Employment and Training Administration
Washington, D. C. 20210






August 8, 1996


UIPL 15-86













Unemployment Insurance Service




Work-Relief and Work-Training Exclusion

  1. Purpose. To provide an interpretation of Section 3309(b)(5) of the Federal Unemployment Tax Act (FUTA) which permits an exception to coverage requirements of Section 3304(a)(6)(A), FUTA, for services performed as part of an unemployment work-relief or work-training program.

  2. References. The Internal Revenue Code, including the Federal Unemployment Tax Act (FUTA), and Unemployment Insurance Program Letter (UIPL) 15-86, dated February 13, 1986.

  3. Background. UIPL 15-86 provided the Department's interpretation of "work-relief" and "work-training" for purposes of assisting States in determining what services may be excluded from coverage for unemployment compensation (UC). Since that UIPL did not clearly distinguish between services performed in work-relief and services performed in work-training, confusion has resulted as to what services may actually be excluded. This UIPL provides the Department's position on the difference between "work-relief" and "work-training." As this UIPL results in broadening the interpretation taken in UIPL 15-86, it will not result in States needing to amend their laws.

  4. Federal Law Requirements. The Department has long taken the position that, because FUTA is a remedial statute aimed at overcoming the evils of unemployment, it is to be liberally construed to effectuate its purposes and exemptions to its requirements are to be narrowly construed. This interpretation avoids "difficulties for which the remedy was devised and adroit schemes by some employers and employees to avoid the immediate burdens at the expense of the benefits sought by the legislation."(1)

    Section 3304(a)(6)(A), FUTA, requires that each State pay UC based on services performed for certain governmental entities and nonprofit organizations. Specifically, Section 3304(a)(6)(A) requires coverage of services to which Section 3309(a)(1) applies. Section 3309(a)(1) applies to services excluded from the term "employment" solely by reason of either Section 3306(c)(7) or (8), FUTA. Section 3306(c)(7) pertains to services performed for a "State, or any political subdivision thereof . . . ." Section 3306(c)(8) pertains to services performed for "religious, charitable, educational, or other organization described in section 501(c)(3)" of the Internal Revenue Code. Exclusions from this required coverage are found in the remaining paragraphs of Section 3306(c) and Section 3309(b). Section 3309(b)(5) excludes services performed--

    (5) as part of an unemployment work-relief or work-training program assisted or financed in whole or in part by any Federal agency or an agency of a State or political subdivision thereof, by an individual receiving such work relief or work training.

    The Department's position is that while "work-relief" and "work-training" are both excluded, they are two distinct exclusions. Work-relief projects are primarily intended to alleviate the disadvantaged status of the individual by providing employment. For "work-training," there is no requirement that the individual must be economically disadvantaged. Instead, work-training focuses on improving the individual's employability. (This does not, however, preclude the possibility that some work-training programs be limited to the economically disadvantaged.)

    As noted above, UIPL 15-86 did not clearly distinguish between work-relief and work-training. The following listing is intended to clarify their distinguishing characteristics. No attempt is made to list names of programs that fall under the definitions given in this UIPL since the characteristics of the program will determine whether or not they must be covered.

    1. Both of the following characteristics must be present in either work-relief or work-training:

      (1)  the employer-employee relationship is based more on the participants' and communities' needs than normal economic considerations such as increased demand or the filling of a bona fide job vacancy;

      (2)  the products or services are secondary to providing financial assistance, training, or work-experience to individuals to relieve them of their unemployment or poverty or to reduce their dependence upon various measures of relief, even though the work may be meaningful or serve a useful public purpose.

    2. A work-relief or work-training program must have one or more of the following characteristics:

      (1)  the wages, hours, and conditions of work are not commensurate with those prevailing in the locality for similar work;

      (2)  the jobs did not, or rarely did, exist before the program began (other than under similar programs) and there is little likelihood they will be continued when the program is discontinued;

      (3)  the services furnished, if any, are in the public interest and are not otherwise provided by the employer or its contractors; and

      (4)  the jobs do not displace regularly employed workers or impair existing contracts for services.

    3. The following characteristic must be present only for work-relief programs:

      The qualifications for the jobs take into account as indispensable factors the economic status, i.e., the standing conferred by income and assets, of the applicants.

  5. Action Required. State agency administrators are requested to provide this UIPL to appropriate staff.

  6. Inquiries. Direct questions to your Regional Office.

1.  These interpretations were stated on page 5 of Supplement #5--Questions and Answers Supplementing Draft Language and Commentary to Implement the Unemployment Compensation Amendments of 1976 - P.L. 94-566, dated November 13, 1978. Several Federal court decisions, including two cases involving UC, United States v. Silk, 331 U.S. 704, 712 (1947) and Farming, Inc. v. Manning, 219 F.2d 779, 782 (3d Cir., 1955), are illustrative of this position.