Church-school coverage findings in Alabama and Nevada

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| U.S. DEPARTMENT OF LABOR | CLASSIFICATION |
| Employment and Training Administration | |
| Washington, D. C. 20210 | UI |
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| | CORRESPONDENCE SYMBOL |
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| | TURL |
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| | ISSUE DATE |
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| | January 3, 1980 |
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| RESCISSIONS | EXPIRATION DATE |
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| None | |
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| DIRECTIVE | : | UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-80 |
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| TO | : | ALL STATE EMPLOYMENT SECURITY AGENCIES |
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| FROM | : | ROBERTS T. JONES |
| | | ADMINISTRATOR |
| | | OFFICE OF THE DEPUTY ASSISTANT SECRETARY |
| | | OFFICE OF MANAGEMENT Assistance |
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| SUBJECT | : | Secretary's Findings as to Unemployment Compensation Laws of Alabama and Nevada on Issue of Coverage of Church-Related Elementary and Secondary Schools |
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1. Purpose. To inform SESAs of the Secretary of Labor's decision that the 1976 amendments to the Federal Unemployment Tax Act (FUTA), require, as a condition of certification, that State laws provide coverage of services performed in the employ of nonprofit church-related elementary and secondary schools.

2. References. Sections 3304(a)(6) and 3309(a) and (b), FUTA, as enacted by Public Law 91-373 and amended by Public Law 94-566; Unemployment Insurance Program Letter (UIPL) 39-78.

3. Background. The SESAs were informed in UIPL 39-78 that the Secretary of Labor interpreted the 1976 amendments to FUTA as requiring, as a condition for certification, that the States extend coverage, effective January 1, 1978, to employees of church-related elementary and secondary schools. There have been challenges to such coverage in State and Federal courts and by State attorney general opinions, and several States exempted some or all church-related schools from coverage. The Secretary initiated conformity and substantial compliance proceedings as to six States on July 6, 1979. Because of the complexity of the statutory and constitutional issues involved and the evidence the State wished to introduce related thereto in the limited time available before the certification date, the Secretary offered all of the States involved an opportunity to postpone the proceedings, without prejudice to them, until 1980. Alabama and Nevada did not accept the offer, and hearings were held on September 26, 1978. The Administrative Law Judge assigned to preside over the proceedings recommended to the Secretary that he find church-related elementary and secondary schools exempt from mandatory coverage.

4. Secretary's Decision. The Secretary did not accept the recommendation and held that "FUTA, as amended by the 1976 amendments, requires State unemployment compensation laws to provide coverage for employees of nonprofit church-related elementary and secondary schools." The Secretary also said, "I believe that covering such schools under FUTA does not create excessive governmental entanglement with religion and is within the limits of government regulation provided by the Constitution."

   The States of Alabama and Nevada were, accordingly, found to have failed to amend their laws so that they contain the provisions required by FUTA after amendment of Section 3309(b), FUTA. The States were also found to have failed to comply substantially with the required provisions of FUTA for the 12-month-period ending October 31, 1979. A copy of the Secretary's decision is attached.

5. Appeal Rights. The States of Alabama and Nevada have the right, within 60 days after the Governors have been notified of the decision, to file a petition for review of the findings with a United States Court of Appeals. During that period the Secretary's action to "withhold" certification is stayed pursuant to Section 3310, FUTA. If a State should appeal, the commencement of judicial proceedings will stay the Secretary's action for 30 days from that date. The court may thereafter grant interim relief if warranted, including a further stay.

6. Certifications. The States of Alabama and Nevada were not certified under Section 3304(c), FUTA, and their laws were not certified under Section 3303(b), FUTA. The lack of certification, however, does not at present constitute a withholding, but rather an abeyance of withholding by reason of a stay.

7. Action Required. State Administrators are requested to ensure that this UIPL is communicated to the appropriate staff immediately. In States where there have been administrative or court decisions or interpretations of the State law exempting all or certain categories of church-related elementary and secondary schools or certain categories of services in the employ of such schools that are inconsistent with the Secretary's decision, the State agencies should seek changes in the State law to bring it into conformity with FUTA requirements as a condition of certification under Section 3304(c), FUTA, for 1980 and subsequent years.

8. Attachment. Decision of the Secretary.

The separate Secretary’s findings are linked at https://oui.doleta.gov/dmstree/uipl/uipl80/uipl_1580a.pdf; they are not transcribed here. ETA later described the Supreme Court’s rejection of this coverage interpretation in UIPL 02-82.