Work relief and work-training coverage under FUTA

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| U.S. DEPARTMENT OF LABOR | CLASSIFICATION |
| Employment and Training Administration | |
| Washington, D. C. 20213 | UI |
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| | CORRESPONDENCE SYMBOL |
| | |
| | TEURA |
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| | ISSUE DATE |
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| | February 13,1986 |
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| RESCISSIONS | EXPIRATION DATE |
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| | February 28,1987 |
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| DIRECTIVE | : | UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-86 |
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| TO | : | ALL STATE EMPLOYMENT SECURITY AGENCIES |
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| FROM | : | BARBARA ANN FARMER |
| | | Acting Administrator |
| | | for Regional Management |
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| SUBJECT | : | Interpretation of Section 3309(b)(5), FUTA, Work Relief or Work-Training Program Exceptions to Section 3304(a)(6)(A), FUTA, Coverage Requirement |
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1. Purpose. To provide an interpretation of Section 3309(b)(5) of the Federal Unemployment Tax Act (FUTA) which permits an exception to coverage requirements of Section 3304(a)(6)(A), FUTA, for services performed as part of an unemployment work-relief or work-training program by individuals receiving such work-relief or work-training.

2. References. Sections 3304(a)(6)(A), 3309(a), 3309(b)(5), 3306(c)(7), and 3306(c)(8) of the Federal Unemployment Tax Act (FUTA)

3. Background. Section 3304(a)(6)(A), FUTA, requires State unemployment insurance (UI) laws to provide for coverage of services to which Section 3309(a)(1), FUTA, applies. Section 3309(a)(1), FUTA, applies to services performed for certain nonprofit organizations and to practically all services for State and local government entities, with certain permitted exceptions to both requirements. Section 3309(b)(5), FUTA, states one of those exceptions. If an unemployment work-relief or work-training program is assisted or financed in whole or in part by any Federal agency or an agency of a State or a political subdivision of a State, then services performed as part of such programs by individuals receiving work-relief or work-training may be exempted by State law from the mandatory UI coverage requirement. States are not precluded from covering such services; they are simply not required to provide such coverage in their laws as a condition for conformity with Section 3304(a)(6)(A), FUTA. Over the years, questions have arisen many times about what constitutes a work-relief or work-training program for purposes of this exemption. State legislation has sometimes presented potential issues based on an incomplete understanding of the work-relief exemption. It is apparent that an interpretation of the exemption provided by Section 3309(b)(5), FUTA, is needed.

4. Interpretation. As Federal law provides, an unemployment work-relief or work-training program must be assisted or financed in whole or in part by a Federal or State agency or a political subdivision of a State before services performed by individuals receiving such work relief or work training may be exempted from coverage.

   a. In order to qualify for the exemption provided by Section 3309(b)(5), FUTA, an unemployment work-relief or work-training program that is financed or assisted in whole or in part by any Federal agency or an agency of a State or a political subdivision of a State, must have as a minimum the following characteristics:

   - (1)  the employer-employee relationship is based more on the participants' and communities' needs than normal economic considerations such as increased demand or the filling of a bona fide job vacancy;
   
     (2)  qualifications for the jobs take into account as indispensable factors the economic status, i.e., the standing conferred by income and assets, of the applicants;
   
     (3)  the products or services are secondary to providing financial assistance, training, or work-experience to individuals to relieve them of their unemployment or poverty or to reduce their dependence upon various measures of relief, even though the work may be meaningful or serve a useful public purpose.
   

   b. Such an unemployment work-relief or work-training program will also have one or more of the following characteristics:

   - (1)  the wages, hours, and conditions of work are not commensurate with those prevailing in the locality for similar work;
   
     (2)  the jobs did not, or rarely did, exist before the program began (other than under similar programs) and there is little likelihood they will be continued when the program is discontinued;
   
     (3)  the services furnished, if any, are in the public interest and are not otherwise provided by the employer or its contractors; and
   
     (4)  the jobs do not displace regularly employed workers or impair existing contracts for services.
   

5. Action Required. State employment security agencies should take the actions appropriate to assure that the State's UI law is consistent with Federal requirements as interpreted herein.

6. Inquiries. Direct questions to the appropriate regional office.