermont Bill Amending the Unemployment Compensation
Law to Cover Separation from Work Due to Family and Medical Leave
SB 143
cc:
Senator Patrick Leaby
Hon. Jan Backus, Vermont Legislature
6
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JUL 23. 1'97 09:46 FR SEN LEAHY
202 2243479 IU 318026560503
1.02/00
U.S. Department of Labor
Assistant Secretary for
Employment and Training
Washington, D.O. 20210
JUL
17 1997
The Honorable Patrick Leaby
United States Senate
Washington. D.C. 20510-4502
Dear Senator Leahy:
Your letter to Cynthia Metzler, former Acting Secretary of Labor,
concerning the Department's objections to Vermont Senate Bill
(SB) 143 was sent to me because the Employment and Training
Administration has oversight responsibility for the Federal-State
Unemployment Insurance (UI) Program.
AS you know, SB 143 provides that a worker taking leave under
Vermont's family leave law 'shall be deemed able and available
for work" for UI purposes. Our Regional Office in Boston has
advised the Vermont agency that SB 143 would conflict with
Federal UI law since a worker would be considered able and
available for work regardless of the facts of the situation.
Although we appreciate your concerns regarding family leave and
Vermont's potantial fund surplus. we believe the Regional Office
has taken the correct position. Following are our reasons.
AS conditions for participation in the Federal-State UI program,
Federal law requires payment of UI through public employment
offices and limits withdrawals from a State's unemployment fund
to payments of cash benefits to individuals with respect to their
unemployment. 26 U.S.C. $5 3304 (a) (1) and (4), and 3306 (h) I 42
U.S.C. SS 503 (a) (2) and (5). We have consistently interpreted
these provisions as requiring that State UI laws contain tests to
assure that UI is paid only to workers who lose their positions
when employment slackens and who, while maintaining their
connection to the labor force, cannot find other work.
That this was the intent behind these provisions is clearly
demonstrated by the history of the 1935 legislation creating the
Federal-State UI program. The creation of the UI program was
recommended by the Committee on Economic Security's Report to the
President which stated that, to serve its purposes, UI "must be
paid only to workers involuntarily unemployed. The employees
compensated must be both able and willing to work and must be
denied benefits if they refuse to accept other suitable
employment." (Page 18 of Report.) According to the Senate
Committee report for the legislation, the "essential idea in.
unemployment compensation is the creation of reserves during
07/23/97 09:42
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7
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JUL 20
yr 09.41 PR DC/V LENNI
CEAL Carents IV
r.aveo
- 2 -
periods of employment from which compensation is paid co workmen
who lose their positions when employment slackens [that 18, the
worker losse his/her tobl and who cannot find other work.
(Emphasis added.) S. Rep. No. 628, 74th Cong. 1st Sess. 11
(1935) The report goes on to say that UI differs from relief
"in that payments are made as a matter of right, not on a needs
basis, but only while the worker is involuntarily unemployed."
Id.
To operate an acceptable UI program a State must, therefore,
establish a genuine test to determine if an individual is
unemployed due to lack of work. The able and available
requirement is a longstanding, accepted test for determining
this. Since 1937, issuances by the Department and its
predecessor agencies have advised that State laws must contain
able and available requirements to conform with Federal law.
Section 5000.B in Part V of the Employment Security Manual states
that States must assure that UI will be paid "only to individuals
who are unemployed and who are able to work and available for
work."
Under the Vermont proposal, the availability of all workers on
family leave is presumed without consideration of individual
circumstances. As a result, no real test of availability for
suitable work is applied to a worker on family leave even though,
in most cases, a suitable job (that is, the job from which the
worker is on leave) is available for that worker.
Your letter forwarded a legal memorandum supporting SB 143 which
made several points touching on Federal UI law. The enclosure
responds to these points. Note that Item 4 of the enclosure
addresses a narrow situation where workers on family leave may be
considered available, and thus potentially eligible for DI.
Although the UI program is not. in most cases, the appropriate
vehicle for providing income replacement to individuals on family
leave, other approaches exist. Vermont could establish a
separate program with benefit and administrative COSTE funded
either from general revenues or a special payroll tax. If the
state establishes a payroll tax, it could be accompanied by a
corresponding reduction in employer UI contributions 50 that the
program would initially be cost neutral for employers. We note
that this approach is being proposed in Vermont for other
purposes. As always, we are willing to work with Vermont to
accomplish the aims of SB 143 in a manner consistent with Federal
law.
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JUL 23 '97 09:07 FR SEN LEAHY
202 2243479 IU
1,64/00
- 3 -
I hope that I have been able to clarify the Department's position
with regard to SE 143. If you have any further questions, please
feel free to contact Grace Kilbane, Director, Unemployment
Insurance Service. Her telephone number is (202) 219-7831.
Sincerely,
RAYMOND J. CHALDE
Acting Assistant Secretary
Enclosure
07/23/97 09:42
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CARD
FEDERAL ISSUES RAISED IN LEGAL MEMORANDUM
1.
The determination of a "voluntary quit" is reserved to the
states.
One of the basic Federal law tests of unemployment is
whether a worker is able and available for the week for
which UI is claimed. If B voluntary quit occurs in a week
claimed, an availability issue is created because the quit
suggests the individual has taken him/herself out of the
labor market. States are free to determine if any
ineligibility arising from the voluntary quit is applied
beyond the week the quit occurred. since SB 143 modifies
the disqualification provision for weeks beyond the suit,
this aspect raises no Federal issue.
The Department is developing a directive encouraging
liberalization of voluntary quit provisions when good
personal cause exists. Workers available for work should
not be penalized by reason of separation from work for good
cause.
2.
"Vermont and 10 other states exempt workers who are ill or
disabled from their work-search requirements".
All eleven States apply these provisions to workers whose
illness occurs after separation from work, who had already
registered for work with the State employment service, and
who were not offered (and therefore did not refuse) suitable
work. Under these provisions, workers demonstrate
availability by seeking work through the employment service
and by being required to accept suitable work. Thus, these
States apply an availability tast. Under SB 143, however,
availability is presumed even though, by remaining on leave
when a job is available, the individual may be unavailable
for work.
3.
workers may maintain an employment relationship while
collecting UI.
There is no Federal requirement that an employment
relationship must be severed before UI is paid. Workers
regularly receive UI due to reduced workweeks and short-term
layoffs. However, the workers must continue to be available
for work. The court cases cited in the memorandum recognize
the importance of availability requirements since the courts
applied them in each case based upon each claimant's
individual circumstances.
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JUL as
y/ 09.40 PR SCN LEMI
CCIE CCY-MIN IW
- 2 -
4.
States have latitude to determine what constitutes
availability for work.
Although this is true, States must still have a genuine test
of availability. The Vermont proposal eliminates any test
for workers on family leave by substituting a conclusive
statutory presumption of availability even when facts
demonstrate the individual 1s unavailable. No examination
of the individual's circumstances is made.
Only after a genuine test of availability is applied
may a worker on family leave be determined eligible.
For example, a worker on the night shift may be forced
to take family leave because the employer is unable to
accommodate the worker's request to work the day shift.
