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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUL

ISSUE DATE

September 30, 1997

RESCISSIONS

None

EXPIRATION DATE

Continuing

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 41-97

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

GRACE A. KILBANE
Director
Unemployment Insurance Service

 

SUBJECT

:

Application of Between and Within Terms Denial to Head Start Program Personnel

  1. Purpose. To clarify the application of the between and within terms denial provisions of Section 3304(a)(6)(A) of the Federal Unemployment Tax Act (FUTA) to Head Start program personnel.

  2. References. Section 3304(a)(6)(A), FUTA; P.L. 94-566; P.L. 95-19, Draft Language and Commentary to Implement the Unemployment Compensation Amendments of 1976--P.L. 94-566 and Supplement 4, 1976 Draft Legislation, dated August 26, 1977; Unemployment Insurance Program Letter (UIPL) No. 40-79, dated August 3, 1979; UIPL No. 41-83, dated September 13, 1983; UIPL No. 30-85, dated July 12, 1985; UIPL No. 15-92, dated January 27, 1992; and UIPL No. 43-93, dated September 13, 1993.

  3. Background. UIPL No. 40-79 set forth the Department's position on whether Head Start agencies are "educational institutions" for purposes of the "between and within terms denial" provisions required and/or allowed by Section 3304(a)(6)(A), FUTA. Subsequent amendments to the "between and within terms denial" provisions have raised questions about whether the treatment of Head Start services has changed. This UIPL reiterates the Department's position and provides specific discussion of the amendments made following the issuance of UIPL 40-79.

  4. Discussion. Section 3304(a)(6)(A), FUTA, requires, as a condition for employers in a State to receive credit against the Federal unemployment tax, that the State law provide that unemployment compensation (UC) be payable based on services to which Section 3309(a)(1), FUTA, applies, in the same amount, on the same terms, and subject to the same conditions as UC payable on the basis of other service subject to State law. The major mandates of this Section are: (1) coverage of services performed for State and local governments and their instrumentalities and nonprofit organizations as defined under Section 3309(a)(1), FUTA; (2) equal treatment in the payment of UC to employees of such entities; and (3) denial of UC based on certain educational services performed for such entities between and within academic terms. These conditions are required for employers in a State to receive credit against the Federal unemployment tax. UIPL No. 43-93 describes the optional and required denial provisions in clauses (i) through (vi) of Section 3304(a)(6)(A), FUTA. The six clauses are described below:

  5. Interpretation and Application. The between and within terms denial provisions apply only to services performed (1) for an educational institution, (2) in an educational institution while employed by an ESA, or (3) to or on behalf of an educational institution by a governmental entity or nonprofit organization.

    Whether Head Start Agencies are Educational Institutions under Clauses (i) and (ii) of Section 3304(a)(6)(A), FUTA. Head Start programs are comprehensive developmental programs designed to meet children's needs in the health (medical, dental, mental, nutritional), social, and education areas. The goal is child adjustment and development at the emotional and social levels, rather than school-type training.

    Whether Head Start agencies are "educational institutions" was discussed in UIPL 40-79. That UIPL stated that Head Start programs operated by Community Action Groups do not meet the criteria of "educational institutions," and the between and within terms denial does not, therefore, apply to services performed for such groups. UIPL 40-79 stated, however, that when a local board of education operates a Head Start program as an integral part of the school system in facilities of an educational institution, with Head Start workers as employees of the board and the schools in every respect, subject to all employing policies, such as hiring, firing, working conditions, as other employees performing services for the educational institution, then such workers are considered to be employed by an educational institution. As such, these workers are subject to the denial provisions in the same manner as are all other educational institution employees. This remains the Department's position.

    Application of Clauses (iv) and (v), Section 3304(a)(6)(A), FUTA to Head Start Services. UIPL 40-79 did not address clauses (iv) and (v), as these provisions were not added until 1983. UIPL 41-83 advised the States of the addition of these clauses to Federal law, but did not discuss Head Start agencies.

    Clause (iv) applies to services performed for an ESA. Clause (iv) defines an ESA as "a governmental agency or governmental entity which is established and operated exclusively for the purpose of providing such services to one or more educational institutions." Since Head Start agencies do not exist exclusively for the purpose of providing services to educational institutions, they are not ESAs.

    Clause (v) permits States to apply the between and within terms denial to services "provided to or on behalf of" an educational institution by a governmental entity or nonprofit organization to which Section 3309(a)(1), FUTA, applies. UIPL 41-83 states that the words "provided to" require only that the services provided to the educational institution give some benefit or support to the institution. The words "on behalf of" are more restrictive. They apply--

    to those employees of a governmental entity or nonprofit organization who perform services as an agent of or on the part of an educational institution. This situation could arise, therefore, only where an employee of a governmental entity or nonprofit organization performed services as an agent of or on the part of an educational institution in such a representative capacity.

    Whether services are "provided to or performed on behalf" of an educational institution depends on the facts present in each individual case. Thus, if State law contains a provision implementing optional clause (v), a case-by-case determination must be made to determine if Head Start services are "provided to or on behalf of an educational institution," assuming that the Head Start agency is a governmental entity or nonprofit organization to which Section 3309(a)(1), FUTA, applies.

    If a State law implements optional clause (v), the application to Head Start programs may be limited as to scope and/or time by a State, but, as discussed in UIPL 43-93, the limitation must be uniformly applied throughout the State. A State may not treat Head Start services "provided to or on behalf of" one school district differently from Head Start services "provided to or on behalf of" those performed for another school district. Also, a State may not treat the services performed for a governmental entity differently from services performed for a nonprofit organization.

  6. Action Required. Administrators are to provide this information to appropriate staff.

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