Unemployment compensation is designed to protect against wage loss during unemployment due to economic causes. The disqualifications, except for that imposed because of fraud in connection with a claim, are intended, not to punish claimants for "wrong" actions, but to delineate the unemployment which is not due to economic causes, and against which, therefore, the system does not insure.

Even unemployment which begins with a disqulaifying act becomes atributable to economic conditions at some point in the worker's search for work. The precise point at which this occurs could not be established in advance for all cases, and, in fact, may vary with the circumstances of the individual case and the seriousness of the disqualifying act. After 13 weeks, however, it seems clear that the unemployment could no longer be attributable to the claimant's past act. Experience has shown that in good times as well as bad, the average single spell of unemployment is about six weeks. Conceivably, certain disqualifying acts in some individual cases might be responsible for a spell of unemployment somewhat longer than the average, but certainly not for spells of unemployment exceeding three months.

The individual who has served the period of uncompensated unemploy ment caused by a disqualifying act should be entitled to full protection, based on his prior employment, for subsequent weeks of unemployment due to economic causes. For him, as for all claimants, benefits are payable only for weeks of unemployment during which he is available for work and meets the other eligibilty requirements.

State disqualification provisions may create some anomalies and work injustices. For example, in one State, a worker who leaves a job for good personal cause forfeits all benefit rights based on that job, and can draw no benefits based on any other base period employment for the duration of this period of unemployment. His co-worker discharged for misconduct connected with the job, however, may denied benefits for a period of 3 to 6 weeks, with a corresponding 3 to 6 week reduction in his potential benefits for the year. Another State regards discharge for job-connected misconduct as more reprehensible than a voluntary leaving, and provides substantially longer disqualification period for such a discharge than for a quit.

A worker who leaves one job to accept another one at a substantial raise in pay is ordinarily regarded as demonstrating a praiseworthy ambition to get ahead. Yet in some States if the new job ends before he has worked a prescribed period, he may find himself without U.I. protection because his prior wage credits had been cancelled as a penalty for leaving the first employer for a reason not attributable to that employer.

The trend toward increasingly harsh disqualifications in State laws, for occurences which represent, at worst, an error in judgment on the part of the worker and, not infrequently, circumstances over which he had no control, appears to stem less from efforts to tighten administration of the system than from the impact of benefit payments on employer experience rating accounts. Excessive statutory disqualifications for often trivial causes do not contribute to proper and efficient administration; only careful screening of all claimants and proper application of reasonable disqualifications by better trained personnel can accomplish this objective. If the trend toward over-severe disqualification periods in State statutes, a trend which potentially defeats the purpose of unemployment insurance, is to be reversed, it is clear that a Federal requirement is necessary. Such a requirement should include a prohibition against the charging to employer experience rating accounts of benefit payments subsequent to disqualification periods.

Maritime employers

The Department of Labor supports the provision of H.R. 15119 that the FUTA be amended to provide that tax credit under Section 3302 not be allowed to certain employers (including certain Federal instrumentalities and certain maritime employers) with respect to contributions paid under a State law that does not meet the conditions for such coverage prescribed in Section 3305 of the Act. S. 1991 contains a similar provision limited, however, to maritime employers.

Because of Federal jurisdiction over Federal instrumentalities and maritime matters, Congress amended the FUTA to give States permission to levy unemployment taxes on certain such instrumentalities and maritime employment under specified conditions. The provision with respect to maritime employment was added in 1946 and contained conditions which were designed to prescribe the State of coverage, and to preclude discriminatory treatment of either mari

time employers or maritime workers. The State of coverage of services on a vessel is the one in which the office controlling the operations of that vessel is located. Contributions of maritime employers must be determined by the same rules as contributions of other employers, and the services of workers must be treated, for purposes of wage credits, like the services of shoreside workers. Since several State laws then contained provisions discriminating against maritime workers, the FUTA amendment in 1946 expressly provided that States had until January 1, 1948, to bring their laws into line with the Federal statute. That amendment did not, however, provide the consequences if a State did not meet the condition specified in the Federal statute.