The worker remains available for day work. If this is
the case, no Federal issue is raised concerning
availability.
5.
The Commission on Family and Medical Leave established by
congress recommended that States modify their UT laws to
make it possible for workers to take leave.
The Commission's report did not discuss Federal law
requirements for the UI program, nor did it explicitly
recommend what provisions of State law be amended. We
assume that the Commission recommended States anact only
amendments consistent with Federal UI law.
As noted above, when the facts and circumstances indicate a
worker on family leave is able and available, such worker
may be eligible for UI. Also CLSE noted above, States may
modify their voluntary quit provisions concerning family
leave.
NON TOTAL PAGE. as **
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February 26, 1997
Memorandum in Support of Vermont Bill Amending
the Unemployment Compensation Law to
Cover Separation from Work Due to Family and Medical Leave
prepared by
AFL-CIO
National Employment Law Project
Women's Legal Defense Fund
Summary
The Vermont Legislature has a bill pending to provide unemployment compensation to
individuals who are on unpaid leave under circumstances that qualify for coverage under the state
family and medical leave law. 21 Vt. Stat. Ann. §§ 471-474. The main question addressed by this
memo is whether the proposed legislation complies with the federal laws, specifically the Federal
Unemployment Tax Act (FUTA) and the Social Security Act (SSA), that regulate the shared
federal-state unemployment compensation system. 26 U.S.C. §§ 3304, 3306; 42 U.S.C. § 503.
As detailed below, the proposed law complies in all respects with federal unemployment
law given the substantial deference accorded the states in defining the relevant terms of
disqualifications and continuing eligibility necessary to implement the bill In addition, the
Family and Medical Leave Act (29 U.S.C. §§ 2610 et seg.) and the Employee Retirement Income
Security Act (29 U.S.C. §§ 1001 et seq.) do not preempt the proposed legislation. Thus, consistent
with federal law and sound policy considerations, we support the legislation as a model for states
to better address the current needs of working men and women to balance the demands of work
and family.
Purpose of the Shared
Federal-State Unemployment Law
The federal-state unemployment system, as enacted in 1935, left the states with the
primary discretion to dictate the scope of their unemployment laws. The federal-state framework
was adopted after significant debate which led to the rejection of proposals for a national
unemployment system. Thus, as certified by the U.S. Department of Labor, the states must
comply with a limited set of federal mandates to qualify for federal administrative funding and the
federal tax credit applied against an employer's state unemployment taxes.
As described by the Executive Director of the Committee on Economic Security, which
was appointed by President Roosevelt to draft the Social Security Act "At the very outset of its
final deliberations, the committee decided against federal dictation regarding the content of state
unemployment compensation laws. It reached the conclusion that the federal bill should contain
only a few necessary standards
Edwin Witte, The Development of the Social Security Act
(University of Wisconsin Press: 1952), P. 125. According to the federal Advisory Council on
Unemployment Compensation, 2 federal role exists where "necessary to secure basic national
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page 2
interests." Advisory Council on Unemployment Compensation, Defining Federal and State Roles
in Unemployment Insurance (January 1996), p. 26.
In the end, rather than impose specific federal restrictions on state legislation on general
matters of eligibility, coverage and disqualifications, the Committee on Economic Security
decided to draft suggested state legislation which meets the minimum federal requirements.
Social Security Board, Draft Bills for State Unemployment Compensation of Pooled Funded and
Employer Reserve Account Types (Washington, D.C.: 1936). Most states, including Vermont,
adopted the suggested legislation of the Committee on Economic Security. This model, in fact,
formed the basis of the nation's unemployment laws, which continue to evolve to meet the
changing needs of the workforce.
Elements of Federal Compliance Related
to the Vermont Unemployment Compensation Bill
The proposed Vermont law, providing for unemployment benefits when workers are on
leave for family and medical needs, amends the state's unemployment law in two key areas: 1)
"voluntary quit" is defined to limit the disqualification for claimants who leave work temporarily
for family and medical leave purposes; and 2) "able and available" for work is defined to exempt
claimants who are on family and medical leave from the work-search requirement. We address
each of these provisions in num to determine whether they comply with the requirements of the
federal unemployment law.
I. The proposed state law, limiting the duration of the voluntary quit disqualification for
claimants who leave work for family and medical leave reasons, complies with federal law.
While the definitions section of the federal unemployment law defines numerous terms,
including "employer", "wages" and "compensation", conspicuously absent is any definition of the
phrase "voluntary quir". 26 U.S.C. §§ 3306 et seq. In contrast, the suggested state laws drafted by
the Committee on Economic Security include a proposed definition of "voluntary quis" which has
been incorporated into most state unemployment laws with variations in scope from state to state.
The absence of language defining "voluntary quit" in the federal law, contrasted with the presence
of the phrase in the suggested state laws, convincingly demonstrates that this was an issue reserved
for the states to decide.
Indeed, there are numerous examples of state laws that go further than the proposed
Vermont law (the Vermont bill continues to disqualify claimants for "voluntarily" leaving their
jobs but limits the duration of the disqualification when they leave work to take family or medical
leave). For example, over one-third of the states cover compelling individual circumstances
requiring an individual to leave her job, which are not limited to reasons directly connected with
the employment Advisory Council on Unemployment Compensation, Unemployment Insurance
in the United States: Benefits. Financing, Coverage (February 1995), PP. 110-112. These laws
cover claimants who leave their jobs for reasons related to compelling family circumstances.
Another 23 states, including Vermont, have enacted special provisions for employees who leave
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page 3
work due to an illness or disability not necessarily connected with the individual's employment.
U.S. Dept. of Labor, Comparison of State Unemployment Insurance Laws January 1996), Table
401.1.
Among them, Maine, California, Washington, Iowa and Illinois have statutes that excuse
voluntary separations from work under circumstances most similar to those warranting FMLA
protected leave. For example, the Illinois law states that the voluntary quit disqualification shall
not apply to a claimant who left work voluntarily to care for the individual's medical needs or the
health needs of a spouse, child or parent. Ill.Stat § 601(B)(1) (exempting a claimant who leaves
work "because he is deemed physically unable to perform his work by a licensed and practicing
physician, or has left work upon the advice of a licensed and practicing physician that his
assistance is necessary for the purpose of caring for his spouse, child or parent who is in poor
physical health, and such assistance will not allow him to perform the usual and customary duties
of his employment, and he has notified the employing unit of the reasons for his absence.")
2. The proposed state law. exempting claimants who are on unpaid family and medical
Idave from the work-search requirements. complies with federal law.
The states also have considerable latitude to set "able and available" for work standards
Here too, there is no federal statutory law on the subjecz, which contrasts with the Committee on
Economic Security's suggested state law. Thus, the proposed exemption from the work-search
requirement for claimants who are on unpaid family and medical leave complies with the shared
federal-state framework of the unemployment compensation system.
