UCFE coverage ruling for USDA nutritional research subjects

U.S. Department of Labor
Employment and Training Administration
Washington, D.C. 20210
Classification: UIS
Correspondence symbol: TEUPDI
Issue date: December 27, 1996
Rescissions: None
Expiration date: September 30, 1997
Directive: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 09-97 To: ALL STATE EMPLOYMENT SECURITY AGENCIES From: MARY ANN WYRSCH, Director, Unemployment Insurance Service Subject: Unemployment Compensation for Federal Employees (UCFE) Program Coverage Ruling No. 97-1, Human Subjects for Research Studies Conducted by the U.S. Department of Agriculture, Agricultural Research Service (ARS)

1. Purpose. To provide State Employment Security Agencies (SESAs) with a copy of the above UCFE program coverage ruling.

2. Background. For a complete discussion of the background of the UCFE Program Coverage Ruling No. 97-1, please refer to the Discussion/Analysis section of the attachment to this directive.

On August 15, 1996, the Administrator of the ARS requested that the Secretary of Labor issue a UCFE program coverage ruling on whether human subjects participating in nutritional research studies conducted by the ARS perform "Federal Service" within the meaning of 5 U.S.C. 8501(1) for UCFE program coverage purposes. The attached Coverage Ruling held that these subjects did not perform Federal service.

3. Action Required. SESAs should:

a. Provide copies of this directive, plus attachment, to all appropriate staff, including the Unemployment Insurance Tax and Appeals Units.

b. Follow the guidance contained in the attachment when determining the UCFE program eligibility of individuals who participated as human subjects in ARS nutritional research studies.

4. Inquiries. Direct inquiries to the appropriate Regional Office.

5. Attachment. UCFE Program Coverage Ruling No. 97-1.

Attachment: UCFE Program Coverage Ruling No. 97-1

Official attachment: https://oui.doleta.gov/dmstree/uipl/uipl97/uipl_0997a.pdf

              UCFE Program Coverage Ruling No. 97-1


              Human Subjects for Research Studies
                           Conducted by
                U.S. Department of Agriculture,
                  Agricultural Research Service


Ruling: Human subjects who participate in nutritional research
studies conducted by U.S. Department of Agriculture (USDA),
Agricultural Research Service (ARS), do not perform "Federal
Service" within the meaning of 5 U.S.C. 8501(1).

Statement of Facts: In holding that human subjects
participating in ARS nutritional studies do not perform "Federal
service," I have considered the following factors:

     1. Title XIV of the Food and Agriculture Act of 1977
(Public Law 95-113) provides that USDA is the lead Federal agency
for agricultural research in the field of human nutrition and on
the nutritive value of foods. Since 1953, the ARS is the USDA
agency in charge of conducting nutritional studies.

     2. Individuals who participate as "human subjects" in these
nutritional studies are covered by the Common Rule for the
Protection of Human Subjects (45 CFR Part 46, 7 CFR Part 1c, and
ARS Directive 605.1).

     3. Human subjects do not earn annual leave, sick leave, nor
are they covered under any Federal employee retirement system.

     4. On August 2, 1990, the Internal Revenue Service (IRS)
ruled in a non-precedential decision that human test subjects in
medical tests conducted by the Food and Drug Administration are
not employees and do not receive "wages" for income tax
withholding or Federal employment tax purposes. Priv. Ltr. Rul.
91-06-004 (Aug. 2, 1990).

     5. On January 24, 1994, in a Federal Employment Tax
Determination letter mailed to the Bionetics Corporation, the IRS
ruled that an individual's participation as a human test subject
in USDA-sponsored research was as an independent contractor and
not an employee of the firm conducting the research. This letter
was obtained from the ARS on August 16, 1996.

                              - 2 -

Discussion/Analysis: The purpose of the ARS nutritional research
is to carry out the policy of the United States as stated in
Section 1421(b) of the Food and Agricultural Act of 1977: "It is
hereby declared to be the policy of the United States that the
Department of Agriculture conduct research in the fields of human
nutrition and on nutritive value of foods and conduct human
nutrition education activities...."

The individuals who agree to be human subjects for this research
are treated according to the principles contained in the Common
Rule for the Protection of Human Subjects, and in accord with the
Nuremburg Code, the Declaration of Helsinki, and the Public
Health Service Guidelines. These guiding principles are designed
to ensure that human subjects are fully informed of the purpose
and planned procedures to be utilized in the research, and that
the individual's decision to participate is voluntary without
coercion or undue influence. The human subjects receive a $35
per day stipend for as long as they participate in the study.
The ARS considers the $35 per day stipend to be too small to
influence or coerce an individual's decision to volunteer to be a
human subject in its nutritional research studies.

The human subjects participating in these ARS nutritional studies
enter into a consent agreement with the ARS. The consent
agreement stipulates that the human subjects participating in the
study must observe the regimen prescribed by the ARS. The human
subjects agree to provide blood and other bodily samples for
analyses by the research study staff. The human subjects may
elect to end their participation in the study at any time prior
to its completion, and failure of the human subject to comply
with the experimental protocol and/or established rules will
result in the human subject being asked by the ARS to leave the
study.

