DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 43-93
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	BARBARA ANN FARMER Administrator for Regional Management
SUBJECT	:	Optional Between and Within Terms Denial Provisions of Section 3304(a)(6)(A) of the Federal Unemployment Tax Act

1. Purpose. To advise State employment security agencies of the Department of Labor's ("Department") new position concerning the application of the optional between and within terms denial provisions.

2. References. Section 3304(a)(6)(A) of the Federal Unemployment Tax Act (FUTA), UIPL No. 18-78, dated March 6, 1978; UIPL No. 4-83, dated November 15, 1982; UIPL No. 41-83, dated September 13, 1983; UIPL No. 30-85, dated July 12, 1985, (50 FR 48274, 48280); UIPL No. 11-86, dated January 31, 1986; UIPL No. No. 15-92, dated January 27, 1992, (57 FR 7795, 7796); the Draft Language and Commentary to Implement the Unemployment Compensation Amendments of 1976-P.L. 94-566 ("1976 Draft Language"); and Supplements 1 through 5 to the 1976 Draft Language.

3. Background. Section 3304(a)(6)(A), FUTA, requires each State to pay unemployment compensation (UC) based on services performed for certain governmental entities and nonprofit organizations. UC is to be paid based on these services "on the same terms, and subject to the same conditions as compensation payable on the basis of other service" covered by the State law. This is commonly referred to as the "equal treatment" requirement. Exceptions to the equal treatment requirement are found in six distinct clauses of Section 3304(a)(6)(A), FUTA. These provisions are commonly referred to as the "between and within terms denial" provisions.

   Some of the between and within terms denial provisions are required as a condition of certification of State law by the Secretary of Labor. Others are optional. The following describes which provisions are required and which are optional:

   Required: Denial between and within terms based on services performed in an instructional, research or principal administrative (i.e., a "professional") capacity for either an educational institution or an educational service agency (ESA). (Clauses (i), (iii) and (iv) of Section 3304(a)(6)(A), FUTA.)

   Optional:

   1. Denial between and within terms based on services performed in other than an instructional, research or principal administrative (i.e., a "non-professional") capacity for either an educational institution or an ESA. (Clause (ii); clauses (iii) and (iv) which are made optional for nonprofessional services by clause (vi), all of Section 3304(a)(6)(A), FUTA.)

   2. Denial between and within terms based on services performed in either a professional or nonprofessional capacity when the services are provided to or on behalf of an educational institution. (Clause (v) of Section 3304(a)(6)(A), FUTA.)

   In the past, the Department had taken the position that, if an optional denial clause is enacted by a State, it must be applied equally to all services described in that clause. UIPL No. 15-92, the Department's most recent issuance on the optional clauses, provided that a State may not apply the optional denial to some nonprofessional services while excluding other nonprofessional services. UIPL No. 15-92 also restated the Department's position that "if State law contained a provision implementing clause (v), it was required to apply equally to all services described in Section 3304(a)(6)(A)(i)-(iv)." (Emphasis in original.)

   The Department has reconsidered its position and concluded that, if a State so chooses, an optional denial clause need not be applied to all services described in that clause. In addition, the Department has concluded that States have other options concerning the implementation of the optional clauses. This UIPL is issued to provide the Department's new position to the States. Any previous Departmental position conflicting with this new position is superseded.

4. Discussion. As noted above, the between and within terms denial provisions are exceptions to the equal treatment requirement of Section 3304(a)(6)(A), FUTA. The equal treatment requirement only describes the relationship of the services required to be covered by Section 3304(a)(6)(A), FUTA, to other services covered by State law. It does not address how exceptions to its requirements are to be applied. Therefore, the equal treatment requirement is not relevant to this matter.

   Those clauses of Section 3304(a)(6)(A), FUTA, which provide for the optional application of the between and within terms denial all provide that UC "may be denied." It is clear that the denial contained in these clauses is discretionary.No optional clause explicitly requires that all provisions of the clause be applied.

   Social legislation such as the FUTA is to be construed broadly with respect to coverage and benefits. Exceptions to its statutory remedies are to be narrowly construed. (See United States v. Silk, 331 U.S. 704, 712 (1947).) Accordingly, since the denial provisions are exceptions to the broad coverage provisions of Section 3304(a)(6)(A), they are given a narrow reading. The narrower reading in this case dictates that the application of an optional clause may be limited as to scope and/or time by a State.

   Such a reading, which permits a State to differentiate among services, or to otherwise limit application of a clause, could also result in extending coverage to the broadest number of unemployed persons, thereby accomplishing the basic purpose of the coverage requirements of Section 3304(a)(6)(A), FUTA. That is because States could choose to not apply the optional provisions to those services performed by classes of workers more deeply affected by unemployment.

   This discussion also indicates that an optional denial clause is not to be treated as an absolute which the States must implement in its entirety, but instead as a ceiling beyond which a State may not go without violating the equal treatment requirement of Section 3304(a)(6)(A), FUTA; a lesser application is possible. This approach has previously been followed by the Department where a "reasonable assurance" was required if a State implemented an optional clause. As was also noted in UIPL No. 15-92:

   States do have the option of adopting a more restrictive test than the "reasonable assurance" test for nonprofessional services. For example, instead of requiring the reasonable assurance requirement as specified under clause (ii), the State law may include a provision requiring a contract to return to work in the next year or term.

   Applying this concept to the optional denial clauses, States are henceforth granted discretion to apply any optional clause to some or all of the classes of services described in that clause. The term "classes of services" pertains to services performed as, for example, a custodian, cafeteria worker, bus driver, clerical worker or other nonprofessional class. Similarly, States may also limit the time period to which the optional clauses apply.

   Once a State elects to limit the application of a clause, the limitation must be uniformly applied throughout the State. A State may not, for example, treat services performed for one school district differently than services performed in another school district or treat services performed in a nonprofit educational institution differently from services performed in a public educational institution. This is because the denial clauses refer explicitly to "services" and certain periods of time, thereby providing a basis for providing the States the option to limit the provisions of an optional denial clause to particular classes of services or periods of time. There is no similar reference in the statute to schools, school districts or other geographical and political subdivisions and, therefore, no basis for allowing disparate treatment of such geographical or political subdivisions.

5. Interpretation and Application. The clauses of Section 3304(a)(6)(A), FUTA, relating to the optional application ofthe between and within terms denials to "nonprofessional" services are interpreted as follows:

   An optional clause represents an exception to the equal treatment requirement beyond which a State may not go. However, States may limit the application of the clause in the following situations, provided the limitation is applied uniformly throughout the State:

   1. Clause (ii)(I) may be applied to some or all of the classes of services described in that clause. The term "classes of services" pertains to services performed as, for example, a custodian, cafeteria worker, bus driver, clerical worker or other nonprofessional class.

   2. A more restrictive test than the "reasonable assurance" test required under the Department's interpretation of that term may be adopted.

   3. The denial period may be limited to a shorter period than the period specified in clause (ii)(I), and the denial period may be applied only to selected vacation periods or holiday recesses specified in clause (iii).

6. Action Required. State Administrators should provide this information to appropriate staff.

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

8. Attachments. None.