Unemployment coverage of AmeriCorps participants

U.S. Department of Labor
Employment and Training Administration
Washington, D.C. 20210

Classification: UI
Correspondence symbol: TEURL
Issue date: April 20, 1995
Rescissions: None
Expiration date: April 30, 1996
Directive: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 25-95
To: ALL STATE EMPLOYMENT SECURITY AGENCIES
From: MARY ANN WYRSCH, Director, Unemployment Insurance Service
Subject: Coverage of Services Performed by AmeriCorps Participants

1. Purpose. To provide States with guidance concerning coverage of services performed by AmeriCorps participants for State and local governments and certain nonprofit organizations.

2. References. The Federal Unemployment Tax Act (FUTA), 26 U.S.C. 3301 et seq., and the National and Community Service Act of 1990 (NCSA), as amended, codified at 42 U.S.C. 12501 et seq.

3. Background. The Department has received several inquiries concerning whether Federal unemployment compensation (UC) law requires State UC coverage of services performed by AmeriCorps participants for State or local governments and certain nonprofit organizations in National and Community Service Programs under the NCSA. This UIPL provides guidance on this issue.

4. Discussion.

a. AmeriCorps. Under the NCSA, the Corporation for National Service makes grants to States, which in turn grant the funds to local non-profit organizations and educational institutions which operate the National and Community Service Programs. The Corporation also grants funds directly to national non-profit organizations, State and local governmental entities and Native American Indian tribes for these public service programs. The Corporation is charged with the operation of three programs: AmeriCorps, Learn and Serve America and the National Senior Service Corps.

Participants in AmeriCorps grantee programs perform full-time or part-time public services in exchange for post-service educational benefits. Full-time participants receive a stipend for living expenses while enrolled. Participants generally perform public service in one of four areas: education, environment, public safety or human service. For example, participants may provide services at a soup kitchen or may transform a vacant lot into an urban garden.

b. Federal UC Law Requirements. Section 3304(a)(6)(A), FUTA, requires that UC must be payable based on services performed in the employ of State and local governments and certain nonprofit organizations. Specifically, UC must be payable based on the services described in Section 3309(a)(1), FUTA. Section 3309(a)(1), FUTA, applies to those services excluded from the definition of employment solely by reason of being performed for the State and local governments described in Section 3306(c)(7), FUTA, or the religious, charitable, educational and other nonprofit organizations described in Section 3306(c)(8), FUTA. Exclusions to this required coverage are found in the other paragraphs of Section 3306(c), FUTA, and Section 3309(b), FUTA. Whether an individual performs services in the employ of a governmental or nonprofit entity is determined under the common-law test required by Section 3306(i), FUTA.

In sum, Federal UC law requires that UC must be paid based on services performed by an employee for governmental and nonprofit entities unless an exclusion exists in Federal law. The question concerning AmeriCorps is whether an employment relationship exists between the AmeriCorps participants and the grantee/subgrantee programs.

c. Application of Federal UC Law to AmeriCorps Services. The General Counsel for the Corporation for National Service has provided an opinion (attached) which interprets the NCSA as precluding, as a matter of law, the finding of an employer-employee relationship between the grantee/subgrantee program and the participant. Since the Corporation for National Sevice is the organization with the responsibility for administering and interpreting the NCSA, the Department has chosen to defer to its interpretation. Therefore, since there is no employer-employee relationship under this interpretation, the required coverage provision of Section 3304(a)(6)(A), FUTA, does not apply. At the same time, nothing in the NCSA or the FUTA requires States to exclude services performed by Americorps participants. Whether such services are covered is a matter to be determined under each State's law.

5. Action Required. State agency administrators are requested to provide the above information to appropriate staff.

6. Inquiries. Direct questions to the appropriate Regional Office.

Attachment: Corporation for National Service memorandum, March 6, 1995

Official attachment PDF

To: Mary Ann Wyrsch, U.S. Department of Labor
From: Terry Russell, General Counsel
Re: Our interpretation of the National and Community Service Act of 1990, as amended, with respect to whether an employment relationship exists between AmeriCorps participants and grantee programs.
Date: March 6, 1995

The National and Community Service Act of 1990, as amended (NCSA), provides that “[a] participant shall not be considered to be an employee of the program in which the participant is enrolled.” 42 U.S.C. § 12511(17)(B). Thus, as a matter of law, an employer/employee relationship does not exist between the grantee/subgrantee program and the participant. While characteristics of a common law employer/employee relationship may exist in particular instances, these facts are immaterial as the NCSA precludes the finding of such a relationship as a matter of law. We interpret the introductory language of section 12511, “for purposes of this subchapter,” as merely meaning that the terms used in the subchapter must be interpreted in accordance with the definitions listed in the definitional section.

The payment by AmeriCorps grantees/subgrantees of State workers’ compensation taxes based on participants’ service or taxes on participants’ wages under the Federal Insurance Contributions Act, 26 U.S.C. § 3101 et seq. (FICA), is consistent with the above interpretation of section 12511(17)(B). AmeriCorps grantees/subgrantees may still be liable for the payment of workers’ compensation and FICA taxes despite the provision in section 12511(17)(B) that participants are not employees, because the NCSA expressly authorizes the use of grant funds to pay workers’ compensation and FICA to the extent the program is subject to such taxes. 42 U.S.C. § 12594(b). This specific provision relating to workers’ compensation and FICA taxing takes precedence over the general provision that participants are not employees. Since the NCSA also expressly mentions the Federal Unemployment Tax Act (FUTA) tax, a similar result would occur to the extent that grantees may be subject to the federal unemployment tax, although most such organizations, as non-profits and State and local governmental organizations, are not subject to this tax. No similar provision exists, however, to authorize the use of grant funds to pay State unemployment contributions or reimbursements. Thus, we interpret the NCSA as providing that AmeriCorps participants are not employees of the grantee/subgrantee programs with the express statutory exception that they may be treated as such for workers’ compensation purposes, and, to the extent that the grantee/subgrantee is subject to FICA and FUTA taxes, for the purposes of those statutes as well.