School employees and unemployment between terms during COVID-19

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                 Unemployment Insurance
               ADVISORY SYSTEM                            CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                        OUI/DL
             Washington, D.C. 20210                       DATE
                                                          May 15, 2020

ADVISORY:        UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 10-20,
                 Change 1

TO:              STATE WORKFORCE AGENCIES

FROM:            JOHN PALLASCH
                 Assistant Secretary

SUBJECT:         Unemployment Compensation (UC) for Individuals Affected by the
                 Coronavirus Disease 2019 (COVID-19) – Interpretation of “Between and
                 Within Terms” Denial Provisions in Section 3304(a)(6)(A) of the Federal
                 Unemployment Tax Act (FUTA)

1. Purpose. To provide guidance to states regarding UC flexibilities related to COVID-19,
   specifically in determining eligibility of an individual whose employment is subject to the
   “between and within terms” denial provisions of Section 3304(a)(6)(A), FUTA.

2. Action Requested. The Department of Labor’s (Department) Employment and Training
   Administration (ETA) requests that State Workforce Administrators provide the information
   in this Unemployment Insurance Program Letter (UIPL) to appropriate program and other
   staff in state workforce systems as they respond to the economic effects of COVID-19.

3. Summary and Background.

   a. Summary – This UIPL provides guidance to states on UC eligibility for an individual
      affected by COVID-19 whose employment is subject to the “between and within terms”
      denial provisions.

        This UIPL includes: 1) an explanation of the “between and within terms” denial
        provisions; 2) application of these provisions within the context of responding to the
        spread of COVID-19; 3) application of these provisions as they relate to an individual
        working remotely; 4) application of these provisions as they relate to an individual
        working in a nonprofessional capacity; 5) guidance for determining whether an individual
        has a “reasonable assurance” of continued employment within the context of COVID-19;
        and 6) application of the “between and within terms” denial provisions for programs
        included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public
        Law 116-136).

 RESCISSIONS                                              EXPIRATION DATE
 None                                                     Continuing

   b. Background – The UI program is facing an unprecedented demand due to the economic
      effects of efforts to mitigate the spread of COVID-19. Many educational institutions are
      temporarily closing, changing semester and term dates, or changing dates for scheduled
      breaks in response to COVID-19.

       The Department addressed permissible flexibility for states under existing federal law in
       response to the COVID-19 pandemic with the publication of UIPL No. 10-20,
       Unemployment Compensation (UC) for Individuals Affected by the Coronavirus Disease
       2019 (COVID-19), issued on March 12, 2020.

       On March 27, 2020, the President signed into law the CARES Act. This legislation
       provides emergency assistance and health care response for certain individuals, families,
       and businesses affected by the COVID-19 pandemic. The CARES Act includes the
       Relief for Workers Affected by Coronavirus Act set out in Title II, Subtitle A. UIPL No.
       14-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Summary
       of Key Unemployment Insurance (UI) Provisions and Guidance Regarding Temporary
       Emergency State Staffing Flexibility, issued April 2, 2020, summarizes the various UC-
       related provisions within the CARES Act.

4. Guidance. Section 3304(a)(6)(A), FUTA (26 U.S.C. § 3304(a)(6)(A)), requires, as a
   condition for employers in a state to receive credit against the Federal unemployment tax,
   that the state law provide that UC be payable based on services to which Section 3309(a)(1),
   FUTA (26 U.S.C. § 3309(a)(1)), applies, in the same amount, on the same terms, and subject
   to the same conditions as UC payable on the basis of other service subject to state law.

   Major mandates in this section include: 1) coverage of services performed for state and local
   governments and their instrumentalities and certain nonprofit organizations, and Federally-
   recognized Indian tribes; 2) that the payment of UC to employees of such entities be made in
   the same amount, on the same terms, and subject to the same conditions as other service
   subject to UC law, otherwise known as the “equal treatment” provision; and 3) an exception
   to the “equal treatment” provision requiring denial of UC based on certain educational
   services performed for such entities between and within academic terms. These conditions
   are required for employers in a state to receive credit against the Federal unemployment tax.

   The denial of UC based on services for educational institutions and educational service
   agencies between academic years and terms to certain employees is described in clauses (i)
   through (v) of 3304(a)(6)(A), FUTA (26 U.S.C. § 3304(a)(6)(A)).