Prior to October 1995, the ARS utilized contractors (e.g., the
Bionetics Corporation) for assistance in conducting the metabolic
research studies including the payment of the human subjects'
stipends. In 1995, the California Employment Development
Department (CEDD) informed the contractor at the ARS' Western
Human Nutrition Research Center (WHNRC) that human subjects
participating in nutritional studies at the WHNRC were employees
of the contractor. Under California State law, the contractor
became liable for State unemployment taxes based on the payment
of the $35 per day stipend. In October 1995, the WHNRC assumed
the responsibility for the payment of the human subjects'
stipends, and the issue arose whether these subjects perform
"Federal Service." All stipends provided to human subjects are
now paid by the ARS.

                              - 3 -

The Unemployment Compensation for Federal Employees (UCFE)
program provides unemployment compensation coverage for Federal
civilian employees. In order to be eligible to receive
unemployment compensation under the UCFE program, an individual
must perform "Federal Service" as defined at 5 U.S.C. 8501(1).
The term "Federal Service," in part, is defined to be "service
performed after 1952 in the employ of the United States
or an instrumentality of the United States which is wholly or
partially owned by the United States...." (Emphasis added.)
Therefore, for UCFE program coverage purposes, an individual must
be a civilian employee of the United States Federal Government
and not an independent contractor.

In reviewing this matter I have examined the relevant statutes,
regulations, and consent agreements in addition to the decisions
and determinations of the CEED and the IRS in determining whether
human subjects participating in nutritional research with the ARS
perform service as employees or are independent contractors.

The question of whether an individual is an independent
contractor or an employee is one of fact to be determined upon
consideration of the facts and the application of the law and
regulations in a particular case. Individuals are employees for
Federal employment tax purposes if they have the status of
employees under the usual common law rules applicable in
determining the relationship. Guidance for making the
determination is found in three substantially similar sections of
the IRS Employment Tax Regulations: 26 CFR 31.3121(d)-1;
§ 31.3306(i)-1; and § 31.3401(c)-1, which relate to the Federal
Insurance Contributions Act, the Federal Unemployment Tax Act,
and Federal Income Tax withholding respectively, as well as IRS
Revenue Ruling 87-41, 1987-1 C.B. 296. Generally, the
relationship of employer and employee exists when the person for
whom the services are performed has the right to control and
direct the individual who performs the services not only as to
the result to be accomplished but also as to the details and
means by which that result is obtained. In this connection, it
is not necessary that the firm actually direct or control the
manner in which the services are performed; it is sufficient that
the right to do so be present.

Other factors characteristic of employment are the right of the
employer to discharge and the furnishing of tools or a work
place. An individual who is not by statute an employee and is
not an employee under the common law rules is an independent
contractor. Independent contractors are subject to another's
control and direction only with respect to the result to be
accomplished and not the means and methods to be used.

                              - 4 -


Consideration must also be given to such factors as the
continuity of the relationship and whether the individual's
services are an integral part of the business of the employer as
distinguished from an independent trade or business of the
individual in which the individual assumes the risk of realizing
a profit or suffering a loss.

The pertinent facts submitted for my consideration indicate:

     1. The ARS nutritional research studies are conducted in
accord with the Common Rule for the Protection of Human Subjects
(45 CFR Part 46, 7 CFR Part 1c, and ARS Directive 605.1), and in
accord with the Nuremburg Code and the Declaration of Helsinki.
These require that human subjects' participation in research must
be voluntary and uncoerced. Since ARS nutritional research
studies follow the above regulations and international
agreements, it suggests that the human subjects are volunteers,
not employees, who are subject to control and direction.
Further, I agree with the ARS that the stipend paid to the human
subjects for each day they participate in the research ($35 per
day) is an amount so small that it does not have an undue
influence on the decision of the individual to participate in the
research.

     2. Human subjects who voluntarily participate in the ARS
nutritional research studies enter into a consent agreement under
which they agree to follow research protocols established by the
ARS during the duration of the research study. A continuing
relationship between the ARS and the human subjects is not
established.

     3. The human subjects do not produce a product or provide a
service to the ARS during these research studies. Providing
samples of blood and normal bodily functions is not an activity
pursued as a livelihood by the human subjects.

     4. The human subjects control the means and methods used
to accomplish the task, i.e., the provision of samples of bodily
functions. While the ARS controls the research protocols to be
followed, including the schedule of sample collection, the human
subjects control their own bodily functions.

     5. The ARS provides no tools, supplies, or equipment to the
human subjects. The ARS does use instruments during the
nutritional research to collect and analyze bodily samples
provided by the human subjects, however these instruments are not
used by the human subjects.

                                 - 5 -


     6. Human subjects are not entitled to sick leave or annual
leave and are not covered under any Federal Employee Retirement
System.

The reasons stated above indicate that an employment relationship
does not exist and support the conclusion stated in the first
paragraph of this ruling that, for UCFE program purposes, human
subjects who participate in nutritional research studies
conducted by the USDA, ARS, do not perform "Federal Service"
within the meaning of 5 U.S.C. 8501(1).

This coverage ruling is issued pursuant to redelegation of
authority from the Assistant Secretary, in Employment and
Training Order No. 2-92, dated April 10, 1992, (published at
57 Fed. Reg. 13760), which is authorized by Section 6 of
Secretary's order No. 4-75 (40 Fed. Reg. 18515) (as amended by
Secretary's Order No. 14-75).




MARY ANN WYRSCH                                     DATE
Director
Unemployment Insurance Service



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cc:   WYRSCH (2), CASTILLO, GILLHAM, BALDWIN, COSTA, CHRON