References: Chapter V, Section 5, and Chapter XI, Section 1, ET Handbook No. 391. Background: The locality-based comparability payments (known as locality pay) is authorized for GS employees in certain areas of the country. The Office of Personnel Management recently increased the number of areas to 32. The new pay localities are Hartford, CT and Orlando, FL. The locality rates of pay were computed based on the annual rates shown on the 1998 General Schedule and reflect the locality pay percentages authorized by the President on August 29, 1997. The locality rates of pay are considered basic pay for retirement, life insurance, premium pay, and severance pay purposes and for advances in pay. They are also used to compute worker's compensation payments and lump-sum payments for accrued and accumulated annual leave. They are NOT considered basic pay for other pay administration purposes. The locality pay increases became effective January 1998. Instruction: SESAs should provide copies of the attached 32 Federal Locality Salary Tables to appropriate staff members engaged in UCFE claims activities. Action Required: SESAs should follow the above instructions and provide the attached revised 32 Federal Locality Pay Tables to appropriate staff.

References: Section 3303(a)(1), Federal Unemployment Tax Act (FUTA) and Unemployment Insurance Program Letter (UIPL) 29-83. Background: In order to promote the employment of public assistance recipients, some States have considered or enacted legislation intended to ensure that employer experience rates are not adversely affected if these individuals subsequently become unemployed. A method chosen by some States to prevent an adverse effect on experience rates has been to exclude from the employer¿s experience rating computations unemployment benefits paid to former employees who have previously received public assistance. The Department of Labor considers efforts to encourage the employment of public assistance recipients laudable; however, it is the Department of Labor¿s position that consideration of the receipt of public assistance or other pre-employment circumstances of employees (current or former) in employer experience rating determinations does not conform with Federal law. Federal Law Requirements: Section 3303(a)(1), FUTA, contains the Federal experience rating requirement for employers in a State to receive the additional credit against the FUTA tax. Additional credit is allowed to employers paying reduced rates of contributions, where the State law conforms with 3303(a)(1), FUTA. For FUTA tax credit purposes, these employers are treated as though they had paid contributions at the highest rate assigned based on experience, or 5.4 percent, whichever is lower. Section 3303(a)(1), FUTA, requires that State law provide that: - no reduced rate of contributions to a pooled fund or to a partially pooled account is permitted to a person (or group of persons) having individuals in his (or their) employ except on the basis of his (or their) experience with respect to unemployment or other factors bearing a direct relation to unemployment risk during not less than the 3 consecutive years immediately preceding the computation date; Although the term ¿experience¿ is often used as convenient shorthand, no State system directly measures experience with respect to unemployment. Instead, all States use a factor or combination of factors bearing a direct relation to unemployment risk. Since the unemployment risk of the worker is the basic phenomenon which is to be measured, the factors referred to in Section 3303(a)(1) are limited to those basic elements that measure an employer¿s experience with the impact of unemployment upon his or her workers. (See page 2 of the Attachment to UIPL 29-83.) In addition, the experience must be measured throughout a period of not less than 3 years preceding the computation date. The use of public assistance status or other pre- employment circumstances of individual workers is not consistent with this interpretation of the requirements of Section 3303(a)(1), FUTA, for two reasons. First, using these circumstances to a priori exclude wages earned by a worker in determining experience is inconsistent with Federal law, since a portion of the employer¿s experience during the 3- year period will never be used. Second, the receipt of public assistance and other pre-employment circumstances are not directly related to the employer¿s experience with the impact of unemployment on his or her workers. These circumstances are not directly related to the employer¿s need for services, the term of employment, or the reason for separation from employment. For example, during a lay-off, all workers are separated due to a lack of work. Whether the individual previously received public assistance has no bearing on the fact that a lack of work exists. As another example, if a worker is discharged for misconduct, the reason for the separation is the worker¿s misconduct, not pre-employment status. In conclusion, all situations where the consideration of pre-employment income or circumstances could be introduced into a State¿s experience rating system, including the noncharging of benefits, is inconsistent with Section 3303(a)(1), FUTA. However, because the Department of Labor strongly supports endeavors to employ public assistance recipients, the Department is exploring legally permissible avenues that might benefit employers who hire welfare recipients. We will notify States of the findings upon completing the effort. Action: State administrators are requested to take necessary action to assure that State law conforms with and is applied consistently with Section 3303(a)(1), FUTA, as interpreted in this UIPL.

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References. Chapter IV, ET Handbook No. 384, Second Edition, 20 CFR 614.12 and 5 U.S.C. 8521(a)(2). Instructions. State Employment Security Agencies (SESAs) shall use the attached schedule to determine Federal military wages for UCX "first claims" filed beginning with the first day of the first week which begins after April 3, 1999, pursuant to 20 CFR 614.12. SESAs will continue to use the existing schedule for UCX "first claims" filed before the effective date of the attached revised schedule. As provided by 20 CFR 614.12(d), the attached schedule shall be published as a notice in the Federal Register. Action Required. Administrators should provide the above instructions and the attached revised schedule to appropriate staff.

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