At least two States now fail to afford seamen equal treatment, notwithstanding the fact that the Congress made nondiscrimination a condition for relinquishing to those State legislatures its jurisdiction over maritime employment for unemployment insurance purposes. In the case of one State such failure affects a substantial proprotion of the seamen engaged in Great Lakes shipping. Nearly 20 years of urging by the Federal Government and by the affected seamen has not produced correctional action by the State. Interstate claims

The Department of Labor recommends the adoption of a provision requiring that State laws not deny benefits to, or reduce the benefits of, an otherwise eligible individual because he files his claim for benefits in another State or in Canada, or because at the time he claims benefits, he resides in another State or Canada. S. 1991 contains such a provision, as does H.R. 15119, but the provision in H.R. 15119 deletes the reference to Canada. The reference to Canada is necessary and should be included.

From the enactment of the original Social Security Act to the present, the Federal unemployment insurance laws have been silent on the subject of interstate benefits. The Committee on Economic Security and the Congressional Committees which developed the original legislation recognized that interstate movement of workers would present problems in a State system, but decided to leave the problems of multi-State workers for later legislation based on experience.

The States have met the problems of such workers by voluntary interstate agreement. The Interstate Benefit Payment Plan was adopted in 1938 by individual State agreements. The Plan has been amended, modified and supple.

mented through the years by additional voluntary action.

From 1938, when benefit payments began, until 1955, no State paid interstate claimants a different benefit amount from intrastate claimants, nor denied claims on the grounds they were filed in another State. In 1955, however, the Alaska legislature provided that maximum basic benefits were $45 for individuals filing in Alaska and $25 for those filing from outside Alaska; in addition, dependents' allowances were provided only for dependents located in Alaska. Since then, the Alaska payment to interstate claimants has been reduced to $20. In 1963, Ohio and Wyoming added restrictions on the rights of interstate claimants. Ohio pays interstate claimants either their computed benefit or the average being paid in the State from which they claim whichever amount is lower; Wyoming pays either 75 percent of the computed benefit, or the maximum in the State in which the claim is filed, whichever amount is lower. All three States reduce the claimant's maximum potential benefits in line with the weekly reduction.

Legislatures in other States have displayed interest in similar restrictions. There have also been State proposals that benefits be denied to individuals who resided outside the State at the time they claimed benefits-so that, for example, a worker who normally commuted to work across State lines could not receive benefits if he became unemployed.

Federal legislation prohibiting a State from denying or reducing benefits to interstate claimants or out-of-State residents should be enacted before more States add such provisions.

To be complete, the legislation should be applicable on the same basis to Canada. In 1942, the United States and Canada entered into an Executive Agreement authorizing the inclusion of Canada in the Interstate Benefit Payment Plan as if it were a State. All but four States (Alabama, Iowa, Maine, and New Hampshire) and Puerto Rico have subscribed to the reciprocal agreement with Canada, under which claims may be filed in Canada against the subscribing State, and in the State, against Canada. The omission of these five jurisdictions is not attributable to Canada. That country would like to extend the agreement to all jurisdictions. Nor would participation in the reciprocal agreement

be adverse to the interests of the States. There is thus every reason why the prohibition of discrimination against interstate claimants should be applicable also to claims filed in Canada. Failure to do so merely puts a premium, in some border States, on the hiring of Canadian workers in preference to American workers. Since benefits are not payable to the Canadian workers there could be no charge to employers' experience rating accounts.

Requalifying requirement

The Department of Labor recommends, and both H.R. 15119 and S. 1991 provide that as a condition of Federal tax credit State laws provide that an individual be required to have had work, since the beginning of a benefit year in which he drew benefits, in order to qualify for unemployment compensation in the next benefit year.

The number of States in which it is possible to establish 2 benefit years with no intervening employment has declined steadily in recent years, because of shortened lag periods and increased qualifying requirements, as well as specific requalifying requirements. Nevertheless, the relatively few instances in which such cases occur have resulted in much criticism of the program. This provision would eliminate the possibility. Each State legislature would decide how much work should be required and whether or not it must be in covered employment. Training

The Department of Labor recommends, and both S. 1991 and H.R. 15119 provide, another new requirement under which State laws would have to specify that compensation shall not be denied to an otherwise eligible individual because he is attending training with the approval of the State agency. Moreover, an individual taking such training cannot be found to be not otherwise eligible on the grounds that he is unavailable for work, is not making an active search for work, or refused work.

