Model state law for work-sharing programs

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                UI-STC
               ADVISORY SYSTEM                           CORRESPONDENCE SYMBOL
                                                         OUI/DL
          U.S. DEPARTMENT OF LABOR
                                                         DATE
             Washington, D.C. 20210                      December 21, 2012



ADVISORY: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 22-12,
          CHANGE 1

TO:           STATE WORKFORCE AGENCIES

FROM:         JANE OATES /s/
              Assistant Secretary

SUBJECT:      Short-Time Compensation Provisions in the Middle Class Tax Relief and Job
              Creation Act of 2012

1. Purpose. To provide model legislation for states to use in implementing the provisions in
   Subtitle D of Title II of the Middle Class Tax Relief and Job Creation Act of 2012 on short-
   time compensation or “worksharing” programs, and to provide additional guidance to the
   state agencies about the new definition of short-time compensation in Federal unemployment
   compensation law.

2. References.
   • Section 194 of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 (Public
      Law (Pub. L.) 97-248);
   • Section 401 of the Unemployment Compensation Amendments of 1992 (Pub. L.102-
      318);
   • The Layoff Prevention Act of 2012 (Subtitle D) Title II of the Middle Class Tax Relief
      and Job Creation Act of 2012, (Pub. L. 112-96),
   • Federal Unemployment Tax Act (FUTA; 26 U.S.C. 3301 et seq.);
   • Section 303(a)(5) of the Social Security Act (SSA);
   • Sections 414(i) and (j) of the Internal Revenue Code (IRC); and
   • Unemployment Insurance Program Letter (UIPL) No. 45-92. Unemployment
      Compensation Amendments of 1992 (P.L. 102-318) - Provisions Affecting the Federal-
      State Unemployment Compensation (UC) Program;
   • UIPL No. 22-12. Short-Time Compensation Provisions in the Middle Class Tax Relief
      and Job Creation Act of 2012

3. Background. Short-time compensation (STC), also known as work-sharing or shared work
   programs, preserves employees’ jobs and employers’ trained workforces from disruptions to
   a firm’s regular business activity by reducing hours of work for an entire group of affected
   employees rather than by laying off some employees while others continue to work their
   regular work schedule. STC provides a portion of a weekly unemployment compensation
   (UC) payment to certain individuals whose work weeks have been reduced. STC cushions
   the adverse effect of the reduction in business activity on workers and ensures that these

 RESCISSIONS                                             EXPIRATION DATE
 None                                                    Continuing

   workers will be available to resume prior employment levels when business demand
   increases.

   Initially, the TEFRA of 1982 authorized states to implement temporary STC programs using
   funds from their accounts in the Unemployment Trust Fund (UTF). In UIPL No. 39-83, the
   Department of Labor (Department) issued model legislation to the states to implement these
   temporary STC programs. This UIPL expired on September 30, 1985. The Unemployment
   Compensation Amendments of 1992 added permanent statutory authority for states to fund
   STC from their accounts in the UTF and established certain requirements in its definition of
   an STC program.

   On February 22, 2012, the President signed into law the Middle Class Tax Relief and Job
   Creation Act of 2012 (the Act), which contains many provisions concerning the UC program.
   In UIPL No. 22-12, the Department provided guidance to states about the minimum
   conformity requirements for the new definition of STC in the Act. Section 2165 of the Act
   also required the Secretary of Labor, after consultation with stakeholders, to develop model
   legislation, guidance, and reporting requirements for use by states in developing and enacting
   STC programs.

   As required by Section 2165(c) of the Act, the Department consulted with employers, labor
   organizations, state workforce agencies, and other program experts about model legislative
   language, guidance, and reporting. A Notice of Listening Sessions on Implementation of
   Unemployment Insurance Provisions of the Middle Class Tax Relief and Job Creation Act of
   2012 (Pub. L. 112–96) was published at 77 Federal Register 16074 (March 19, 2012) and
   two listening sessions were held. Recordings of these sessions are at:
   https://www.workforce3one.org/view/5001206850055897580/info and
   https://www.workforce3one.org/view/5001206850373490082/info.

4. The Listening Sessions. In these sessions, the Department explained that the term “short-
   time compensation” is defined in new subsection (v) of Section 3306, FUTA, which became
   effective on the date of enactment of the Act, February 22, 2012. States are not required to
   enact an STC program into law; however, states enacting a new STC law may not operate an
   STC program that does not conform to this definition. The Act provides states with current
   STC laws a transitional period to conform to the new requirements, which is discussed in
   UIPL No. 22-12. Section 3306(v)(10), FUTA, provides that “upon request by the State and
   approval by the Secretary of Labor” additional provisions may be included in a State STC
   law if these are “determined to be appropriate for purposes of a short-time compensation
   program.”

   During the listening sessions, some stakeholders expressed the opinion that the model
   language should be limited to that which is necessary to conform to the new definition and
   that no other requirements be included in the model legislation. Some states have STC laws
   that have been in place since the 1980s, and expressed an interest in keeping the model
   language as consistent with the model language in UIPL No. 39-83 as the new definition of
   Section 3306(v), FUTA, would allow. Some states inquired about the approval process




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   provided in Section 3306(v)(10), FUTA, if their current law contained additional provisions
   beyond the minimum conformity requirements.

5. The Model Legislation. The Department agrees with the stakeholders that the model
   legislation should be limited to what is necessary to conform to the new definition of an STC
   program. The Department also agrees that the model legislation be tailored in such a way
   that those states that currently have STC laws based on the 1983 guidance should not be
   required to amend their STC laws if these laws are appropriate for an STC program that
   meets the definition in Section 3306(v), FUTA. Therefore, the Department has developed
   model language based upon the 1983 model language that has been updated and revised to
   assist states in enacting conforming legislation. States are not required to use the model
   language but if a state enacts a law using the model language provided it will be in
   conformity with the new definition of a short-time compensation program in Section
   3306(v), FUTA.

   As noted above, several states have operated STC programs since the 1980’s consistent with
   the previous model language. These state laws may contain additional provisions for an STC
   program other than the provisions necessary to conform to the new definition of an STC
   program. These additional provisions concern the size of the affected unit in an STC
   program; limitations on participation in the STC program by employers who are either
   maximum rated employers in the state experience rating system or delinquent in the payment
   of contributions, penalties or interest; or include a requirement that, if the affected unit is
   covered under a collective bargaining agreement, the bargaining agent must agree to the plan.
   These provisions were recommended in the previous model language and were not addressed
   in the Act. The Department considers these provisions appropriate for the operation of an
   STC program, and a state law containing these optional provisions will be in conformity with
   the new definition of an STC program. The approval of these provisions is made under the
   Secretary’s authority under Section 3306(v)(10), FUTA, to permit such additional provisions
   that are appropriate for an STC program. The model language clearly identifies these as
   optional provisions should a state wish to include them in any new enactment, or if a state
   currently has these provisions in its STC law.