Many states exempt workers in similar situations to those that would be covered by the
proposed Vermont law. Most on point, Vermont and 10 other states exempt workers who are ill
or disabled from their work-search requirements. U.S. Dept. of Labor, Comparison of State
Unemployment Insurance Laws January 1996), Table 401.1. The current Vermont law, which
would be extended under the proposed bill to apply to family and medical leave, provides that
"no claimant shall be considered ineligible in any week of unemployment for failure to comply
with the provisions of this paragraph if such failure is due to an illness or disability which occurs
after he has registered for work
21 Vt. Stat.Ann. § 1343(a)(3).
U.S. Department of Labor
Guidance Interpreting the Federal Law
In reaching the conclusion that Vermont's unemployment law may cover claimants on
unpaid family and medical leave consistent with federal law, we are not unmindful of a 1970
statement of the U.S. Department of Labor (DOL) interpreting the federal law to require
payment of unemployment benefits "only to individuals who are unemployed and who are able to
work and available to work
Employment Security Manual, Part 5000(B) (August 31, 1970).
DOL's interpretation is based on the provision of FUTA defining "compensation" as "cash
benefits payable to individuals with respect to their unemployment." 26 U.S.C. § 3306(h). From
this language, combined with the requirement that funds withdrawn from the federal trust fund
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"shall be used solely for the payment of unemployment compensation," DOL reads into the law a
requirement that the claimant be "unemployed" and "able and available" for work.
To the extent that the 1970 subregulatory manual is still DOL's standing policy, it only
indicates that states are expected to maintain these general requirements in their state law.
Wisely, the DOL manual did not attempt to define for the states the terms "unemployed" or "able
and available" for work The states have broad latitude to define "able and available" for work,
as described above. Whether an individual is sufficiently "unemployed" is also a matter for state
law to decide. As with the other general standards of eligibility and disqualification described
above, the term "unemployed" is not defined in federal law and was left for inclusion by the
Committee on Economic Security in the suggested state laws.
Certainly, federal law allows claimants to be considered "unemployed" and recover
benefits while on unpaid leave, as proposed in the Vermont law. Indeed, there are many
circumstances where workers are entitled to unemployment benefits while maintaining an
ongoing relationship with their employer. For example, nearly all states (including Vermont)
operate a "partial" unemployment benefits program, meaning that benefits are paid to workers
who are still employed but whose hours have been reduced below full time. U.S. Dept. of Labor,
Comparison of State Unemployment Insurance Laws January, 1996), Table 306. The same is
true of "short-time compensation" or "work-sharing" programs that have been adopted by 17
states (including Vermont), where unemployment benefits are paid to current workers whose
hours were reduced in order to avoid layoffs. Id. at p. 3-17.
The case law also highlights that the states are free to determine whether-and to what
extent the employer-employee relationship must be severed for the worker to be considered
unemployed. In Donahue V. Dept of Employment Security. 142 Vt. 351, 355 (1982) the
Vermont Supreme Court held that "nowhere does the statute require that an individual be wholly
unattached to any employer" to be considered "unemployed". As a result, the Court awarded
benefits to a group of hourly paid, nonprofessional school employees during the three-weeks of
Christmas, mid-winter and spring vacations observed by the Vermont public schools. During that
time, the claimants did not perform any work and did not receive any pay. However, as the
Court noted, the "claimant's relationship with his or her employer had not been severed by these
regularly scheduled vacation period recesses."
In Pennsylvania Electric Company V. Board of Review. 450 A2d 779 (Pa. Cmwlth. 1982),
the court specifically addressed whether a claimant was "unemployed" while on unpaid leave.
The claimant was properly awarded benefits, the court found, when she placed on unpaid sick
leave after becoming pregnant and presenting medical certification that her job threatened her
and her child's safety. While separated from the work and without pay, she continued her life
insurance and hospitalization coverage. She was entitled to receive holiday pay, when applicable,
and to return to work when released by her physician. The court found that to be "unemployed"
it was sufficient that "the claimant has not performed any services, nor has she received any
renumeration." Id. at 782. See also Terterman V. Appeal Board, 1988 Del.Super. LEXIS 3
(1987) ("the fact that the employer-employee relationship WELS not completely severed does not
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disqualify the claimant from benefits as the statute does not require such severance.")
Indeed, as described in Donahue, supra, existing Vermont law defining "unemployed"
simply requires that the claimant not be earning wages and not be performing services, which
encompasses the right to coverage while on unpaid leave. 21 Vt. Stat.Ann. §§ 1301(9)(A), (B) (the
claimant "performs no services and with respect to which no wages are earned."). As
recommended by the Advisory Council on Unemployment Compensation, there is a strong
federal interest which should be promoted by DOL to encourage state laws that expand access to
unemployment benefits where workers leave their jobs for "legitimate family reasons". Advisory
Council on Unemployment Compensation, Defining Federal and State Roles in Unemployment
Insurance (1996), PP. 12-13. Thus, the proposed Vermont law, and its definition of
"unemployed" which encompasses unpaid leave, are consistent not only with federal law but also
with the policies that the ACUC has identified as necessary for increased national support on the
part of the DOL.
No FMLA & ERISA Preemption
Finally, the Vermont bill, as proposed, is not preempted either by the FMLA or ERISA.
FMLA clearly states that it does not preempt any provision of state law that is more beneficial to
the covered employees. 29 U.S.C. § 2651. States therefore may provide more beneficial family
and medical leave protections, but not less than what is required by FMLA. For example,
Vermont's state law applies to employers with at least 10 employees compared with the FMLA,
which covers only employers with at least 50 employees. With respect to ERISA, the statute
specifically exempts state unemployment compensation from its broad preemption provision. 29
U.S.C. § 1003(b)(3).
Policy Considerations
In Support of the Vermont Bill
The proposed bill is also supported by sound policy considerations. According to the
bipartisan Commission on Family and Medical Leave, which was established by Congress to
study the impact of the FMLA, the major reason why employees in FMLA-covered businesses do
not take FMLA leave is that they cannot afford to do so. In order to make it possible for workers
to take needed leave, the Commission on Family and Medical Leave recommended that serious
consideration be given to the development of a uniform system of wage replacement Specifically,
the Commission suggested that states extend unemployment compensation qualifications to
employees on family and medical leave. Commission on Family and Medical Leave, A Workable
Balance: Report to Congress on Family and Medical Leave Policies (1996), P. 199-199. The
Carnegie Corporation made similar suggestions to finance family and medical leave. Carnegie
Corporation, Starting Points. Meeting the Needs of Our Youngest Children (1994), P. 47.
The bill is also a response to the well-recognized need for state unemployment
compensation programs to adapt to changes in the labor market, particularly the expanding role
of women in the workforce. As indicated above, the Advisory Council on Unemployment
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Compensation recommended strongly that the unemployment compensation system expand
access to employees, mostly women, who lose their jobs due to compelling "individual"
circumstances, including family responsibilities. Advisory Council on Unemployment
Compensation, Unemployment Insurance in the United States: Benefits, Financing. Coverage
(1995), Recommendation 21, P. 19; Defining Federal and State Roles in Unemployment
Insurance (1996), Recommendation 8, P. 12-13.
