In reply refer
to MUL
Manpower Administration
Washington, DC 20210
    November 14, 1972















Conformity of Provisions Omitting Charges for Unemployment Directly Due to Disaster




UIPL No. 419, May 2, 1956; UIPL No. 78, December 29, 1944




To announce a new decision superseding UIPL No. 419 regarding the noncharging of unemployment insurance paid for unemployment directly caused by a major disaster.


As a result of the devastation caused by the floods in the eastern section of the United States in June 1972 and the ensuing unemployment of thousands of workers, requests have been made for reexamination of the question of whether affected employers may, consistently with Federal requirements, be relieved of charges for benefits paid workers for unemployment due to the disaster. Upon reconsideration of the question it has now been concluded that the position concerning such noncharging, as announced in Unemployment Insurance Program Letter No. 419, dated May 2, 1950,should be modified.

Unemployment Insurance Program Letter No. 419 announced a March 16, 1956decision of the then Secretary of Labor that amendmentsto the Connecticut and Pennsylvania laws, providing for the omission of charges to relieve employers whose plants had been damaged in flood disasters, did not meet the requirements of section 3303(a)(1)of the Federal Unemployment Tax Act. (Both State laws provided also that the noncharging would be inoperative if the Secretary rendered an adverse decision, so the laws continued to conform to Federal requirements.)

The argument advanced by one State for finding such noncharging in conformity was that Federal law could be construed as not requiring charges against an employer's account if the unemployment compensated is not within his control. The Secretary concluded that he would not be justified in accepting the approach that only benefits paid for unemployment that can be controlled by an employer should be charged. If this approach were adopted, few charges to employer's accounts could be required, since, in the last analysis, most unemployment is beyond the control of any employer. No sound basis now exists for construing section 3303(a)(1) as permitting the charging only of benefits for unemployment that can be controlled by an employer. The reasons stated in Unemployment Insurance Program Letter No. 419, for rejecting the arguments then advanced to support an interpretation of section 3303(a)(1) as permitting charging only of benefits for unemployment within the control of an employer, are still valid.

However, also in Unemployment Insurance Program Letter No. 419 is the statement, that since unemployment that results from a flood or other disaster is not due to the worker's act or condition, it is part of the worker's risk. According to the Unemployment Insurance Program Letter, benefits paid for such unemployment must therefore be charged, if an employer's rate is to be determined, as required by section 3303(a)(1), on the basis of his experience with respect to unemployment or other factors bearing a direct relation to unemployment risk.

Upon reconsideration of this point, the Assistant Secretary for Manpower has concluded that a State law may, consistently with section 3303(a)(1),provide for the noncharging of unemployment insurance benefits paid to individuals for unemployment that is directly caused by a major natural disaster declared by the President pursuant to section 102 (1) of the Disaster Relief Act of 1970 (P.L. 91-606),if such individuals would have been eligible for disaster unemployment assistance with respect to that unemployment but for their receipt of unemployment insurance benefits.

Unemployment Compensation Program Letter No. 78 (issued December 29, 1944, and reinstituted in 1967) which provides that section 3303(a)(1),

". . . does not require that all benefits paid be charged as a part of the experience of employers, provided that those which are charged assure a reasonable measurement of the experience of employers with respect to unemployment risk. The same general principle is true if separations, periods of unemployment, or benefit wages are used for the measurement of experience. The test is one of reasonableness in the measurement of each employer's experience in relation to other employers and to the purposes of experience rating."

The benefits paid for unemployment due directly to a major natural disaster under the circumstances described above, may be considered not a reasonable charge to employers. A major natural disaster is not a contingency that can be reasonably considered foreseeable as a risk of unemployment. Accordingly, unemployment due directly to a major natural disaster may reasonably be said not to be a part of the unemployment risk which section 3303(a)(1) requires the experience rating systems of the States to measure.

The conclusion of the Assistant Secretary for Manpower described above does not preclude the States from charging benefits paid underthose specified circumstances if they choose to do so; it leaves to each State the decision as to whether those benefits shall be charged or noncharged. If a State chooses the latter, consideration should be given to appropriate State legislation authorizing suchnoncharging.



Deputy Assistant Secretary
for Manpower and
Manpower Administrator