   These exceptions apply to three categories of employees: 1) employees of an educational
   institution; 2) employees of an educational service agency; and 3) if the state law provides
   for the optional denial in clause (v) of Section 3304(a)(6)(A), FUTA (26 U.S.C. §
   3304(a)(6)(A)), employees who provide services to or on behalf of an educational institution.

   Clause (i) of Section 3304(a)(6)(A)(i), FUTA (26 U.S.C. § 3304(a)(6)(A)(i)) applies to
   services “in an instructional, research, or principal administrative capacity” (professional
   capacity).

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 Clause (ii) of Section 3304(a)(6)(A)(ii), FUTA (26 U.S.C. § 3304(a)(6)(A)(ii)) applies to
 “services in any other capacity” and encompasses any services in other than an instructional,
 research, or principal administrative capacity, regardless of the legal or educational
 requirements to perform such services (nonprofessional capacity).

 Under these provisions, certain employees in specified categories may not be paid UC based
 on such educational employment between academic years or terms if the employees have a
 “contract” or “reasonable assurance” of performing services in such educational employment
 in the following year or term. Additionally, certain employees in these categories may also
 not be paid UC based on such educational employment during vacation periods or holiday
 recesses (i.e., within terms) if the employees have “reasonable assurance” of performing
 services in such educational employment in the remainder of a term.

 “Between Terms” Denial Provision

 The “between terms” denial provision is mandatory when services are performed in a
 professional capacity. The state has discretion in determining whether its state law includes
 the “between terms” denial provision to services in a nonprofessional capacity.

 When state law applies the “between terms” denial provision to services in a nonprofessional
 capacity, if a claim is denied based on the “between terms” denial provision, retroactive
 payment is required if no job is offered in the second year or term and the individual has filed
 timely continued claims.

 Specifically, the “between terms” denial provision applies:

     with respect to services in an instructional, research, or principal administrative
     capacity for an educational institution to which section 3309(a)(1) applies,
     compensation shall not be payable based on such services for any week
     commencing during the period between two successive academic years or terms
     (or, when an agreement provides instead for a similar period between two regular
     but not successive terms, during such period) to any individual if such individual
     performs such services in the first of such academic years (or terms) and if there
     is a contract or reasonable assurance that such individual will perform services in
     any such capacity for any educational institution in the second of such academic
     years or terms. (26 U.S.C. § 3304(a)(6)(A)(i)).

“Within Terms” Denial Provision

Application of the “within terms” denial provision is mandatory when services are performed
in a professional capacity. The state has discretion in determining whether its state law
includes the “within terms” denial provision to services in a non-professional capacity (See
Section 3304(a)(6)(A)(vi), FUTA and page 3 of UIPL No. 05-17).

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Specifically, the “within terms” denial provision applies:

     [d]uring an established and customary vacation period or holiday recess if such
     individual performs such services in the period immediately before such vacation
     period or holiday recess, and there is a reasonable assurance that such individual
     will perform such services in the period immediately following such vacation
     period or holiday recess. (26 U.S.C. § 3304(a)(6)(A)(iii)).

 UIPL No. 05-17, Interpretation of “Contract” and “Reasonable Assurance” in Section
 3304(a)(6)(A) of the Federal Unemployment Tax Act, issued December 22, 2016, clarifies the
 Department’s interpretation of the terms “contract” and “reasonable assurance” as used in
 Section 3304(a)(6)(A), FUTA, and assists states in applying these terms consistent with
 federal law requirements.

 a. Application of the “between and within terms” denial provisions as it relates to
    responding to the economic effect of the COVID-19 pandemic. As discussed in UIPL
    No. 10-20, the Department has a longstanding legal interpretation of Federal UC law that
    “unemployment” includes a reduction of both work hours and earnings. Therefore, an
    individual who is not working, but has not experienced a reduction in income (including
    earnings, paid sick leave, and paid family leave), is not eligible to receive UC for the
    week.