Extending unemployment compensation to workers on unpaid leave also allows them to
return to work rather than forcing them to search for new jobs This promotes stability in
employment and strengthens the national economy, which are key policy objectives of the
unemployment system. See Advisory Council on Unemployment Compensation, Defining
Federal and State Roles in Unemployment Insurance, p. 27. The proposed Vermont law
effectively creates less unemployment by allowing workers to keep their jobs while on leave and
less hardship on those separated from work when necessary to care for themselves or their
families.
Conclusion
Accordingly, consistent with federal law and sound policy considerations, we strongly
support the proposed Vermont legislation as a model for states to better address the current needs
of working men and women to balance the demands of work and family.
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BILL AS INTRODUCED
Page 1
1997
S.143
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2
Introduced by Sepator Backus of Chirtenden County and Senator Bartlett of Lameille
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County
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Referred to Committee on
S
Date:
6
Subject: Labor, unemployment compensation; family and parental leave
7
Statement of purpose: This bill proposes to authorize finding of wage replacement
8
benefits for employees taking family or parental leave.
9
AN ACT RELATING TO UNEMPLOYMENT COMPENSATION AND FAMILY
10
AND PARENTAL LEAVE
11
It is hereby enacted by the General Assembly of the State of Vermont:
12
Sec. 1. FINDINGS AND BURPOSE
JR
13
The General Assembly finds that family and parental leave laws enacted in this state and
14
the nation we largely ineffective because workers who most need the law's protections
15
are least able to afford to take leave when they are ellgible to do so, It is therefore the
il
16
purpose of this act to amend Vermont's unomployment compensation laws to make
17
workers eligible for compensation in circumstances in which shey take family or parental
18
leave
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To:
Maurice Emsellem, Esq. at NELP
From:
Wendeline De Zan, Intern
MEMORANDUM
Subject: State UI Laws:
Date:
November 6, 1998
State UI Laws
Exempting Workers on Recall from Work Search
State:
Arkansas
Citation:
Ark. Stat. Ann 11-10-507 (1997)
Brief:
Employee on short-term layoff, expecting recall to a full-time job w/in 8 weeks
is not required to register for work or to seek other work.
Provision:
An insured worker shall be eligible to receive benefits
(3)(E) An individual on short-term layoff who expects to be recalled by his
employer to @ full-time job and whose employer intends to recall the individual
to a full-time job within eight (8) weeks after the initial date of his layoff shall
not be required during the layoff to register for work at an Arkansas
Employment Security Department office or to seek other work.
State:
Michigan
Citation:
Mich. Comp. Laws § 421.28 (1979) (Mich. Stat. Ann. § 17.530 (1998))
Brief:
Employee on short term layoff, expecting recall w/in 45 days is not required
to register for work and be available if employer notifies commission in writing
that Employer will take back Employee within 45 days.
Provision
(a)
The requirements that the individual report at an employment office,
register for work, be available to perform suitable full-time work, and
seek work may be waived by the commission if the Individual is laid off and
the employer who laid the individual off notified the commission in writing or
by computerized data exchange that the layoff is temporary and that the work
is expected to be available for the Individual within a declared number of
days, not to exceed 45 calendar days
if Individual is not recalled within the specified period, the waiver shall
cease to be operative with respect to that layoff
requirement that the individual shall seek work may be waived by the
commission where it finds that suitable work is unavailable both in the locality
where the individual resides and in those localities in which the individual has
earned base period credit weeks
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001
U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
3 LABOR
Washington, D.C. 20210
UNITED STATES of
FAX COVER SHEET
OFFICE OF THE ADMINISTRATOR
WAGE AND HOUR DIVISION
FAX NUMBER (202)219-4753
COMMERCIAL (202)693-0051
TO: Nicole Rabner
DATE: 12/2/98
FAX NUMBER: 456-9412
PAGES: 12
(include cover sheet)
LOCATION:
FROM: Kathy Curran.
If you do not receive all of the pages please call:
NAME:
NUMBER: 459
COMMENTS/INSTRUCTIONS:
Sorry it truc 80 long- heris on dieft
discussion - leti talk.
K.
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R
DRAFT 12/1/98, 3:20 p.m.
Federal Support for State Paid Parental Leave Initiatives
The Family Medical Leave Act, signed into law by President Clinton on February 5,
1993, signaled our nation's recognition that American workers face enormous obstacles
in their struggle to balance work and family, and that the federal government can, and
should, play a role in helping to achieve that balance. The FMLA enables millions of
working Americans to care for a child after birth or adoption, by providing up to 12
weeks a year of unpaid, job-protected leave. But many of those workers are unable to
take the full amount of time they need and are entitled to, because they simply cannot
afford to go that long without a paycheck. Other workers who are not protected by
FMLA but have access to unpaid leave can face the same dilemma.
Several state governments are exploring strategies to provide wage replacement for
parents who have access to and want to take leave to care for a newborn or newly
adopted infant but cannot afford to do so, The Administration could assist states in this
effort, and encourage more states to consider their own paid leave initiatives, through a
federally funded grant program. The funds could be used by states to support research
and development activities; to subsidize benefits in a pilot or demonstration program; to
underwrite the administrative and implementation costs of starting up a state-funded
benefit program; and to evaluate the success of state initiatives.
Supporting these initiatives would not only benefit the working citizens of the individual
states, but would also allow us to explore, through the "laboratory of the states," which
approaches to paid parental leave work best and which approaches provide the most
promising models for a nation-wide paid leave plan.
First, a caveat: any proposal to encourage paid leave should be considered in the
context of proposals to raise the minimum wage and to expand FMLA (by lowering the
coverage threshold to 25 and/or giving covered employees 24 hours/year for routine
medical care for children/elderly parent or to attend school conferences). Also, we
should be aware of, and avoid, the possibility that any policy decisions or funding
decisions could create negative incentives for employers who currently, or might
otherwise, provide paid leave for their employees.
1. What States are Doing: InItiatives States Have Implemented or are Considering:
Several states have taken or are considering taking steps to address the problem,
either as employers themselves or as a state-wide policy. In almost all cases, these
efforts are just beginning and could be encouraged and energized by federal support.
These state efforts can be broadly categorized into four groups: state-as-employer;
direct benefit; insurance model; and research:
We are still awaiting more information on current state efforts in this area.
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Nevertheless, most states have not pursued paid leave proposals. We have not
determined why there has been only modest interest in this area. Therefore, it is
unclear if these proposals would be sufficiently interesting to states to pursue.
State as employer:
We have identified only one state that provides paid parental leave to its own
employees. In Ohio, state employees can receive up to four weeks of paid parental
leave at 70% of base salary.
Direct benefit:
One state currently provides some paid parental leave to low-income workers. Under
Minnesota's At-Home Infant Care Program, working, low income parents not on
welfare can receive up to 75% of the state child care subsidy as wage replacement.
Insurance model:
Several states are exploring whether to use existing state insurance programs as a
means to provide working parents with paid leave. Currently, coverage varies among
states.
California, New York and New Jersey all have looked into expanding their Temporary
Disability Insurance (TDI) programs to cover parental leave. TDI plans provide paid
leave to employees who must take leave due to a non-work related illness or injury¹:
California: Considered a plan to allow FMLA leave takers to qualify for TDI but
tabled it pending additional research.