6. Approval of other additional provisions not included in model language that a state
   wishes to be considered appropriate for an STC program. Section 3306(v)(10), FUTA,
   provides flexibility to states to request approval by the Secretary of Labor of other provisions
   that a state wishes to be considered appropriate for an STC program. This UIPL details the
   procedure for a state with an additional provision[s] in its STC law, or a state developing
   legislation to enact a new STC law that wishes to add such an additional provision in its STC
   law, to request approval by the Secretary of Labor. We strongly encourage states to consult
   with the Department before enacting any optional provisions other than those identified in
   the model legislation. Any additional provision must be consistent with how an STC
   program is defined in Sections 3306(v)(1) through (9), FUTA.

   An authorized representative of the state (normally this would be the Administrator of the
   State Agency) must request, in writing, that the Department approve any additional optional
   provisions as appropriate for a STC program.



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   Any request to approve an additional provision a state considers appropriate for a STC
   program must include the text of the additional provision; a citation where the state proposes
   to codify the additional provision in its state law; a description of the provision and a detailed
   rationale as to why the state considers the provision appropriate for a STC program; and a
   request that the Department approve the provision.

   The request must be addressed to:


   Gay Gilbert
   Administrator
   Office of Unemployment Insurance
   200 Constitution Ave N.W. Room S-4524
   Washington, D.C., 20210

   A PDF of the request may also be sent electronically to:

   [email protected]


7. Action Requested. State Administrators are requested to provide this information to
   appropriate staff.

8. Inquiries. Inquiries should be directed to the appropriate regional office.

9. Attachment. Draft Language and Commentary to Implement a Short-Time Compensation
   Program.




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Attachment 1 (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2012/UIPL_22_12_Chg1_Att1.pdf)

Draft Language and Commentary to Implement a Short-Time Compensation
  Program

I.   Draft Language

      A.   Definitions

            1.    The term “affected unit” means a specified plant, department, shift, or
                  other definable unit which includes ____ or more workers to which an
                  approved short-time compensation plan applies.

            2.    The term “Director” means the state agency official designated to
                  perform primary oversight of the unemployment compensation
                  program, or any delegate or subordinate responsible for approving
                  applications for participation in a short-time compensation plan.

            3.    The term “health and retirement benefits” means employer-provided
                  health benefits, and retirement benefits under a defined benefit pension
                  plan (as defined in section 414(j) of the Internal Revenue Code or
                  contributions under a defined contribution plan (defined in section
                  414(i) of such Code), which are incidents of employment in addition to
                  the cash remuneration earned.

            4.    The term “short-time compensation” means the unemployment
                  benefits payable to employees in an affected unit under an approved
                  short-time compensation plan, as distinguished from the
                  unemployment benefits otherwise payable under the unemployment
                  compensation provisions of a State law.

            5.    The term “short-time compensation plan” means a plan submitted by
                  an employer, for approval by the Director, under which the employer
                  requests the payment of short-time compensation to workers in an
                  affected unit of the employer to avert layoffs.

            6.    The term “usual weekly hours of work” means the usual hours of work
                  for full-time or part-time employees in the affected unit when that unit
                  is operating on its regular basis, not to exceed forty hours and not
                  including hours of overtime work.

            7.    The term “unemployment compensation” means the unemployment
                  benefits payable under this Act other than short-time compensation
                  and includes any amounts payable pursuant to an agreement under any


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            Federal law providing for compensation, assistance, or allowances
            with respect to unemployment.

B.   Application to Participate in the Short-Time Compensation Program

     An employer wishing to participate in the short-time compensation program
     shall submit a signed written short-time compensation plan to the Director for
     approval. The Director shall develop an application form to request approval
     of a short-time compensation plan and an approval process. The application
     shall include:

        1.    The affected unit (or units) covered by the plan, including the number
            of full-time or part-time workers in such unit, the percentage of
            workers in the affected unit covered by the plan, identification of each
            individual employee in the affected unit by name, social security
            number, and the employer’s unemployment tax account number and
            any other information required by the Director to identify plan
            participants.

        2.    A description of how workers in the affected unit will be notified of
            the employer’s participation in the short-time compensation plan if
            such application is approved, including how the employer will notify
            those workers in a collective bargaining unit as well as any workers in
            the affected unit who are not in a collective bargaining unit. If the
            employer will not provide advance notice to workers in the affected
            unit, the employer shall explain in a statement in the application why it
            is not feasible to provide such notice.

        3.    A requirement that the employer identify the usual weekly hours of
            work for employees in the affected unit and the specific percentage by
            which their hours will be reduced during all weeks covered by the
            plan. An application shall specify the percentage of reduction for
            which a short-time compensation application may be approved which
            shall be not less than 10 percent and not more than 60 percent. If the
            plan includes any week for which the employer regularly provides no
            work (due to a holiday or other plant closing), then such week shall be
            identified in the application.

        4.    Certification by the employer that, if the employer provides health
            benefits and retirement benefits under defined benefit pension plans
            (as defined in section 414(j) of the Internal Revenue Code) or
            contributions under a defined contribution plan (defined in section
            414(i) of such Code) to any employee whose usual weekly hours of
            work are reduced under the program, such benefits will continue to be
            provided to employees participating the short-time compensation
            program under the same terms and conditions as though the usual


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           weekly hours of work of such employee had not been reduced or to the
           same extent as other employees not participating in the short-time
           compensation program.

           For defined benefit retirement plans, the hours that are reduced under
           the short-time compensation plan shall be credited for purposes of
           participation, vesting, and accrual of benefits as though the usual
           weekly hours of work had not been reduced. The dollar amount of
           employer contributions to a defined contribution plan that are based on
           a percentage of compensation may be less due to the reduction in the
           employee’s compensation.

           Notwithstanding the above, an application may contain the required
           certification when a reduction in health and retirement benefits
           scheduled to occur during the duration of the plan will be applicable
           equally to employees who are not participating in the short-time
           compensation program and to those employees who are participating.

