FY 2014 grants to detect worker misclassification

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                  UI
               ADVISORY SYSTEM                             CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                         OUI/DUIO
             Washington, D.C. 20210                        DATE
                                                           July 16, 2014



ADVISORY:       UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 18-14

TO:             STATE WORKFORCE AGENCIES

FROM:           PORTIA WU /s/
                Assistant Secretary

SUBJECT:        Fiscal Year 2014 Unemployment Insurance Worker Misclassification
                Prevention and Detection Supplemental Funding Opportunity

1. Purpose. To notify states of a supplemental funding opportunity involving fiscal year
   (FY) 2014 unemployment insurance (UI) State Administration funds to address worker
   misclassification within the federal-state UI program and to provide guidance on how states
   can submit funding requests.

2. References.
   • Consolidated Appropriations Act, 2014 (Public Law 113-76);
   • Employment and Training (ET) Handbook No. 401, 4th Edition, Unemployment
      Insurance Reports; and
   • Unemployment Insurance Program Letter (UIPL) No. 3-11, Implementation of the
      Effective Audit Measure.

3. Background. The Consolidated Appropriations Act of 2014 authorizes grants to states for
   the administration of the state UI laws, including $10,000,000 for “activities to address the
   misclassification of workers.” Worker misclassification occurs when an employee is
   erroneously classified by an employer as an independent contractor, or not classified at all
   and become part of the underground economy. Both of these actions reduce UI tax revenue
   and adversely affect an employee’s ability to receive UI benefits, worker’s compensation,
   Social Security benefits, health insurance coverage, retirement coverage, and protection under
   the Fair Labor Standards Act. These actions are also unfair to employers who abide by the
   law and properly classify their employees. The Employment and Training Administration
   (ETA) is committed to developing UI tax-related systems and tools focused on the prevention
   and detection of worker misclassification.

   The FY 2014 appropriation identifies $10 million for two initiatives focused on increasing
   capacity to address worker misclassification. ETA’s Office of Unemployment Insurance
   (OUI) will make $8 million in competitive grants available to states to increase their capacity
   for preventing and detecting worker misclassification and enforcing their state UI laws and
   policies. OUI will also award $2 million to states that have demonstrated a high level of

 RESCISSIONS                                              EXPIRATION DATE
 None                                                     September 30, 2016

   performance or significant improvement in detecting and prosecuting employers who fail to
   pay their fair share of taxes due to worker misclassification.

4. Use of Funds. Examples of appropriate proposals for states to increase their capacity for
   preventing and detecting worker misclassification include:

   •   Improving systems that will enable them to share and analyze data from Federal and state
       agencies that will enhance identifying employers more likely to misclassify employees;
   •   Implementing targeted audit strategies to focus on those employers most likely to
       misclassify workers;
   •   Establishing a state-wide task force to target egregious worker misclassification schemes;
       and
   •   Developing education and outreach programs for employers to help prevent
       misclassification.

5. Application, Award, and Expenditure of Supplemental Funds. An individual state may
   request up to $500,000 for misclassification prevention, detection, and enforcement projects.
   If the projected cost of the project exceeds $500,000, the state must commit to completing the
   project without additional Federal funds. If the amount of funds approved for all states is less
   than the total amount available, ETA may make awards greater than the initial maximum
   amount of $500,000, or a second solicitation could be issued.

   ETA will use the attached Supplemental Budget Request (SBR) Outline to evaluate
   proposals. Each element should be addressed succinctly and provide the specific information
   requested. Applicants should describe proposed expenditures to explain and justify the
   request. States must submit a proposal outlining the project along with Standard Forms
   (SF)-424 (Application for Federal Assistance) and form SF-424A (Budget Information –
   Non-Construction Programs).

   Proposals, along with forms SF-424 and SF-424A, must be submitted to ETA’s National
   Office no later than August 15, 2014, by sending, via e-mail, an electronic copy of the
   proposal to [email protected]. Due to the tight timeframe for developing and submitting
   supplemental budget requests, ETA asks states to provide only the information requested.
   ETA will only consider proposals that meet the minimum standard score of 80 points. If the
   total amount of funds requested in all of the state applications exceeds the amount of funding
   available, funds will be awarded from the highest score in descending order until the funds
   are exhausted. After projects have been approved, ETA will issue an award letter to states
   listing the project(s) to be funded and the total funding level for the state.

   States must obligate the funds for misclassification projects by September 30, 2016, and
   liquidate the obligations within 90 days after that date. Upon written request from the state,
   no later than August 31, 2016, the grant officer may extend the liquidation period only if the
   funds have been obligated to an outside contractor. An extension cannot be granted if the
   funds are intended for use by state staff or by another state agency.




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   During the life of the project, expenditures should be reported on the ETA 9130 (ETA
   Financial Report) in the remarks section. By applying for these funds, the state is agreeing
   that the project will be completed with no additional Federal funding.

6. Proposed Data Collection. ETA is developing a data collection request for OMB approval
   for quarterly state reporting on the implementation of SBR activities. This request may
   include reporting information on SBR project quarterly expenditures, the completion of
   specific project milestones, and additional data necessary to assist the National and Regional
   offices in monitoring implementation. ETA will communicate with the UI system to seek
   comment on the proposed data collection through the Paperwork Reduction Act clearance
   process, and will notify states upon OMB approval of the final data collection. ETA
   anticipates this data collection will be in place for states that receive grants under this SBR
   opportunity.