New Jersey: New Jersey's TDI currently provides women with a pregnancy-related
disability benefit up to $364 weekly (or 2/3 of their earnings) typically for 6 weeks
following a normal delivery. A bill was introduced in 1997 to extend TDI coverage
for parental leave (birth or adoption) and for leave to care for seriously ill spouse,
child or parent. ("Paid Family Leave Act.")
New York has also considered a bill that would allow the use of workers'
compensation disability benefits to cover FMLA leave.
Two states, Vermont and Massachusetts, have looked at using the Unemployment
Insurance system to provide paid parental leave:
Massachusetts is exploring using both UI and TDI for family leave. Two bills are to
be introduced in early December 1998. The first would provide unemployment
1 Work-related illnesses are typically covered by state workers' compensation programs.
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benefits for employees who must leave work for family or medical reasons (whether
or not covered by FMLA or the state FML law), using monies in the unemployment
solvency fund. The second would establish a TDI system in Massachusetts, which
will include eligibility for up to 16 weeks of parental leave for the birth, adoption,
foster care or placement of a child, and will provide partial wage replacement during
the leave period. A Family and Employment Trust Fund would be established to pay
the benefit, funded by employer contributions.
Vermont: Proposed legislation would have extended UI benefits to workers taking
leave covered by the state family and medical leave law.
In addition, many employees have access to short-term or long-term disability
insurance through their employers.
NB: In response to Vermont's request for an opinion on their proposed legislation, the
Department of Labor has taken the position that use of UI trust fund monies for this
purpose would violate the requirement under the Federal-State UI program that
recipients must be involuntarily unemployed, and able and willing to work.
Research:
Maryland: A bill was introduced (when?) to set up a task force to study paid leave.
(status/outcome?)
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II. How the Federal Government Can Help: Federal Grants to Support/Assist
State Initiatives/Demonstration Projects
Purpose and design of the grant program:
The Administration could propose a federal grant program that would assist states in
developing or implementing paid leave initiatives or demonstrations by making federal
funds available to state grantees for the following purposes:
To subsidize part or all of the benefit;
To cover some or all administrative costs of developing and implementing a paid
leave program;
To conduct research and to develop paid leave proposals;
To evaluate impacts of programs.
States would be invited to submit proposals, and grants would be awarded
competitively, with the size and number of awards dependent upon the amount of
funding available. (See below for cost discussion.)
If the Administration decides to pursue this proposal, it would be necessary to consider
exactly how we wish the program to work, what goals we want to achieve, and how to
design an appropriate grant program. Among the issues/options to consider in
designing a grant program would be:
-Identify specific policy goals to be served in addition to increasing workers'
ability to take new parent leave, if any.
-Whether to make all the grants competitive, or to make a portion of the funding
available to any state that applied, for example, for research activities.
-Decide how general or specific the grant criteria should be: should we make
funding available to any project proposal that seems promising, and if so, how
will we determine which proposals to select; or to develop specific grant criteria-
for example:
- size of population to be served
- issues to be researched
- participation of third parties (such as universities) to assist in evaluation
activities
- length or amount of benefit
-Whether to subsidize benefit amounts, for what groups, and in what amounts,
for example:
- subsidize 50%? 25%? 10%? Or a fixed dollar amount.
- only for recipients under a certain income level?
- only for recipients with a certain workforce attachment?
-How do we evaluate the success and/or consequences of various approaches
to providing parental leave, and if so, by what criteria? For example:
- at what benefit level/benefit duration are workers are various incomes
more likely to take leave?
- what impact does paid leave have on new parents' return to the
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006
workforce?
. what impact does paid leave have on employer incentives to provide
paid leave? unpaid leave (if not FMLA-covered)?
-Would we award grants to state proposals to develop paid leave plans for their
own employees?
-Could substate governmental units also apply for grants, and if so, could they
apply in their capacity as employers?
-What is the appropriate agency to administer the grant program.
Authority and appropriations:
In addition to new funds for the grants, we would need to have legislative authority for
the grant program. It is possible that legislative authority for current DOL programs
could be used for awarding grants to certain kinds of proposals. For example, Section
513 of ERISA (29 U.S.C. 1143) gives fairly broad authority to do research, surveys, and
studies either by contract or grants related to employee benefit plans. Under this
section we might be able to fund a state proposal to use, or explore using, employee
benefit plans to provide paid parental leave. We may also be able to find limited
authority under JTPA or other ETA programs.
Existing authority is likely to be quite limited, however, and new legislation would likely
be necessary to authorize a more flexible and complete grant program.
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III. Cost Estimates: Costs, Pros And Cons Of Grant Proposals
All figures are estimates based upon similar experiences. Actual costs may vary
greatly. If any option is chosen for further consideration, more refined cost estimates
must be developed.
1. Support research and development activities
OPTION 1: fund academic, white paper type research focussing on existing paid leave
no Part this as
plans: why they work; why there aren't more; impact on other benefits; etc. Could
include a conference where papers are presented.
Costs: cost per review-type paper estimated at $50,000. Additional funds would
be necessary for an optional conference.
Pros: very helpful in laying groundwork for widespread provision of paid leave,
e.g., there are a number of questions (such as those mentioned above) that should be
answered before proposing any widely applicable, costly paid leave program; option
works well with Rep. Woolsey's plans
Cons: not newsworthy until findings are made (and then only if at a high profile
conference), but could be done in conjunction with #2 and #3 and/or Woolsey's plan
OPTION II: fund state paid leave commission(s) including survey and review of existing
paid leave plans (private or state-funded)
Costs: minimum funding for a single state commission including administration,
travel and survey/review, assuming meets 6 times in one year: travel $50,000;
administration (2 staff persons) $125,000; survey/review paper (1) $50,000. This
assumes no payment to commissioners other than per diem and travel cost
reimbursements. For a paid executive director assume an additional $125,000 for
salary and benefits.
Pros: more newsworthy than option I if can provide sufficient money and chose
high profile state(s); could be done in combination with option I to provide solid
foundation (politically and factually) for implementing federally or state-funded paid
leave programs or expansion of privately funded plans.
Cons: only slightly more newsworthy than option I (and only when findings are
released). Research at this price will be relatively superficial, lacking new survey data.
OPTION III: update FMLA Commission national survey work with emphasis on
collecting paid parental leave data
Costs: previous work included both an employee and an employer survey.
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008
Either part or both could be updated. Minimum cost of employee survey is $500,000.
Both surveys previously cost $1,200,000.
Pros: data would allow us to assess for the need for new programs and target
programs to people who most need the help, revised surveys would also provide
(currently unavailable) data needed to "cost-out" these program; as a side benefit would
provide WH with much longed for data on FMLA
Cons: costly compared to previous two options; time consuming (probably 9
month) before results are available.