        5.   Certification by the employer that the aggregate reduction in work
           hours is in lieu of layoffs (temporary or permanent layoffs, or both).
           The application shall include an estimate of the number of workers
           who would have been laid off in the absence of the short-time
           compensation plan.

        6.   Agreement by the employer to: furnish reports to the Director relating
           to the proper conduct of the plan; allow the Director or his authorized
           representatives access to all records necessary to approve or
           disapprove the plan application, after approval of a plan, to monitor
           and evaluate the plan; and follow any other directives the Director
           deems necessary for the agency to implement the plan and which are
           consistent with the requirements for plan applications.

        7.   Certification by the employer that participation in the short-time
           compensation plan and its implementation is consistent with the
           employer’s obligations under applicable Federal and State laws.

        8.   The effective date and duration of the plan that shall expire not later
           than the end of the 12th full calendar month after the effective date.

        9.   Any other provision added to the application by the Director that the
           United States Secretary of Labor determines to be appropriate for
           purposes of a short-time compensation program.

C.   Approval and Disapproval of the Short-time Compensation Plan




                                     3

        The Director shall approve or disapprove a short-time compensation plan
        in writing within __ days of its receipt and promptly communicate the
        decision to the employer. A decision disapproving the plan shall clearly
        identify the reasons for the disapproval. The disapproval shall be final,
        but the employer shall be allowed to submit another short-time
        compensation plan for approval not earlier than __ days from the date of
        the disapproval.

D.   Effective Date and Duration of the Short-time Compensation Plan

        A short-time compensation plan shall be effective on the date that is
        mutually agreed upon by the employer and the Director, which shall be
        specified in the notice of approval to the employer. The plan shall expire
        on the date specified in the notice of approval, which shall be either the
        date at the end of the 12th full calendar month after its effective date or an
        earlier date mutually agreed upon by the employer and the Director.
        However, if a short-time compensation plan is revoked by the Director
        under paragraph E of this Act, the plan shall terminate on the date
        specified in the Director's written order of revocation. An employer may
        terminate a short-time compensation plan at any time upon written notice
        to the Director. Upon receipt of such notice from the employer, the
        Director shall promptly notify each member of the affected unit of the
        termination date. An employer may submit a new application to
        participate in another short-time compensation plan at any time after the
        expiration or termination date.

E.   Revocation of Approval

        The Director may revoke approval of a short-time compensation plan for
        good cause at any time, including upon the request of any of the affected
        unit's employees. The revocation order shall be in writing and shall
        specify the reasons for the revocation and the date the revocation is
        effective.

        The Director may periodically review the operation of each employer’s
        short-time compensation plan to assure that no good cause exists for
        revocation of the approval of the plan. Good cause shall include, but not
        be limited to, failure to comply with the assurances given in the plan,
        unreasonable revision of productivity standards for the affected unit,
        conduct or occurrences tending to defeat the intent and effective operation
        of the short-time compensation plan, and violation of any criteria on which
        approval of the plan was based.

F.   Modification of an Approved Short-time Compensation Plan




                                      4

        An employer may request a modification of an approved plan by filing a
        written request to the Director. The request shall identify the specific
        provisions proposed to be modified and provide an explanation of why the
        proposed modification is appropriate for the short-time compensation
        plan. The Director shall approve or disapprove the proposed modification
        in writing within     days of receipt and promptly communicate the
        decision to the employer.

        The Director, in his or her discretion, may approve a request for
        modification of the plan based on conditions that have changed since the
        plan was approved provided that the modification is consistent with and
        supports the purposes for which the plan was initially approved. A
        modification does not extend the expiration date of the original plan, and
        the Director must promptly notify the employer whether the plan
        modification has been approved and, if approved, the effective date of the
        modification.

        An employer is not required to request approval of a plan modification
        from the Director if the change is not substantial, but the employer must
        report every change to the plan to the Director promptly and in writing.
        The Director may terminate an employer’s plan if the employer fails to
        meet this reporting requirement. If the Director determines that the
        reported change is substantial, the Director shall require the employer to
        request a modification to the plan.

G.   Eligibility for Short-Time Compensation

        An individual is eligible to receive short-time compensation with respect
        to any week only if the individual is monetarily eligible for unemployment
        compensation, not otherwise disqualified for unemployment
        compensation, and:

        (1) During the week, the individual is employed as a member of an
        affected unit under an approved short-time compensation plan, which was
        approved prior to that week, and the plan is in effect with respect to the
        week for which short-time compensation is claimed.

        (2) Notwithstanding any other provisions of this Act relating to
        availability for work and actively seeking work, the individual is available
        for the individual’s usual hours of work with the short-time compensation
        employer, which may include, for purposes of this section, participating in
        training to enhance job skills that is approved by the Director such as
        employer-sponsored training or training funded under the Workforce
        Investment Act of 1998.




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        (3) Notwithstanding any other provision of law, an individual covered by
        a short-time compensation plan is deemed unemployed in any week during
        the duration of such plan if the individual’s remuneration as an employee
        in an affected unit is reduced based a reduction of the individual’s usual
        weekly hours of work under an approved short-time compensation plan.

H.   Benefits


        1.   The short-time compensation weekly benefit amount shall be the
           product of the regular weekly unemployment compensation amount
           for a week of total unemployment multiplied by the percentage of
           reduction in the individual's usual weekly hours of work.

        2.   An individual may be eligible for short-time compensation or
           unemployment compensation, as appropriate, except that no individual
           shall be eligible for combined benefits in any benefit year in an
           amount more than the maximum entitlement established for regular
           unemployment compensation, nor shall an individual be paid short-
           time compensation benefits for more than 52 weeks under a short-time
           compensation plan.

        3.   The short-time compensation paid to an individual shall be deducted
           from the maximum entitlement amount of regular unemployment
           compensation established for that individual's benefit year.

        4.   Provisions applicable to unemployment compensation claimants shall
           apply to short-time compensation claimants to the extent that they are
           not inconsistent with short-time compensation provisions. An
           individual who files an initial claim for short-time compensation
           benefits shall receive a monetary determination.

        5.   The following provisions apply to individuals who work for both a
           short-time compensation employer and another employer during
           weeks covered by the approved short-time compensation plan.

           (a) If combined hours of work in a week for both employers does not
           result in a reduction of at least 10 percent (or, if higher, the minimum
           percentage of reduction required to be eligible for a short-time
           compensation benefit as provided in State law) of the usual weekly
           hours of work with the short-time employer, the individual shall not be
           entitled to benefits under these short-time compensation provisions.