     If the school schedule changes because of the COVID-19 pandemic and an individual
     experiences both a reduction of work hours and earnings, UC would generally be payable
     to such individual to whom the “between and within terms” denial provisions would
     otherwise apply. This is because weeks the individual would ordinarily be working (but
     not due to circumstances surrounding the COVID-19 pandemic) are not considered to be
     “between two successive years or terms,” nor are they considered to be part of an
     “established and customary vacation period or holiday recess.”

     Below are three examples addressing changes to school operations and how they affect
     an individual’s eligibility for UC during the COVID-19 pandemic.

             Example 1 (Between Terms): Semester or term ends earlier than usual. If the
             educational institution or school system elects to end a semester, term, or school
             year earlier than usual in response to COVID-19, and there is a corresponding
             reduction in pay, the individual’s week or weeks of unemployment are not
             considered to be “between two successive academic years or terms.” Therefore,
             the “between terms” denial provision does not apply to those weeks between the
             early termination date and the end of the regularly scheduled year or term.

             At the end of the regularly scheduled year or term, the state must reassess the
             benefit entitlement of the individual to determine if the individual has a
             reasonable assurance or a contract to return at the start of the next regularly
             scheduled academic year or term.

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           Example 2 (Within Terms): Dates of a scheduled break are changed, but the
           length of time remains the same. Where the educational institution or school
           system merely changes the dates of the break, without extending its duration (e.g.,
           the break is earlier or later than usual but still one week or whatever the length of
           the normal break would be), this break would be deemed “established and
           customary.” Therefore, if the individual has “reasonable assurance” of
           immediately returning after the break, the “within terms” denial provision would
           apply.

           Example 3 (Within Terms): Dates of a scheduled break are extended. If the
           educational institution or school system extends the length of the break from the
           “established and customary vacation period or holiday recess,” the state must
           consider the normal length of the vacation or break period for that educational
           institution as an “established and customary vacation period or holiday recess”
           during which time the denial applies. However, any additional time included in
           the break would not be considered as part of the “established and customary”
           break. Therefore, the “within terms” denial provision would not apply to the
           additional time beyond the normal period of the break.

b. Application of the “between and within terms” denial provisions to an individual
   working remotely. As noted above, the definition of “unemployment” includes both a
   reduction in hours and a reduction in pay. Thus, an individual who continues to work
   remotely, and is being paid, is not considered “unemployed,” and is therefore, not eligible
   for UC. However, to the extent the individual experiences a reduction in hours and a
   reduction in pay, the individual may be entitled to partial benefits under state law.

c. Application of the “between and within terms” denial provisions to an individual
   working in a nonprofessional capacity. As discussed earlier, the state has discretion in
   determining whether to apply the “between and within terms” denial provisions to
   services in a nonprofessional capacity.

   In a state where state law requires that either the “between terms” or “within terms”
   denial provision applies to an individual working in a nonprofessional capacity, the same
   analysis as set forth in the three examples above will apply.

   In a state where state law requires that the “between terms” denial provision applies to an
   individual working in a nonprofessional capacity, the state should encourage the
   individual who has a contract or reasonable assurances of employment in the following
   semester or term to continue claiming benefits on a weekly basis so that, should no job
   result pursuant to the contract or reasonable assurance, the individual may be paid
   benefits retroactively.

   In response to the spread of COVID-19, it is permissible for a state to temporarily
   suspend the “between and within terms” denial provisions in state law for individuals
   working in a nonprofessional capacity, consistent with the provisions under Section

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   3304(a)(6)(A)(ii) and Section 3304(a)(6)(A)(vi), FUTA. If a state chooses to do so, it
   should consider the impacts on trust fund solvency.

d. Determination of reasonable assurances in the context of the COVID-19 pandemic.
   The state must make a determination at the time of filing that reasonable assurances exist
   for employment in the fall semester or term based on information provided by the
   individual and the employing educational institution or school system. In the event a
   decision is later made by the employer that the educational institution or school system
   will not reopen as regularly scheduled, or that a specific individual does not have a
   reasonable assurance of employment in the same or similar capacity due to budget cuts or
   declining enrollment, or for any other reason, the state agency must re-assess the
   individual’s entitlement to benefits. See UIPL No. 05-17 for further guidance on the
   interpretation of “contract” and “reasonable assurance.”

e. Application of the “between and within terms” denial provisions to the CARES Act
   programs.

   i.   Pandemic Unemployment Assistance (PUA) under Section 2102 of the CARES Act.
        PUA eligibility requires that an individual is not eligible for regular UC, Pandemic
        Emergency Unemployment Compensation (PEUC), or Extended Benefits (EB) and
        that the individual is unemployed, partially unemployed, or unable or unavailable for
        work because of a listed COVID-19 related reason in Section 2102(a)(3)(A)(ii)(I) of
        the CARES Act.

