Windsor ruling and unemployment programs

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                 Unemployment Compensation
               ADVISORY SYSTEM                            CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                        OUI/DL
             Washington, D.C. 20210                       DATE
                                                          June 18, 2014


ADVISORY:       UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 14-14

TO:             STATE WORKFORCE AGENCIES

FROM:           PORTIA WU /s/
                Assistant Secretary

SUBJECT:        Effect of the U. S. Supreme Court’s Decision in United States v. Windsor on the
                Federal-State Unemployment Compensation Program

1. Purpose. To advise states of the effect of the U. S. Supreme Court’s decision in United
   States v. Windsor on the unemployment compensation (UC) program.

2. References.
   • Federal Unemployment Tax Act (FUTA) Section 3306(c)(5), 26 U.S.C. 3306(c)(5);
   • United States v. Windsor, 570 U.S. 12 (2013), striking down Defense of Marriage Act,
      Pub. L. 104-99, Section 3, 1 U.S.C. 7
   • Training and Employment Guidance Letter (TEGL) No. 26-13, Impact of the U.S.
      Supreme Court’s Decision in United States v. Windsor on Eligibility and Services
      Provided Under Workforce Grants Administered by the Employment and Training
      Administration;
   • TEGL No. 27-13, Impact of the U. S. Supreme Court’s Decision in United States v.
      Windsor on the Trade Adjustment Assistance Program.

3. Background. The decision of the United States Supreme Court in United States v. Windsor
   impacts the federal-state unemployment compensation program. This Unemployment
   Insurance Program Letter (UIPL) describes the impact for state UC agencies and the
   employers they serve.

   Section 3306(c)(5), FUTA, excludes from the definition of “employment” “service performed
   by an individual in the employ of his son, daughter, or spouse[.]” Thus, an employer spouse
   may not include, in the calculation of FUTA taxes, wages paid to an employee spouse.

   Coverage of services under FUTA does not directly impact coverage under state UC laws.
   States are not required to adopt the exclusions from the definition of “employment” set out in
   Federal law, and may cover additional services, such as services provided by a spouse in the
   employ of his/her spouse. However, in practice, many state UC laws closely mirror the
   definition of employment in FUTA. In addition to determining employer liability for state

 RESCISSIONS                                             EXPIRATION DATE
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   UC contributions, the state definition of “employment” determines whether wages earned by
   an individual may be used to establish eligibility for UC. If services are excluded from the
   definition of employment, the wages may not be used for UC eligibility purposes.

   In 1996, Congress enacted the Defense of Marriage Act (DOMA). Section 3 of DOMA amended
   the rules of construction that apply to federal laws to provide that the word “marriage” meant
   “only a legal union between one man and one woman as husband and wife,” and the word
   “spouse” referred only to “a person of the opposite sex who is a husband or a wife.” By decision
   dated June 26, 2013, the U.S. Supreme Court, in United States v. Windsor, held that this
   provision was unconstitutional.

4. ETA policy on same-sex marriage. The Department of Labor’s policy is to recognize
   lawful same-sex marriages as broadly as possible to the extent that federal law permits, and
   to recognize all marriages valid in the jurisdiction where the marriage was celebrated (“state
   of celebration”). Consistent with this policy, ETA will recognize all marriages, including
   same-sex marriages, that are entered into lawfully and recognized under a state’s law. ETA
   will recognize such marriages even if the marriage is not recognized in the state where the
   married individual resides. The federal-state unemployment compensation program consists
   of 53 “states,” including the District of Columbia, Puerto Rico, and the Virgin Islands.

5. Applicability of Windsor ruling to calculation of FUTA taxes. Consistent with the text of
   section 3306(c)(5) and the decision in Windsor, for purposes of Federal law, wages paid to a
   same-sex spouse who is providing services in the employ of his/her same-sex spouse must be
   excluded from the calculation of FUTA taxes.

   Consistent with the agency’s broader policy, in the case of FUTA, ETA has adopted a “state
   of celebration” rule. That is, for purposes of FUTA Section 3306(c)(5), “spouse” refers to
   persons married in a state that legally recognizes and designates the relationship as a
   “marriage” under that state’s law. State of residence is not relevant to whether the exclusion
   applies. For example: An employer is legally married in State #1 (state of celebration),
   which recognizes same-sex marriage. The couple then moves to State #2 (state of residence),
   which does not recognize same-sex marriage. While in State #2, the employer pays wages to
   his/her “spouse” and files a tax return as an employer in the state. With respect to federal
   payroll taxes, s/he must still observe the FUTA exclusion, even if his/her marriage is not
   recognized in the state where s/he is filing the return.

   This interpretation has no effect on state UC law, when state law does not depend on federal
   law for definitions or interpretations. It does not require states to recognize same-sex
   marriages, nor does it require an exclusion from coverage of services provided by same-sex
   spouses in those states that exclude spouses from coverage but do not recognize same-sex
   marriages. States have authority to determine the scope of the spouse exclusion in
   accordance with state law.

   Likewise, this interpretation does not affect payment of benefits under Federal UC programs,
   including Unemployment Compensation for Federal Employees (UCFE), Unemployment


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   Compensation for Ex-Servicemembers (UCX), Disaster Unemployment Assistance (DUA),
   and Trade Readjustment Allowances (TRA). States pay benefits to UCFE and UCX
   claimants under an agreement with the Secretary of Labor, and are required, by the terms of
   that agreement, to pay benefits “in the same amount, on the same terms, and under the same
   conditions” as would have been payable under the state UC law. See 5 USC 8502(b). For
   DUA, the terms and conditions of state law regarding payment of regular compensation
   generally apply to applications for and payment of DUA. See 20 C.F.R. 625.11. Similarly,
   for TRA, the law of the state in which the applicant is entitled to UC applies. See 20 C.F.R.
   617.16 and 617.59.

   TRA is only one of the benefits available under the federal Trade Adjustment Assistance
   (TAA) program for workers. The effect of the decision in Windsor on the delivery of other
   TAA benefits administered by the state workforce system is explained in TEGL No. 27-13,
   Impact of the U. S. Supreme Court’s Decision in United States v. Windsor on the Trade
   Adjustment Assistance Program. The effects of the Windsor decision on partner programs in
   the state workforce system are described in TEGL No. 26-13, Impact of the U.S. Supreme
   Court’s Decision in United States v. Windsor on Eligibility and Services Provided Under
   Workforce Grants Administered by the Employment and Training Administration.

6. Action Requested. States are requested to review this UIPL and share it with appropriate
   staff.

7. Inquiries. Inquiries should be directed to the appropriate Regional Office.




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