           (b) If the combined hours of work for both employers results in a
           reduction equal to or greater than 10 percent (or, if higher, the
           minimum percentage reduction required to be eligible for a short-time


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             compensation benefit as provided in state law) of the usual weekly
             hours of work for the short-time compensation employer, the short-
             time compensation benefit amount payable to the individual is reduced
             for that week and is determined by multiplying the weekly
             unemployment benefit amount for a week of total unemployment by
             the percentage by which the combined hours of work have been
             reduced by 10 percent (or, if higher, the minimum percentage
             reduction required to be eligible for a short-time compensation benefit
             as provided in state law ) or more of the individual’s usual weekly
             hours of work. A week for which benefits are paid under this
             provision shall be reported as a week of short-time compensation.

             (c) If an individual worked the reduced percentage of the usual
             weekly hours of work for the short-time compensation employer and is
             available for all his usual hours of work with the short-time
             compensation employer, and the individual did not work any hours for
             the other employer, either because of the lack of work with that
             employer or because the individual is excused from work with the
             other employer, the individual shall be eligible for short-time
             compensation for that week. The benefit amount for such week shall
             be calculated as provided in 1 of this section.

        6.    An individual who is not provided any work during a week by the
             short-time compensation employer, or any other employer, and who is
             otherwise eligible for unemployment compensation shall be eligible
             for the amount of regular unemployment compensation to which they
             would otherwise be eligible.

        7.    An individual who is not provided any work by the short-time
             compensation employer during a week, but who works for another
             employer and is otherwise eligible may be paid unemployment
             compensation for that week subject to the disqualifying income and
             other provisions applicable to claims for regular compensation.

I.    Charging Short-Time Compensation Benefits

      Short-time compensation shall be charged to employers' experience rating
      accounts in the same manner as unemployment compensation is charged
      under the State law. Employers liable for payments in lieu of contributions
      shall have short-time compensation attributed to service in their employ in
      the same manner as unemployment compensation is attributed. 1


  1
   For a limited time period, as discussed in UIPL No. 22-12, a state may relieve an
  employer of charges or not require reimbursement for STC benefits if they are
  subject to 100 percent reimbursement by the Federal government.


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       J.    Extended Benefits

             An individual who has received all of the short-time compensation or
             combined unemployment compensation and short-time compensation
             available in a benefit year shall be considered an exhaustee for purposes of
             extended benefits, as provided under the provisions of section __ , and, if
             otherwise eligible under those provisions, shall be eligible to receive extended
             benefits.

II.   Commentary on Draft Language for a Short-Time Compensation Program

      A State is not required to operate a short-time compensation or “STC” program.
      However, if it does so, the program must be consistent with the requirements of
      Section 3306(v) of the Federal Unemployment Tax Act (FUTA) as added by The
      Layoff Prevention Act of 2012 (Subtitle D of Title II of Public Law (Pub. L.) 112-
      96). Section 3306(v), FUTA, provides the criteria that a State must follow to assure
      that approval of an STC plan is consistent with Federal requirements. The model
      legislation incorporates those criteria and identifies provisions that are necessary to
      implement state STC programs. The implementation provisions address eligibility
      conditions, criteria for approval and revocation of STC plans, and entitlement of
      individuals who work in the employ of employers other than the STC employer.

      States may need to change various provisions of the model legislation in order to
      meet their own statutory formats and requirements. Any substantive modifications or
      additions must, however, be consistent with requirements of the FUTA and Title III
      of the Social Security Act. Additionally, states should examine whether the
      provisions of State law relating to withdrawal of money from the unemployment fund
      include authorization to withdraw money to pay STC benefits. States may need to
      update such provisions if the provisions limit the withdrawal to pay STC under the
      authority of either Section 194 of the Tax Equity and Fiscal Responsibility Act of
      1982 (Pub. L. 97-248) or Section 401 of the Unemployment Compensation
      Amendments of 1992 (Pub. L. 102-318).

      The following is a section by section commentary on the provisions contained in the
      model legislation.

       A.    Definitions

                   1.    Affected Unit – The employer must identify the affected unit to
                         which the application to participate in the STC plan applies to help
                         the Director administer the plan. Since the employer must certify
                         that its application to participate in the STC program is in lieu of
                         making temporary or permanent “layoffs” within the affected unit,
                         then the affected unit must, at a minimum, include two workers.
                         However, for purposes of the State STC program, a State may


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     choose to increase the minimum number of workers in an affected
     unit to a higher number, and the blank in the model language is
     intended to afford some flexibility for the State. However, a State
     should not set such a high minimum number that would inhibit
     meaningful participation of the state employers in the STC
     program.

2.   Director - The state official with oversight responsibility for the
     unemployment compensation program, or the designate of the
     official, with authority to approve an STC application.

3.   Health and Retirement Benefits – The term refers to health benefits
     and retirement benefits under specific types of pension plans
     identified in the section 3306(v), FUTA definition by reference to
     the IRC. The requirements in connection with these benefits are
     described fully in the requirements for the plan application.

4.   Short-Time Compensation (STC) – The term refers to a payment
     made to workers who are working reduced hours under an STC
     plan, and the payment is different from regular unemployment
     compensation in the amount payable and the conditions of
     entitlement.

5.   Short-Time Compensation Plan (STC Plan) – The term refers to a
     plan approved by the Director when an employer requests approval
     for the payment of STC to employees within an affected unit of the
     employer when the employer reduces the hours of work in the
     affected unit in lieu of “layoffs.” The layoffs may be temporary or
     permanent.

6.   Usual Weekly Hours of Work – The usual hours of work of full-
     time and regular part-time workers in the affected unit. Overtime
     hours are not included as part of usual weekly hours of work.

     The model language specifically includes regular part-time
     workers as individuals in an affected unit who may be included as
     participants in an approved STC plan. These part-time workers
     must be regular employees of the employer who normally work
     part-time hours as distinguished from part-time workers who work
     on a seasonal, temporary or intermittent basis. A state STC law
     may not limit participation only to full-time workers.

7.   Unemployment compensation (UC) – The term is used here solely
     for purposes of distinguishing benefits paid under the regular
     unemployment compensation program from those paid under the
     STC program. It applies to any regular, extended, or additional


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            unemployment compensation payable under State law, and any
            amounts payable in accordance with agreements between the State
            and the Secretary of Labor under any Federal unemployment
            compensation law. The distinction made here does not alter the
            designation of STC as a form of unemployment compensation for
            other applicable purposes.