2. Subsidize benefits and administrative costs in a pilot or demonstration project
OPTION: state or employer funded paid parental leave (modeled after $200 a week
federally paid leave proposal)
Costs: For all states assume $113m for start up costs based upon using UI
system (ranging from $250,000 to $2,500,000 per state). For all states assume yearly
operating costs for approximately $162m $193m ($3m to $4m per state); benefit costs
assuming $200 standard weekly per person benefit varies from $425m to $1.8b ($9m-
$38m per state) assuming between 4 and 12 weeks of paid leave to women with
infants. Cost per state total for first year $14m- $42m:
Can therefore fund at:
$50m 1-3.5 states
$100m 2-7 states
$250m 6-18 states
$500m 12-36 states
Pros: provides some real benefits to real people in need; more cost effective
way to test concept of paid leave; experience could help with passage of federal
legislation or lead to more states and private employers providing paid leave
Cons: possible legal and political obstacles to the federal government providing
benefits to a small set of persons through a grant mechanism; may be difficult to specify
who is or isn't eligible for benefits (e.g., under a grant, can work force attachment
requirements, income thresholds, etc. be specified?); may be difficult to find acceptable
benefit delivery system that can process claims quickly. (could not mandate services in
UI system or in workers' compensation system.); paid leave benefits (vs. just using
federal funds to cover administration) does not lend itself well for a one-time
intervention. would states be willing to pay for funding program (i.e. benefit) costs in the
out years? state provided benefits may discourage employers from providing similar
benefits.
3. Underwrite administrative/implementation costs of starting up a state-funded program
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OPTION I: TDI expansion (to add expanded parental leave) in the five jurisdictions that
currently have paid leave
Costs: Fund the administrative changes; less than $10,000,000
Pros: expands benefit coverage when new paid leave programs are started,
making a real difference for workers; may have fewer political/legal obstacles as well as
less costly than directly funding benefits
Cons: paying for administrative costs may not be sufficient incentive for states to
expand TDI; would probably require state legislative changes to include parental leave
for men and for adoptions; may require higher premiums for employers and employees;
not only not as newsworthy as paying for benefits but may not be newsworthy if seen as
only a small change in benefits
OPTION II: TDI startup in non-TDI states
Cost: For all states assume $113m for start up costs based upon using UI
system (ranging from $250,000 to $2,500,000 per state). For all states assume yearly
operating costs for approximately $162m - $193m ($3m to $4m per state); future years
administrative costs would come from the insurance premiums.
Can therefore fund at:
$50m 9-10 states
$100m 17-20 states
$250m all states
Pros: expands coverage to more states; minimal federal cost; provides new real
benefits when paid leave programs are started; state TDI programs are
employee/employer tax based and could be funded by states on a continuing basis not
just for the period of the grant. this may have fewer political/legal obstacles and longer
term impact than directly funding benefits; provides benefits in addition to parental
leave benefits (such as illness or injury).
Cons:- federally only paying for administration not as newsworthy as providing
benefits; may not be sufficient incentive to states to start a TDI program - we have no
indication of how many, if any states, would be interested; may need competitive grant
process which would be difficult to set up given the varying costs that come with varying
state sizes; could not mandate delivery of services through UI system or through
workers' compensation system.;
OPTION III: state or employer funded paid parental leave (modeled after $200 a week
federally paid leave program)
Costs: For all states assume $113m for start up costs based upon using UI
system (ranging from $250,000 to $2,500,000 per state). For all states assume yearly
8
12/02/98 WED 16:04 FAX 2022195122
WAGE & HOUR
010
operating costs for approximately $162m - $193m ($3m to $4m per state); future years
administrative costs would come from the insurance premiums.
Can therefore fund at:
$50m 9-10 states
$100m 17-20 states
$250m all states
Pros: provides real benefits when new paid leave programs are started; may
have fewer political/legal obstacles than #2; less costly than #2
Cons: may still have some of the political/legal obstacles (mentioned earlier)
when singling out a few employers/states; not as newsworthy as providing benefits;
need to identify source of benefit funds; not likely to be sufficient incentive to states or
employers to implement new paid leave plans which require large continuing benefit
costs; could not mandate delivery of services through UI system or through workers'
compensation system; might discourage private sector provision of paid leave benefits
9
5
011
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WAGE & HOUR
Paid Parental Leave: the Federal Government as a Model Employer
Set forth below are estimates of what it would cost the federal government as an
employer to implement a paid leave plan for parents of newly born or adopted infants,
similar to the broader proposal we have been discussing: a paid leave benefit of $200
available for parents of newly born or adopted infants. The Office of Personnel
Management (OPM) calculated the cost of making the benefit available for either six
weeks or twelve weeks, for a program with an income cap and a workforce attachment
requirement.
To begin the calculations, you need to know how many federal employees are likely to
need to take the leave, that is, how many federal employees have newly born or
adopted infants, and what portion of those take leave. However, OPM tracks only the
types of leave taken by federal employees (i.e., annual or sick leave or leave without
pay). OPM has no data on the reasons federal employees take leave, nor do they have
data on the rate at which federal employees take FMLA leave.
In 1997, approximately 2.8% of the employed female U.S. workforce had children under
the age of 1 year. (CPS, 1997) Using that as a very rough proxy, we asked OPM to
assume that at any given time 2.8% of the workforce (male and female) will have a
newly born or adopted infant.
COST ESTIMATES:
The following are the costs of allowing full-time, permanent, executive branch
employees to receive a $200 per week benefit to take leave to care for a newly born or
adopted infant, first with an income cap, and then with both an income cap and a
workforce attachment requirement:
Income Ellgibility Cap, No Workforce Attachment
COST ESTIMATE A: Full-time, permanent, executive branch employees at GS 9 or
below: 563,390 employees.
Cost Estimate A-1: 563,390 X .028 X $ 200 X 6 weeks =
$ 18,929,904
Cost Estimate A-2: 563,390 X .028 X $200 X 12 weeks = 37,859,808
COST ESTIMATE B: Full-time, permanent, executive branch employees earning $ 36,
626 or less: 606,804 employees.
Cost Estimate B-1: 606,804 X .028 X 200 X 6 weeks =
$ 20,388,614
Cost Estimate B-2: 606,804 X .028 X 200 X 12 weeks =
$40,777,228
10
$
12/02/98 WED 16:05 FAX 2022195122
WAGE & HOUR
012
Income Eligibility Cap, With 52 Week Workforce Attachment
COST ESTIMATE C: Full-time, permanent, executive branch employees at GS 9 or
below: 563,390 employees.
Cost Estimate C-1: 543,745 X .028 X $ 200 X 6 weeks = 18,269,832
Cost Estimate C-2: 543,745 X .028 X $200 X 12 weeks = 36,539,664
COST ESTIMATE D: Full-time, permanent, executive branch employees earning $ 36,
626 or less: 606,804 employees.
Cost Estimate D-1: 585,471 X .028 X 200 X 6 weeks =
$ 19,671,825
Cost Estimate D-2: 585,471 X .028 X 200 X 12 weeks =
$ 39,343,650
Please note that, in addition to the cost implications, any serious consideration of such
a proposal would require an analysis of non-cost issues, such as: how the federal
workforce would react to providing such benefits only for leave related to new born or
adopted children, and the impact on the private workforce of the federal government
providing such benefits.
1. Another option would be to create a national paid leave commission.
11
PAID PARENTAL LEAVE OPTIONS
I.