When the training is arranged under the MDTA program, those who receive allowances under that program have a financial incentive for training. Some workers, however, may not receive such training allowances; other workers may desire training courses not under MDTA, which would improve their chances of reemployment, but they cannot afford to go without income. While unemployment insurance payments are not intended to be training allowances, neither should the unemployment insurance program put financial pressure on a worker to discourage him from accepting training. While under 25 State laws a claimant taking approved training is not considered unavailable, under only 15 State laws will a trainee not be disqualified for refusing to leave training to accept work.

JUDICIAL REVIEW

H.R. 15119 provides for judicial review of findings of the Secretary of Labor which would result in the denial of certification for payment to a State of costs of administration or the denial of certifications relating to tax credit to employers in a State. It provides among other things that the findings of fact by the Secretary shall be conclusive unless contrary to the weight of the evidence. We propose that this provision be changed to provide that the Secretary's findings of fact shall be conclusive if supported by substantial evidence. This is the rule generally applied in judicial review of administrative action. It is contained in, for example, section 10(y) of the Administrative Procedure Act, section 404 of the Social Security Act, section 217 (b) of the Economic Opportunity Act of 1964, section 603 of the Civil Rights Act of 1964 (by reference to section 10 of the Administrative Procedure Act), and section 608(b) of the Hospital and Medical Facilities Amendments of 1964. The questions of fact that would be involved in findings by the Secretary of Labor are substantially the same as those which would be involved in administrative findings under the aforementioned statutes, and the provision with respect to findings of fact should be the same. The provision in this respect now contained in H.R. 15119 would substitute the judgment of the court for the expertise of an administrative official in a highly technical porgram. This would defeat the purpose of the relevant statutes which place in the Secretary the responsibility for making findings and would place an awesome burden on the courts.

We propose also that if a judicial review provision is adopted by this Committee, the 1950 amendments to section 3304 (c) of the Federal Unemployment Tax Act, the so-called "Knowland Amendment", be modified. The 1950 amendment was a floor amendment and was characterized as follows in the Conference Report on the Social Security Amendments of 1950:

"The conference agreement (referring to the 'Knowland Amendment') is intended as a temporary measure of a stop gap nature pending re-examination by the appropriate committees during the next session of Congress of the whole field of unemployment legislation to ascertain the desirability of appropriate permanent legislation." [Emphasis added.]

A reappraisal o fthe Knowland Amendment was contemplated by the Congress at such time as it would consider permanent legislation for judicial review. Our reappraisal lends us to propose the following changes:

First, we would add to the first and last sentences of section 3304(c) as amended by H.R. 15119 the words “in such subsection". This change is to clarify the reference to the provisions in subsection (a) of section 3304. It reflects no change in substance.

Second, we propose to make a similar change in the second sentence of section 3304 (c) to make it clear that the compliance referred to is with the provisions of section 3304 (a) (5), the so-called labor standards provision.

Third, we propose to delete the words "further administrative or judicial review is provided for under the laws of the State", at the end of the second sentence and substitute therefor the words, "the time for review provided under the laws of the State has not expired or further administrative or judicial review is pending". This change is to eliminate the present ambiguity as to whether the Secretary may act on a State's application or interpretation of the labor standards provision in State law that was not appealed to the highest State court. assures, however, that no action may be taken by the Secretary while a case is pending review within the State or the period available to obtain such review has not yet expired. In other words, it assures that no action may be taken by the Secretary unless an application or interpretation of State law is final.

It

The ambiguity is apparent when the amendment made by the Knowland Amendment to section 3304 (c) is contrasted with the provision of the same amendment to section 303(b) of the Social Security Act. The amendment to section 3304 (c) provides that no finding of the Secretary may be made under the labor standards provisions of the Federal law on the basis of an application or interpretation of the State law "with respect to which further administrative or judicial review is provided for under the law of the State." The provision added to section 303(b) on the other hand, provides that the question of entitlement shall have been decided "by the highest judicial authority given jurisdiction under such State law." Since both provisions were part of the same bill and substantially different language was used, it is persuasive that the Congress did not mean the same thing in both provisions, and there is a good reason why it did not. Section 303(b) relates to entitlement under State law in an area in which no Federal standards are involved. Section 3304 (a) (5), however, prohibits a State's denial of benefits in specified circumstances. It is a Federal standard designed to be applied uniformly.