        Between academic years or terms and during established and customary vacation
        periods or holiday recesses, the individual is unemployed from the educational
        employment because they are between and within terms. Therefore, an individual is
        not unemployed from the individual’s educational employment for one of the listed
        COVID-19 related reasons and cannot establish eligibility for PUA based on services
        subject to the between and within terms denial.

        However, if an individual has other employment between academic years or terms or
        during established and customary vacation periods or holiday recesses that is not
        included in the “between and within terms” denial provisions discussed in this UIPL,
        and is unemployed from that other employment because of a listed COVID-19 related
        reason, the individual may be eligible for PUA.

        If an individual qualifies for PUA during the time period in which the “between or
        within terms” denial provisions would apply, then wages from the educational
        institution may not be used to establish the individual’s weekly benefit amount for
        PUA.

        See UIPL No. 16-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of
        2020 – Pandemic Unemployment Assistance (PUA) Program Operating, Financial,
        and Reporting Instructions, issued April 5, 2020, for additional details.

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        ii.   Federal Pandemic Unemployment Compensation (FPUC) under Section 2105 of the
              CARES Act. The “between and within terms” denial provisions do not apply
              specifically to FPUC because it is based upon the individual’s eligibility for an
              underlying benefit. If the individual is eligible to receive at least one dollar ($1) of
              benefits for the claimed week, the individual will be eligible for the $600 FPUC
              payment. See UIPL No. 15-20, Coronavirus Aid, Relief, and Economic Security
              (CARES) Act of 2020 – Federal Pandemic Unemployment Compensation (FPUC)
              Program Operating, Financial, and Reporting Instructions, issued April 4, 2020, for
              additional details.

       iii.   PEUC under Section 2107 of the CARES Act. The terms and conditions of state law
              that apply to claims for regular UC also apply to claims for PEUC. If an individual is
              not eligible for regular UC because of the “between and within terms” denial
              provisions, the individual is also not eligible for PEUC. See UIPL No. 17-20,
              Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Pandemic
              Emergency Unemployment Compensation (PEUC) Program Operating, Financial,
              and Reporting Instructions, issued April 10, 2020, for additional details.

5. Inquiries. States should direct inquiries to [email protected] and copy the appropriate
   Regional Office.

6. References.

        Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. 116-136,
         including Title II, Subtitle A, Relief for Workers Affected by Coronavirus Act;
        Sections 3304(a)(6)(A) and 3309(a)(1)of the Federal Unemployment Tax Act (FUTA),
         26 U.S.C. § 3304(a)(6)(A);
        UIPL No. 17-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 –
         Pandemic Emergency Unemployment Compensation (PEUC) Program Operating, Financial,
         and Reporting Instructions, issued April 10, 2020,
         https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8452;
        UIPL No. 16-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 –
         Pandemic Unemployment Assistance (PUA) Program Operating, Financial, and Reporting
         Instructions, issued April 5, 2020,
         https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=4628;
        UIPL No. 15-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020
         Federal Pandemic Unemployment Compensation (FPUC) Program Operating, Financial,
         and Reporting Instructions, issued April 4, 2020,
         https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=9297;
        UIPL No. 14-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 –
         Summary of Key Unemployment Insurance (UI) Provisions Regarding Temporary
         Emergency State Staffing Flexibility, issued April 2, 2020,
         https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3390;
        UIPL No. 10-20, Unemployment Compensation (UC) for Individuals Affected by the
         Coronavirus Disease 2019 (COVID-19), issued March 12, 2020,
         https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8893; and

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   UIPL No. 05-17, Interpretation of “Contract” and “Reasonable Assurance” in Section
    3304(a)(6)(A) of the Federal Unemployment Tax Act, issued December 22, 2016,
    https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8999.

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