Commission/Working Group
(1)
Create a Paid Parental Leave Commission to conduct research necessary to assess
existing paid leave proposals and develop additional options if appropriate.
(2)
Task the ERISA Advisory Council to study utilization of benefit practices -- e.g.
disability insurance plans, savings plans and/or cafeteria plans -- to provide wage
replacement without jeopardizing retirement savings.
II.
Research and Development Fund to support States to develop innovative paid parental
leave policies. Approaches that States could adopt include:
(1)
Expansion of State Temporary Disability Insurance (TDI) programs as models for
paid leave. TDI programs currently exist in 5 States (CA, HI, NJ. NY, RI) and
Puerto Rico; these programs provide partial wage replacement for workers out of
the workforce due to pregnancy complications. One or two States are looking at
building on this benefit.
(2)
Creation of State wage replacement system for new parents, administered by U.I.
systems but funded from general revenue or new payroll tax.
(3)
Use of State unemployment compensation programs to provide partial wage
replacement for parental leave-takers. Vermont has been unsuccessful in gaining
DOL authority to pursue this approach.
III.
Federally-Funded, State Administered Paid Parental Leave Proposal. Eligibility criteria
would include:
Income Eligibility. Tied to income (below median income) to assist the families that are
most likely to face a financial barrier to leave-taking. Non-FMLA covered workers
(likely benefit recipients) would be eligible.
Workforce Attachment. Eligible new parents must be authorized to work in the U.S. and
have been in the workforce -- full or part time -- for 1 year prior to birth or adoption.
Linking eligibility to the workplace reinforces the purpose of the plan as a wage
replacement plan, and one-year requirement demonstrates pre-pregnancy workforce
participation. Workers could receive the benefit regardless of whether they intend to
return to their job, or whether they in fact return.
Benefit Duration, Timing, and Amount. Benefit would be available for a set time only
immediately following birth or adoption. A worker with access to employer-paid leave
who wanted to participate in federal paid leave would have to use the federal benefit
before using employer-paid leave in order to minimize disincentives on employers who
might otherwise provide benefits. The simplest benefit amount approach would be to set
one amount available to all eligible workers ($200 per week represents close to the U.I.
average benefit).
4 weeks leave
6 weeks leave
8 weeks leave
ROUGH COST
$425 million
$637 million
$850 million
ESTIMATE of
$200/week wage
replacement for
workers below median
income, assuming full
take-up
** Cost does not include c. $300 million annual U.I. start-up and administrative costs and
includes no matching requirement
086 P01
NOV 13 '98 17:25
Paid Leave Options
A working group developed the following options in for Kitty Higgins in March 1998,
and recommended that the Department explore the first three options:
1. Support state funding for R&D projects to develop innovative paid leave policies.
2. Paid Parental Leave Commission to conduct research necessary to assess existing paid
leave proposals and develop additional options if appropriate.
Convene White House "best practices" conference to highlight existing paid leave
strategies.
3. Ask ERISA Advisory Council working group to study utilization of benefits practices
- for example, disability insurance plans, savings plans and/or cafeteria plans - to
provide wage replacement without jeopardizing retirement savings.
4. Use state unemployment compensation programs to provide partial wage replacement
to parental leave-takers. ("Vermont proposal".)
5. Create state wage replacement system for new parents, administered by UI systems
but funded from general revenue or new payroll tax.
6. Encourage expansion 0 f state Temporary Disability Insurance (TDI) programs as
models for paid leave. (Currently used by 5 states - CA, HI, NJ, NY, RI- and PR.).
Fund state demonstration project.
7. Create federal wage replacement system for "new parent" leave, funded from federal
general revenue. (This is the idea being explored by the DPC.)
8. Work with Treasury to develop tax code changes to assist working parents who take
leave to care for children.
9. Fed gov't as model employer
# 50, 100, 250, 500
NOV-05-1998 09:23
P.03
DRAFT
11/4/98
Impact of Tying Paid Leave Eligibility to UI Eligibility Requirements
UI Eligibility. UI eligibility requirements vary from state to state, but in general the
applicant must have a minimum amount of earnings (which also varies from state to
state) in the first four of the previous five quarters (the base period), and have
earnings of a specific amount in one of those quarters (the high quarter).
So, for example, in AZ an applicant would have to have earned $1000 in the high
quarter and $1500 in the base period. Since s/he already has $1000 from the high
quarter, s/he actually needs only another $500 from the remaining quarters in the base
period. Depending on State law, that $500 must come from one quarter or could be
distributed among the three remaining quarters. (Thus, the applicant must have
worked in the base period, but could have had earnings - that is, worked - in only
two quarters.)
Weak workforce attachment. Thus under UI workers need only a very minimal
connection to the workforce to qualify for benefits - and the same would be true for
paid leave benefits if we track the UI eligibility requirements. This is inconsistent
with the concept that the paid leave proposal is intended to be a wage replacement
benefit for workers with a demonstrated connection to the workforce.
Expanded eligibility pool. Using UI eligibility to determine paid leave eligibility,
instead of requiring a 52-week workforce attachment, would increase the number of
eligible applicants as compared to the current proposal, thus raising the cost of the
program.
Certain workers excluded. If we track UI eligibility exactly, then workers currently
outside the UI system would also be excluded from receiving a paid leave benefit:
for example, self-employed workers, independent contractors, farm workers.
(Adjusting eligibility to include non-UI covered worker would greatly increase
administrative costs.)
Administrative Cost. Note that even if we track UI eligibility requirements there will
still be a very significant administrative cost involved in asking UI to implement a
paid leave program. Given that the cost would likely vary by state, the estimates
given are almost certainly too low.
TOTAI P.03
)RAFT
MLA PAID LEAVE OPTION: COST ESTIMATES
(1)
(2)
(3)
(4)
all take 4 wks
all take 6 wks
all take 8 wks
all take 12 wks
P.02
Jo. of women w/ youngest child < 1 year old (1997 CPS)
3,170,000
3,170,000
3,170,000
3,170,000
Est. of the no. of these women In the labor force*
1,835,430
1,835,430
1,835,430
1,835,430
(57.9% LFPR of all women w/youngest child less 1 year old)
Vorkforce attachment requirement
a. 35% ineligible
1,193,030
1,193,030
1,193,030
1,193,030
b. 10% ineligible
1,651,887
1,651,887
1,651,887
1,651,887
issume 11 percent would not take time off ***
a. 35% ineligible
1,061,796
1,061,796
1,061,796
1,061,796
b. 10% Inelibible
1,470,179
1,470,179
1,470,179
1,470,179
Income requirement:
Cost= $200 X (# of weeks) X 1/2 (#
of persons taking
leave)
Est. cost of serving families below the median****
a. 35% ineligible
$424,718,502
$637,077,753
$849,437,004
$1,274,155,506
b. 10% ineligible
$588,071,772
$882,107,658
$1,176,143,544
$1,764,215,316
ADD'L ADMINISTRATIVE COSTS*****
1st year (start-up + change in base yr)
$113 million
$113 million
$113 million
$113 million
annual operating costs
$162-193 million
$162-193 million
$162-193 million
$162-193 million
Each senario assumes all leave takers take full amount of paid leave
includes job seekers as well as employed
'Based on 2/98 CPS tenure data for women 16 to 44 years of age
35%
were on the job for 1 year or less
nd a guesstimate of the percent of women who would fail the UI eligibility rules
** Data from FMLA Commission: total leave takers for care of newborn/adopted/foster as percent of leave
takers + leave needers
Maybe too high of an estimate given the availability of paid leave.