Benefits are denied in a State pursuant to any application or interpretation of State law that has become final. Precedent actions in a State are not limited to judicial decisions. State administrative tribunals which hear appeals render precedent decisions every day. Very few unemployment insurance cases are ever appealed to the courts. If the Secretary could not act until a case had been heard by the highest court of a State, the labor standards provision would in effect no longer be a uniform Federal standard. It could be applied differently in different jurisdictions without any authority in the Secretary to take the action contemplated by the Federal Unemployment Tax Act, unless and until in each State in which an issue arises, the Supreme Court of the State had considered and ruled upon the issue. Such consequences could not have been contemplated by the Congress even without judicial review of the Secretary's findings. With judicial review there is clearly no reason for them.

RESEARCH AND TRAINING

The Department of Labor has recommended, and H.R. 15119 provides, with only minor changes in the specific language suggested by S. 1991, that the Secretary of Labor be given explicit directions to conduct research in the field of unemployment compensation and to provide for training State unemployment insurance staff.

While a reporting program developed under title III provides significant data about unemployment compensation, there are a number of areas in which exploration of the successes and defects of the program is hampered by a lack of data on experience. In the absence of a specific Congressional mandate to conduct

research, such as was given for TEUC, the unemployment insurance research program has not been wholly effective. A continuing and comprehensive research program is required; the research could be conducted by the Labor Department directly, through State agencies, or through grants or contracts. The research program would obtain needed data concerning the role of unemployment compensation under varying patterns of unemployment, the relationship between unemployment compensation and other social insurance programs, the effect of various eligibility and disqualification provisions, the personal characteristics, family and employment background of claimants. A program of research and information as to the effect and impact of extending coverage to excluded groups would be established. To provide for the widest possible use of the research results, the results would be made public.

Facts gained from the research will provide a basis for evaluation of the program areas which are criticized to determine whether the criticisms were based on statutory deficiencies, administrative weaknesses, or misunderstanding of the program's goals. Proper remedial action could then be developed.

The Department of Labor has also recommended a program of staff training, and provision for the training of unemployment compensation personnel is authorized by both H.R. 15119 and S. 1991. One of the most common criticisms of the program is that benefits are paid to individuals who do not want to work, and who are not, in fact, in the labor force during the period for which benefits are claimed. Payment to such individuals is contrary to the express provisions of every State unemployment insurance law. There has been criticism also that benefits are being denied to people who are entitled to them.

If benefits are paid to those who are not available for work or denied to those eligible, what is needed is not additional statutory prohibitions, but better administrative application of existing provisions. The best way to obtain better administration is to expand the number of well-trained specialists who interview claimants and adjudicate claims. The bill calls for steps to increase the supply of such trained personnel, and to improve the training of those now engaged in claims determination and appeals.

EXTENSION OF PERIOD DURING WHICH "REED ACT" FUNDS CAN BE USED FOR COSTS of ADMINISTRATION

H.R. 15119 extends the period during which States can use for costs of administration funds credited to them under Section 903 of the Social Security Act. The original five-year period, already extended to ten years by Congress (P.L. 88-31, Sec. 3, approved May 29, 1963), is to become a 15 year period under the provisions of the bill passed by the House. The funds have been used in the past almost exclusively for the construction of buildings for use by State employment security agencies.

DEFINITION OF WAGES

To strengthen the financing of the unemployment insurance system, both State and Federal, the amount of a worker's wages which are taxable should be increased substantially. The Department recommends an increase in the wage base to $5,600 effective for calendar year 1968-a 1-year lag in the effective date to allow time for States to revise their definitions of taxable wages accordingly, followed by an increase to $6,600 beginning in calendar year 1971. If it is considered that $5,600 is too great an initial increase, a more gradual approach could be adopted, but the first increase should be no lower than $4,500.

The House action recognized the need for a higher base but it did not deal adequately with the problem. The increases to $3,900 for 1969 through 1971 and to $4,200 beginning in 1972 are not large enough nor do they become effective soon enough.

A substantial increase in the wage base is needed for both Federal and State taxes. The resulting increase in Federal revenue is needed to meet the program's increased administrative costs and to finance the program of extended benefits. At the State level, the higher wage base will increase potential State revenues to meet higher benefit costs. States with low reserves can take immediate advantage of the increased funds, while those with adequate current reserves and income can adjust their tax schedules to keep actual revenue at the present level. The $3.000 limitation was added to the unemployment compensation program in 1939, for the sole purpose of making it possible to simplify employer reporting by using the same base for unemployment taxes as for OASDI. The effect of the $3,000 limit at that time was negligible, because 98 percent of wages in