B.   Applications to Participate in the Short-Time Compensation Program

     This section prescribes the content of an STC plan application under the
     requirements of Section 3306(v), FUTA:

        1.    The application must require the employer to describe the affected
            unit(s) in enough detail so that the Director may properly
            administer such claims. For example, both of the following are
            acceptable: Plant A at 123 Walnut Street; the finishing department
            at Plant A, 123 Walnut Street.

            The employees covered by the plan need to be identified so that
            their claim records can be distinguished from non-STC plan
            claimants employed by the same employer. STC plan claimants
            will be entitled to a different weekly benefit amount than regular
            claimants. The number of weeks for which STC benefits are
            payable and the expiration date of the plan must be noted.

        2.    Section 3306(v)(8), FUTA, requires that an application to
            participate in an STC plan include “a plan for giving advance
            notice, where feasible, to an employee whose usual weekly hours
            of work is to be reduced ….” If all of the employees in an affected
            unit are covered by the same collective bargaining agreement, a
            description of how notice will be provided to the collective
            bargaining representative will suffice. However, if the affected
            unit includes members not covered by a collective bargaining
            agreement, the employer must include in the application a
            description of how the employer will provide notice of the plan to
            those workers.

            Although the Department anticipates that employers will provide
            the required notice, if advance notification to the workers is not
            considered feasible by the employer, a detailed explanation must
            be provided in the application.

        3.    The application shall require the employer to specify the specific
            percentage of reduction in hours worked by the affected
            employees. The range of reduction that a state will approve in a
            STC plan must be in accord with the Section 3306(v)(3), FUTA,


                                 10

     requirement that an STC plan is one where the workers hours are
     reduced by at least 10 percent but no more than 60 percent.

     A State law may specify a narrower range of the reduction in the
     usual hours of work that it will approve an STC plan. For
     example, a state may change the range of reduction in the hours of
     work from 20 percent to 50 percent.

4.   The certification in the application relating to the continued
     provision of health and retirement benefits implements Section
     3306(v)(7), FUTA, which requires an employer to certify that “if
     the employer provides health benefits and retirement benefits
     under a defined benefit plan (as defined in section 414(j)) [of the
     Internal Revenue Code ] or contributions under a defined
     contribution plan (as defined in section 414(i) ) to any employee
     whose workweek is reduced under the program that such benefits
     will continue to be provided to employees participating in the
     short-time compensation program under the same terms and
     conditions as though the workweek of such employee had not been
     reduced or to the same extent as other employees not participating
     in the short-time compensation program.”

     The employer may not reduce the health or specified retirement
     benefits to individuals participating in the STC program.
     However, this provision does not apply if a reduction in such
     health and specified retirement benefits applies to all employees,
     and is not limited to STC participants.

     The employer may not reduce health insurance benefits it provides
     to employees in the affected unit based upon the reduction in hours
     that is part of the employer’s participation in the plan.

     The following two paragraphs of this commentary provide general
     information about retirement plans and are not intended to be a
     comprehensive statement of the complex laws on retirement plans.

     In general, a defined contribution retirement plan is a retirement
     investment account. Section 414(i) of the Internal Revenue Code
     defines such a contribution plan as “a plan which provides for an
     individual account for each participant and for benefits based
     solely on the amount contributed to the participant’s account, and
     any income, expenses, gains and losses, and any forfeitures of
     accounts of other participants may be allocated to such
     participant’s account.”

     In general, a defined benefit retirement benefit plan (as defined in


                           11

     Section 414(j) of the Internal Revenue Code) is not a contribution
     plan but one where the monthly retirement benefit amount is
     determined based on a computation formula specified in the plan.
     The retirement benefit is “defined” because the formula for
     computing benefits is known in advance of retirement and it is not
     contingent on investment income.

5.   As part of any approval of an employer to participate in an STC
     program, the state must verify that the application includes a
     certification by the employer that maintains a retirement plan
     (either a defined benefit plan or a defined contribution plan) for an
     employee who has a reduction in the usual weekly hours of work
     under the employer’s proposed plan that benefits (in the case of a
     defined benefit plan) and employer contributions (in the case of a
     defined contribution plan) will continue to be provided to the
     employee under the same terms and conditions as though the
     employee’s usual weekly hours of work were not reduced.

     For purposes of granting approval of the STC plan, employees
     participating in the employer’s STC plan must be allowed to
     maintain coverage in the retirement plan under the same terms and
     conditions as employees not participating in the STC plan. The
     hours that were reduced under the STC plan must be credited for
     purposes of participation, vesting, and accrual of benefits as
     though the usual weekly hours of work had not been reduced. The
     dollar amount of employer contributions to a defined contribution
     plan that are based on a percentage of compensation may be less
     due to the reduction in the employee’s compensation

     The certification by the employer that that the aggregate reduction
     in work hours is in lieu of layoffs, coupled with the requirement
     for the employer to estimate the number of workers who would
     have been laid off in the absence of the STC plan, is intended to
     demonstrate that the STC plan will be used solely to avert layoffs.
     The estimate of the numbers of averted layoffs also is needed for
     the states to be able to fulfill the reporting requirement of the Act,
     which section 2165(a)(3)(A) of the Layoff Prevention Act of 2012
     requires the Secretary of Labor to establish.

     The term “layoffs” in the model legislation, as used in the
     sentence that the application include a certification by the
     employer that the aggregate reduction in hours under the STC plan
     is “in lieu of layoffs”, means the temporary or permanent layoff of
     employees within an affected unit. Previously, Federal law
     required the employer to request approval to implement an STC
     plan only when the layoffs made by the employer in the absence of


                           12

            an STC plan would have been on a “temporary” basis. There no
            longer is any Federal requirement for the employer to determine
            that the layoffs within the affected unit would have been temporary
            when applying to participate in the state STC program and the state
            may not limit approval to plans that are in lieu of temporary
            layoffs.

        6.    The required agreement by the employer to furnish reports to the
            Director is intended to address the potential need to examine
            company records if needed in order to approve an application in
            accordance with the provisions of the Act. Additionally, access to
            employer records may be necessary to determine whether the plan
            is operating as approved or whether approval should be revoked.

        7.    The STC employer must attest that participation in the plan is
            consistent with its obligations under Federal and State laws.

        8.    The application must include a date that the employer proposes to
            begin the plan and a date when it proposes to end the plan.

        9.    The application must include any other provisions added by the
            Director that are included in the State law and, pursuant to a
            request from the State, have been determined by the Secretary of
            the United States Department of Labor to be appropriate for an
            STC plan.