NOV-05-1998 09:22
*** 1996 median income of primary families with children less than age 3 was $36,626
**** Cost would be determined by States and could be considerably higher
1/04/98
F11/20/97
DRAFT
DRAFT
DRAFT
DRAFT
11/26/97 3:00 PM
Paid-Leave Plan for the Birth or Adoption of a Newborn
Thanks to the Family Medical Leave Act, signed into law by President Clinton on
February 5, 1993, millions of Americans can take unpaid leave from their jobs (up to 12
weeks per year) to care for an infant after birth or adoption - and know that a job will be
waiting for them when they return. But many of those workers are unable to take the full
amount of FMLA-protected time they need, because they simply can't afford to go that
long without a paycheck. And other workers who, although not protected by FMLA,
have access to unpaid leave can face the same dilemma
To address this obstacle, the Administration could propose the creation of a New Parent
Paid Leave Plan, to provide eligible parents with partial wage replacement for up to six
weeks. While careful consideration needs to be given to the effect of such a program on
employer benefit plans, design elements of a workable program would include:
Income eligibility; Eligibility to receive funds would be tied to income. The simplest
approach would be to set a family income cap -- only parents with family earnings
below a set amount would be eligible to receive new-parent paid leave. An
alternative but more complicated approach would be to vary the benefit amount by
family income.
Pros: - Assists the families that are most likely to face a financial barrier to
taking family leave for a newborn/adopted infant.
- Limiting eligibility to workers protected by the FMLA would exclude
those most likely to benefit from such a program.
Workforce attachment:
1. Prior to receiving benefit: New parent paid leave would be available to those
qualifying parents who are authorized to work in the U.S. and have been in the
workforce - part time or full time -- for each of the fifty-two weeks prior to
giving birth/adopting.
Pros: - Funds available to all working parents, regardless of FMLA coverage
- Links eligibility to connection to the workplace and to the concept of
wage replacement.
- One year requirement demonstrates pre-pregnancy workforce
participation.
- Minimum standard for amount of time in the workforce reflects FMLA
concept and excludes from eligibility those whose workforce
DRAFT
participation was minimal.
- If UI administers the program, they will have access to employment
information for all UI-covered workers
Cons: - If UI administers the program, an alternative method of confirming
eligibility would be necessary for non-UI covered workers (e.g., self-
employed, independent contractors, etc.) -- for example, proof of receipt
of wages during the time period. This would add cost to the proposal.
- If UI administers the program, it may be simpler if the eligibility
requirement is the same as for UI - work in roughly 20 of the preceding
52 weeks. (Note, however, that states have discretion to have additional
UI qualifying requirements.)
Note: If data indicates that workers most likely to need paid leave have
generally worked for less than one year, we should change the one-year
requirement as appropriate.
2. After receiving benefit: Workers could receive benefits regardless of whether
they intend to return to their job, or whether they in fact return.
Pros: - Eligibility based on return to employment or the workforce would
require a penalty/recovery scheme for those who -- for whatever reason
-- fail to return to work in a timely manner.
- Commission data indicates that lower income workers, the ones most
likely to need wage-replacement, are the least likely to return to work
following the birth or adoption of an infant.
Cons: - Parents who voluntarily leave their jobs to care for newborn/adopted
infants have presumably decided they are not financially dependent upon
their wage, and therefore do not need a wage replacement benefit. (The
lower any income requirement is set, the less this problem exists - fewer
eligible parents will be financially able to quit their job.)
Benefit duration and timing: Benefits would be available only for the first six weeks
following birth/adoption. A worker with access to employer-paid leave who also
wanted to participate in federal paid leave would have to use the federal benefit
before using employer-paid leave.
Pros: - Simpler to administer
- Minimizes disincentives on employers who might otherwise provide
benefits or more generous benefits.
DRAFT
Cons: - To the extent that an employer benefit plan limits post-pregnancy use of
sick leave to a period immediately following birth, female workers with
accumulated paid sick leave who give birth may not be able to use paid
sick leave after six weeks.
- May not cover time at home for newborn babies/mothers who have
extended hospital stays.
Administration/Implementation The program would be administered, and the
benefits paid, through the state UI system. State participation would not be
mandatory.
Pros: - State employment security agencies (SESAs) have experience in making
payments as agents of the Federal government in the case of other
programs, such as Trade Readjustment Allowances. In FY 98 there are
about 40,000 TRA recipients collecting about $230M in benefits at an
administrative cost of about $5 M per year, which would provide an order
of magnitude in evaluating this proposal.
- States are able to perform these functions under agreement with a Federal
agency assuming suitable arrangements can be made to meet the cost of
administering this separate payment system.
Cons: - To the extent that SESAs are asked to make eligibility determinations that
differ from those under the UI system, staff training and administrative
costs would rise substantially.
- Since the costs of the benefits would be coming from a fund other than
the State trust fund (unless Federal law is amended), it may be expensive
for the States to establish the alternative procedures necessary to make
the payments.
- States are currently underfunded for UI administration costs and would
not be able to embark on a new program without some funding
guarantees.
Benefit amount: Simplest approach would be to set one benefit amount available to
all eligible workers: $200 per week (based on UI average benefit of $190.19, which
represents 35% of the average weekly wage). Alternatives could include having one
or two benefit levels, keyed to income ranges.
113 P08
NOV 28 97 12:58
F11/26/97
DRAFT
POTENTIAL CHANGES FOR FMLA
ADD PAID LEAVE COVERAGE FOR 6 WEEKS OF NEWBORN CARE
Maximum number of women 3,378,000 with newborns in a given year (CPS)
Assume that 1,834,000 will return to work (LFPR of those with <1 year olds)
Assume between 20-33% will be ineligible (tenure data) [will be checking lower bound with
work experience data]
Using bounds implies between 1,467,200 and 1,228,780 would make tenure cut and may want
leave to take care of infant
Without means testing implies cost of (at $200x6weeks=1200 each mother) = $1,760,640,000
and $1,474,536,000 (w/o administrative costs)
How many of these women would meet an income eligibility cut?
Median income for families with children under 3 -- $36,626. If this was the cut off than ½ of
potential above would not qualify so cost would be half -- so between $880,320,000 and
2.
$737,268,000.
Add administrative costs of approximately $200,000 ($60m to change UI base period and $140m
to add payment system to UI [no basis for this number]) and proposal costs out at $1B.
$60,000
all
EXTEND COVERAGE FROM 50 TO 25 PERSON ESTABLISHMENTS
assumes elisible take
EXTEND BENEFITS FROM 12 WEEKS TO 26 WEEKS
full
6 DOL whs Gohing ct
(nemp Ins. system
6 wles