7. “High Performance Bonus” Program. ETA will make a total of $2 million available to
   reward states that have demonstrated a high level of performance or significant improvement
   at detecting worker misclassification and enforcing state UI tax requirements on employers
   who failed to properly classify their workers. The “High Performance Bonus” awards must
   be used to enhance the prevention and detection of worker misclassification or to improve UI
   integrity in the state.

   •   Eligible States. Only states with UI Tax programs that ETA has determined to be in
       good standing are eligible to receive the “High Performance Bonus” award. States that
       fulfill the following requirements are considered to be in good standing because they have
       filed all of the necessary reports that measure their ability to detect misclassification; they
       have validated the data in those reports; and they have achieved a passing grade for the
       measure that evaluates audits that are effective at detecting worker misclassification:

           o Filed all Federal reports required in ET Handbook No. 401, Section II – Fund
             Management Activity during the award measurement period of
             January 1, 2012, through December 31, 2013;
           o Submitted and passed all five UI Tax Data Validation populations; and
           o Received an overall score of “Pass” for the Effective Audit Measure (EAM) for
             calendar year 2013.

   •   Award Amounts. ETA will make four individual state awards, the base amount of each
       will be in the amount of $250,000, for a total of $1 million. The remaining $1 million
       will be allocated proportionally among the four selected states according to the size of
       their employer population, in comparison to the overall number of employers for the four
       states combined. No single state may be eligible to receive more than one “High
       Performance Bonus” award.

   •   Measurement Criteria. ETA will award funds to the four selected states based on the
       following criteria:




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           o Two Highest Performing States - Using the EAM for the calendar year 2013, ETA
             will determine which two eligible states passed the EAM with the highest total
             score. Each of the two states will receive a base award of $250,000 plus their
             share of the additional $1 million, prorated based on the employer population, as
             described above; and
           o Two Most Improved States - Using the EAM, ETA will compare the two calendar
             years 2012 and 2013, and select the two eligible states with the highest percentage
             of improved total score from 2012 to 2013. Each state will receive a base award
             of $250,000 plus their share of the additional $1 million, prorated based on the
             employer population, as described above.

   •   Award Notification. ETA will notify the four High Performance Bonus states no later
       than July 15, 2014. No later than 30 days after notification, each of the four states must
       submit form SF-424 (Application for Federal Assistance) and a statement of work that
       describes how the award will be used. ETA will provide further instructions to the
       awardees once the awards are announced. States must obligate the funds for from these
       awards by September 30, 2016, and liquidate the obligations within 90 days after that
       date. Upon written request from the state, no later than August 31, 2016, the grant officer
       may extend the liquidation period only if the funds have been obligated to an outside
       contractor. An extension cannot be granted if the funds are intended for use by state staff
       or by another state agency.

8. Action Requested. State administrators are requested to:

   •   Provide information contained in this UIPL to appropriate staff; and
   •   Send, via e-mail, an electronic copy of the proposal to [email protected].

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

10. Attachment. Supplemental Budget Request Outline




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Attachment 1 (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2014/UIPL_18-14_Attachment_Acc.pdf)

ATTACHMENT


                          Supplemental Budget Request Outline

1. Name of the Project:

2. Amount of Funding Request for this project: Provide the total dollars requested for this
   proposal. By submitting this proposal, the state agrees to complete this project without
   additional Federal funds.

3. State Contact: Provide the name, telephone number and e-mail address of the individual
   who can answer questions related to this proposal.

4. Project Description: Explain in one or two paragraphs what the funds will accomplish.
5. Project Timeline: The value of this element is 15 points. Provide a timeline identifying the
   dates of significant steps in this project from receipt of the grant through the projected
   implementation date of the project.

6. Description of Costs: The value of this element is 15 points.

       a. Staff - States should use the table format below to request funding for state or
          contractor staff.

               Type of          Number of        Cost Per        Total
               Position         Hours            Hour            Cost


       b. Hardware, Software, and Telecommunications Equipment: Provide an itemized
          list of hardware, software and telecommunications equipment including the cost per
          item and the number of each item requested. A description of each item should
          provide information needed to identify the specific item and a description of the size
          and capacity of each item, if applicable.

       c. Other: Identify and explain the need for each item; provide expected cost per item.

7. Strategic Design: The value of this element is 35 points. Include a brief description of the
   strategic project design identifying key reasons this project is needed. The strategic design
   should include an analysis of current operations and show that the design will meet the state’s
   needs. Describe the current problem(s) and how the project will increase the state’s capacity
   for preventing and detecting worker misclassification and enforcing state UI laws and
   policies. For example, a state may not be conducting targeted audits of employers most likely
   to misclassify workers due to outdated computer systems.

8. Measurable Improvements Expected in UI Operations: The value of this element is 35
   points. Identify which services or performance will be improved or on-going costs reduced
   through implementation of the proposed project. Improvements and cost reductions must be
   quantified and estimates must be reasonable (e.g., improvement might be an estimated 20
   percent decrease in the number of employers who misclassify employees). The narrative
   should explain how the estimate was derived.