C.   Approval and Disapproval of the Plan

     The Act must specify the period of time for the Director to approve or
     disapprove a plan. This requirement is intended to facilitate prompt
     implementation of an approved STC plan by an employer.

     If the STC plan is disapproved, the Director must specify the reason(s) for
     disapproval. These are good administrative practices, and informing the
     applicant-employer of the reason(s) for the plan's disapproval provides the
     employer the opportunity to remedy them in a revised application if the
     employer wishes to reapply to participate in the STC program.

     If a state chooses to provide for administrative appeal by the employer-
     applicant, the model provision for approval or disapproval of a plan should
     be modified to provide for appeal rights under the current administrative
     review provisions of its State law.

     The model language provides for the establishment of a minimum period
     of time before an employer whose application has been rejected may
     submit another plan. The intent is to preclude a hasty second submission


                                  13

     without adequate correction of the reason(s) causing disapproval of the
     earlier plan, but States may consider limiting such period to the minimum
     necessary to meet that intent in order to encourage participation in the
     STC program.

D.   Effective Date and Duration of Plan

     Both the employer and the agency need time to prepare for
     implementation of the plan once it is approved. Therefore, the effective
     date of the plan will be determined by agreement between the employer
     and the Director and the mutually agreed upon effective date will be
     included in the notice of approval to the employer.

     The needs of employers and employees, and economic conditions may
     change dramatically in one year’s time and developing a plan for multiple
     years that effectively forecasts such needs and conditions is extremely
     difficult. Accordingly, the model legislation limits the approval of an STC
     plan to no longer than a 12-month period. At the end of such period, an
     employer may submit a new STC plan and the Director can review it
     based upon current economic conditions.

     Since participation in an STC plan is voluntary, an employer may
     terminate a plan at any time but must send written notice to the Director of
     the termination. The Director will then promptly notify workers covered
     by the STC plan of the termination of the plan by the employer. Just as
     the plan is required to indicate how employees will be notified when their
     hours will be reduced under the plan, the employer should also notify
     employees of the termination of the plan.

E.   Revocation of Approval

     The model language would provide the Director with the authority to
     revoke approval of the STC plan based on good cause, including the
     failure to comply with assurances provided in the plan such as that the
     aggregate reduction in hours is in lieu of layoffs. This provision authorizes
     the Director to periodically monitor the operation by the employer of the
     approved plan to assure no good cause exists for revocation.

F.   Modification of an Approved Plan

     An employer may seek modifications to an approved short-time
     compensation plan. For example, the conditions under which a plan was
     initially submitted and approved may change. These provisions permit
     such revisions under specified conditions. A State may, on the other hand,
     prefer to require the submission and approval of a new plan in lieu of plan
     modifications. If this approach is chosen, these provisions will need to be

                                  14

changed accordingly.

If a modification is desired, an employer must identify the provisions to be
modified and explain why the modifications are necessary and consistent
with the purposes for which the plan was approved. The Director is to
evaluate this information and may approve or deny the request for
modification.

For example, economic conditions might improve, and the employer may
wish to increase the workers’ hours. If the state STC law permits a
reduction of hours between 10 percent and 60 percent and the plan was
approved based on a 30 percent reduction in hours, the employer may
subsequently request instead a 15 percent reduction of hours in the
affected unit.

Conversely, an employer may request to modify an STC plan because
economic conditions have worsened for the employer. If an STC plan was
initially approved based on an estimate that 5 layoffs will be avoided if
there is a 25 percent reduction in hours by the employees in the affected
unit, but the employer’s business suffers more losses than expected, the
employer may request a modification to avert the layoff of additional
members of the affect unit by increasing the percentage of reduction of the
number of hours worked by individuals in the affected unit.

In addition, the Director may be asked to modify an STC plan when one
employer submitted the application and there has been a sale or succession
of the business to a different employer. The Director may require the new
employer to submit a new application or the Director may permit the new
employer to modify the approved STC plan to substitute it as the employer
if the substitution is consistent with the purposes for which the plan was
approved. The substituted employer must agree to abide by all the terms
of the approved plan.

If a modification to a plan is not substantial, then a formal process of
approval may not be necessary. For example, if an employee in the
affected unit finds a new job and separates from the employer, the plan
would not generally have to be formally modified in order for the
employer to remove the employee’s name from the plan. In addition, an
unexpected one week reduction in hours may not require a modification.
For example, if the plan requires a 25 percent reduction in hours of
workers in the affected unit, the employer would not necessarily be
required to request a modification to the plan to reduce the hours worked
by a greater percentage (but no more than 60 percent) for only one week
during the term of the plan.




                             15

     However, the employer must promptly notify the Director of this
     temporary deviation from the terms of the approved plan. If the Director
     determines such change to be substantial, the Director shall require that
     the employer submit a formal request to the Director for approval of the
     modifications.

G.   Eligibility for Short-Time Compensation

     To qualify for STC, an individual must meet certain eligibility
     requirements for regular UC. The model language provides that an
     individual must be monetarily eligible for unemployment compensation
     and not otherwise disqualified. Among these requirements are the wage
     qualification requirement, disqualification provisions, waiting period and
     modified claim filing and reporting procedures.

     In addition to the requirements applicable to regular UC, the model
     language specifies a number of other eligibility requirements that are
     specific to STC.

     First, the individual must be employed in the affected unit identified under
     an approved STC plan, and may be eligible for benefits only for those
     weeks in which the plan is in effect.

     Second, notwithstanding the able to work, available for work, and work
     search requirements that would otherwise be applicable under regular UC,
     the individual may be eligible for STC for any week during the approved
     STC plan that the individual is available for their usual weekly hours of
     work with the STC employer. The hours an individual participates in
     training approved by the Director (which may include employer-provided
     training or training funded under the Workforce Investment Act) will be
     credited towards the availability of an individual for the usual weekly
     hours.

     Third, notwithstanding the definition of unemployment in the State law
     which would not permit an STC employee to be deemed unemployed
     because of the amount of services performed and wages earned, an
     individual may be eligible for STC if the individual receives remuneration
     in accordance with the reduction in the usual weekly hours of work
     specified in the STC plan. However, as further explained in Section H -6
     below, an STC employee who works for another employer in addition to
     the hours worked for the STC employer in the same week may not be
     eligible for STC depending on the number of hours worked.

H.   Benefits




                                  16

1.   The STC weekly benefit amount is the product of the
     unemployment compensation weekly benefit amount for a week of
     total unemployment multiplied by the percentage by which the
     usual weekly hours of work are reduced as long as the usual
     weekly hours of work are reduced in accordance with the reduction
     in the usual weekly hours of work specified in the approved short-
     time compensation plan. This STC weekly benefit amount is
     payable for each week for which the claimant is otherwise eligible,
     regardless of the individual’s earnings and the deductible income
     provisions under State law.

     Example A: The weekly benefit amount is $100 based on usual
     hours of work and earnings of $200. The STC plan provides for a
     30 percent reduction in weekly hours and the STC weekly benefit
     amount is $30. An individual in the affected unit who works the
     reduced hours with the STC employer will be paid pro rata wages
     of $140 and the STC weekly benefit amount of $30.

     Example B: The weekly benefit amount is $100 based on usual
     hours of work and earnings of $200. The STC plan provides for
     usual weekly hours of work to be reduced by 30 percent and the
     STC weekly benefit amount to be $30. However, an individual in
     the affected unit works the same reduced hours with the STC
     employer but the earnings for that week are variable as a result of
     a raise or other compensation from the employer and results in pro
     rata wages of $155. The individual will still receive the STC
     weekly benefit amount of $30 because the STC benefit is based on
     the portion of reduced hours and not the weekly earnings.

2.   An individual may be eligible for STC or regular UC, as
     appropriate, but the maximum benefit amount for the combination
     of STC and UC is the total amount of UC an individual is entitled
     to collect when a claim is filed and a benefit year is established.

     For example, if individuals are eligible for 26 weeks of regular UC
     and an STC plan permits the payment of 52 weeks of STC based
     on a percentage of reduction in hours greater than 50 percent an
     individual will exhaust the entitlement to STC in fewer than 52
     weeks since the individual is subject to the maximum benefit
     amount for regular UC. If individuals are eligible for less than 26
     weeks of regular UC, in this scenario, they would be eligible for
     even fewer weeks of STC payments.

3.   STC payments must be deducted from the maximum amount an
     individual may receive in regular unemployment compensation



                          17

     during a benefit year.

4.   Claims for STC benefits may, in general, follow the procedures for
     regular UC. Special procedures to reflect unusual situations should
     be adopted for STC claims as they are for unemployment
     compensation claims in special situations. The Director may
     suitably modify procedures to promote the efficient processing of
     STC claims.

     State law eligibility and disqualification provisions and claim filing
     requirements that apply to regular UC claimants may apply or may
     be modified to apply to STC claimants. The availability and
     actively seeking work requirements and the partial benefit
     provisions do not, however, apply except to the extent prescribed
     under the STC program eligibility requirements. Thus, it does not
     matter whether the employee’s usual weekly hours of work for the
     STC employer was 40 hours, or the worker was working a
     permanent part time schedule and the usual weekly hours of work
     was less than 40 hours before the STC plan was in effect. The
     following provisions address situations where workers have
     employment with employers (either on a part time or full time
     basis) in addition to the STC employer.

5.   The following provisions address situations where workers have
     employment with employers (either on a part time or full time
     basis) in addition to the STC employer.

     (a) When an individual works for an STC employer and another
     employer, and the combined work hours exceed the percentage of
     the usual weekly hours of work with the STC employer specified
     in the STC plan, the individual is not entitled to STC or regular UC
     because there is no reduction in the usual hours of work.

     For example, in an STC plan, the hours of an individual in full-
     time work for the STC employer are reduced from 40 to 32. The
     individual also works 10 hours with another employer. Since the
     combined hours of work (42) exceed the individual’s usual hours
     of work with the STC employer, there is no STC benefit
     entitlement.

     (b) When an individual works for an STC employer and another
     employer, and the combined work hours is equal to a reduction of
     at least 10 percent (or, if higher, the minimum reduction required
     to be eligible for an STC benefit under State law) of the
     individual’s usual weekly hours of work with the STC employer,
     the individual is eligible for a reduced STC benefit calculated


                           18

                based on the combined percentage reduction below the usual
                weekly hours of work with the STC employer.

                For example, in an STC plan, the affected unit consists of
                individuals who work full-time and the plan is approved for a 20
                percent reduction in hours from 40 hours to 32 hours by the STC
                employer. Workers in the affected unit who only work for the
                STC employer will be paid a STC benefit equal to the 20 percent
                reduction in hours multiplied by the amount of UC payable if the
                individuals were totally unemployed.

                If the individual has combined work of 4 hours with another
                employer, the combined hours of work would be 36 hours, which
                is 10 percent less than the usual weekly hours of work of 40 hours
                with the STC employer. Since the percentage reduction of
                combined hours of work is less than the individual’s usual hours of
                work with the STC employer, the STC benefit is reduced to an
                amount equal to the 10 percent reduction multiplied by the amount
                of UC payable if the individuals were totally unemployed.

                An individual may not be paid a reduced STC benefit that is below
                the minimum range of reduction in hours permitted in the State
                STC law.

           6.   If an individual has concurrent employment with an STC employer
                and another employer, and is not provided any work for either
                employer during a week covered by the STC plan, the individual is
                eligible for the full amount of regular UC to which he or she
                would otherwise be eligible. Such week is reported as a week of
                regular UC and not as a week of STC.

           7.   If an individual has concurrent employment with an STC employer
                and another employer, and the STC employer does not provide any
                work during a week covered by a plan but the individual works for
                the other employer and is determined eligible for regular UC under
                the provisions of State law governing partial unemployment, then
                that week is reported as a week of regular UC and not as a week of
                STC.

I. Charging Short-Time Benefits

         Federal law permits states to reduce employers’ state unemployment tax
         rates from a “standard” rate only on the basis of their “experience with
         respect to unemployment or other factors bearing a direct relation to
         unemployment risk…” (Section 3303(a), FUTA). As states generally
         measure employers’ experience with unemployment through UC


                                     19

          payments made to their former employees, states charge UC benefits
          (including STC) to employers’ accounts when unemployment is in the
          direct or indirect control of the employer, or when the unemployment is
          due to general economic, trade, or other business reasons. Similarly,
          Federal law provides that employers who opt to reimburse UC benefits
          (including STC) rather than pay experience-rated state unemployment
          taxes must reimburse “the amounts of compensation attributable under the
          State law to such service” (Section 3309(a)(2), FUTA). Therefore, the
          Department requires states to require reimbursing employers to reimburse
          the STC costs attributable to the service for these employers.

          However, if the Federal Government reimburses the state for STC
          payments made to an STC employer’s workers under the Layoff
          Prevention Act of 2012, a state may choose not to charge or require
          reimbursement, for the STC benefits that are reimbursed by the Federal
          government. If a state chooses to do so, it must so provide in its STC law.
          This option is fully discussed in UIPL No. 22-12. Because Federal
          reimbursement is temporary, no model language is provided for this
          provision.

J. Extended Benefits

          For purpose of the extended benefits program required under the
          provisions of the Federal-State Extended Unemployment Compensation
          Act of 1970, any STC received by an individual is considered to be
          “regular compensation” as the term is used under that Act. Consequently,
          an individual who has received all of the STC or combined short-time and
          UC payments that are available in a benefit year would be an “exhaustee,”
          entitled to extended benefits if otherwise eligible. Such extended benefits
          must be charged or noncharged in the same manner and to the same extent
          as extended benefits paid to an exhaustee of unemployment compensation
          and to the same extent as extended benefits are attributed or non-attributed
          to a reimbursing employer.

K. Optional Provisions.

          Section 3306(v)(10), FUTA, provides that “upon request by the State and
          approval by the Secretary of Labor, only such other provisions are
          included in the State law that are determined to be appropriate for
          purposes of a short-time compensation program.”

          This is a new provision intended to give states the flexibility to include,
          upon state request and approval by the Secretary, additional STC
          requirements if the Secretary determines they are appropriate for an STC
          program. Many state STC laws currently contain additional requirements
          for employer or employee participation in the STC program. Some of


                                       20

these provisions were part of the model legislation previously issued by
the Secretary of Labor. Others were added to state STC laws after the
guidance providing the previous model language expired.

We have reviewed these provisions. Many of them are common in state
STC laws and are not inconsistent with the specific requirements of an
STC program under Section 3306(v)(1) through (9), FUTA. Accordingly,
the following optional provisions are pre-approved under Section
3306(v)(10), FUTA. States are not required to keep or include these
provisions in their state STC laws as a conformity requirement. However,
if a state law currently contains these provisions, or a state adds them in a
new enactment, they will present no conformity issue.

We are not providing model legislative language for optional provisions.
However, we provide below generic examples of state laws containing
these provisions. Additionally, a state wishing to add these provisions
may request individual technical assistance from the Department of Labor
or consult with other states that have such provisions in their STC laws
before adding them to any new state STC law.

    1. A requirement that, if the affected unit is covered by a collective
      bargaining agreement, the bargaining representative must agree to
      the plan.

       An affected unit may include employees covered by a collective
       bargaining agreement, or more than one collective bargaining
       agreement. Depending on the variety of skills of the workers in an
       affected bargaining unit, there may be more than one individual
       craft union agreement or single industrial union type of
       agreement. A state STC law may require agreement by the
       collective bargaining representative(s) involved to ensure that both
       labor and management are satisfied with the plan and to minimize
       possible problems in connection with implementation of the plan.

       Example of a state law containing this provision, as well as the
       mandatory notice provision:

       A.- The employer certifies that it has obtained the approval of any
       applicable collective bargaining unit representative and has
       notified all affected employees who are not in a collective
       bargaining unit of the proposed short-time compensation plan.

    2. A requirement that the employer provide assurances to the Director
      that it will not hire new employees in the affected unit during the
      term of the plan.



                             21

   Since an STC plan involves the reduction in hours of members in
   the affected unit in lieu of layoffs, it is appropriate for an employer
   to restore the hours of members of the affected unit to the levels
   that existed before the beginning of the plan before hiring new
   personnel in the affected unit when business activity increases for
   that employer.

   Example of a state law containing this provision:

   A.- The employer certifies that it will not hire additional part-time
   or full-time employees for the affected work force while the
   program is in operation.

   B.- The employer provides assurances that it will not hire new
   employees in, or transfer employees to, the affected unit during the
   effective period of the short-time compensation plan.

3. Limitations on tenure of workers in affected unit in an STC plan.

   As specified in the model language, a state may require that an
   affected unit contain a reasonable minimum number of employees
   (but not fewer than 2). These limitations on the size of an affected
   unit are intended to reduce problems of administering numerous
   plans, each for relatively few workers. Any size limitation should
   take into consideration the benefits of layoff aversion and must not
   be so large as to limit effective participation in STC programs by a
   state’s employers or to exclude all but the largest employers in a
   state.

   Additionally, some state STC laws contain a limitation that
   workers in the affected unit must be regularly employed by the
   employer and require that each worker in the affected unit
   previously have worked some specified number of hours or weeks
   for the employer. This limitation is appropriate because an STC
   plan is not intended to address seasonal variations in economic
   activities which are an inherent part of the industry or occupation.
   Therefore, a state may exclude from participation in an STC plan
   workers who are seasonal, temporary or intermittent employees.

4. A limitation that the STC plan is being implemented to avoid the
   layoffs of a certain minimum percentage of workers in the affected
   unit.

   Since STC plans are implemented in lieu of layoffs, it is
   appropriate for a state to require the employer to specify that
   implementation of the plan will avert the layoffs of a minimum


                         22

   percentage of members of the affected unit. Requiring the
   employer to demonstrate that the plan will avert the layoff of a
   certain minimum percentage of workers in the affected unit allows
   the state to make a proper evaluation of the effectiveness of the
   plan as a true layoff aversion strategy.

   Examples of state STC laws containing this provision:

   A.- The plan includes a certified statement by the employer that
   the aggregate reduction in work hours is in lieu of layoffs that
   would affect at least 10 percent of the employees in the affected
   unit and that would have resulted in an equivalent reduction in
   work hours. The plan applies to at least 10 percent of the
   employees in the affected unit.

   B.- The employer's certification that the implementation of a
   short-time compensation plan is in lieu of layoffs that would affect
   at least 15 percent of the employees in the affected unit and would
   result in an equivalent reduction in work hours.

5. A prohibition against STC plan participation by employers who are
   delinquent in the payment of contributions, penalties or interest.

   It is appropriate for a state to limit participation in the STC
   program to only those employers who are meeting their obligations
   under State law, and who are not delinquent in the payment of
   taxes, penalties, or interest to ensure that there is not a negative
   impact on the state’s account in the unemployment trust fund so
   the Director can properly administer the UC program in the state.

   Example of a state STC law containing this provision:

   A. - A short-time compensation plan will only be approved for an
   employer that meets all of the following requirements:

   B. - The employer has filed all quarterly reports and other reports
   required under this act and has paid all obligation assessments,
   contributions, reimbursements in lieu of contributions, interest, and
   penalties due through the date of the employer's application.




                        23