S. 2312 — Unemployment Insurance Modernization and Recession Readiness Act

This section revises federal funding under the Federal-State Extended Unemployment Compensation Act of 1970 (which authorizes temporary extended unemployment benefits of up to 13 additional weeks—or more in high-unemployment areas—beyond regular state unemployment insurance) to provide 100 percent reimbursement (from 50 percent) for extended compensation benefits paid under state law, including dependents' allowances, conditioned on the state not assessing employer payments in lieu of contributions or charging employers for experience rating purposes. The section further reduces federal payments to certain non-complying states by 50 percent of the amount, strikes prior 50 percent federal sharing requirements in subsections (b) and (c), redesignates remaining subsections, and makes a conforming amendment to s. 202(a)(6) by striking the reference to "shareable regular compensation."

This section revises the total unemployment rate (TUR) triggers under the Federal-State Extended Unemployment Compensation Act of 1970 for states to pay extended unemployment benefits (i.e., up to 13 additional weeks of unemployment compensation with 50 percent federal reimbursement during high unemployment periods, subject to increase). (1) It replaces the prior state TUR trigger with a new trigger that is "on" for a week if the state's average seasonally adjusted TUR for the most recent three months equals or exceeds 5.5 percent and remains "on" thereafter notwithstanding state law; (2) it establishes a national TUR trigger that is "on" if the national average seasonally adjusted TUR for the most recent three months equals or exceeds 5.5 percent and remains "on" thereafter notwithstanding state law; and (3) it establishes an elevated national unemployment trigger that is "on" if the national average seasonally adjusted TUR for the most recent three months is at least 0.5 percentage points above the lowest such average for any continuous three-month period in the preceding 12 months, remaining "on" thereafter notwithstanding state law, and turns "off" only if that average has decreased for two consecutive months, is below 5.5 percent, and is less than 1.5 percentage points above the average at the initial "on" week. (Thus, all three triggers are effectively one-way until federal "off" conditions are met.) The Secretary of Labor makes all TUR determinations (including seasonal adjustments), and the Bureau of Labor Statistics must publish the elevated trigger status in its monthly employment situation reports. If the elevated national trigger is concurrently "on" with the state or national TUR trigger, federal reimbursement increases to 100 percent (from 50 percent) for 26 weeks of benefits (from 13 weeks), in addition to any other applicable increases.

This section revises extended unemployment compensation account augmentation requirements under the Federal-State Extended Unemployment Compensation Act of 1970 to establish tiered increases during high unemployment periods, as follows: (1) tier 2 periods (state unemployment rate of 6.5% but less than 7.5%, determined by substituting for the standard 5.5% trigger in section 203(f)(1)(A) or (g)(1)(A)) substitute 100% (from 50%) federal sharing and 26 weeks (from 13) of extended benefits; (2) tier 3 periods (7.5% but less than 8.5%) substitute 150% sharing and 39 weeks; and (3) tier 4 periods (8.5% or higher) substitute 200% sharing and 52 weeks. Augmented amounts remain available for an individual's entire benefit year once a tier is triggered, even if the threshold is no longer met, and optional triggers under section 203(d) and (h) do not apply. (As background, the act provides federal reimbursement for half the costs of state extended unemployment benefits—up to 13 additional weeks beyond regular unemployment insurance—when specified unemployment triggers are met.)

This section revises the calculation of amounts in an individual's extended benefit account under the Federal-State Extended Unemployment Compensation Act of 1970 to use the greatest (from the least) of specified amounts in section 202(b)(1). (As background, extended benefits provide additional weeks of unemployment compensation during periods of high unemployment, shared between states and the federal government.) The amendment applies to extended compensation accounts established on or after the earlier of the date a state changes its statutes, regulations, or policies to comply or January 1, 2027.

This section establishes a transition rule under the Federal-State Extended Unemployment Compensation Act of 1970 permitting continued payment of extended compensation from remaining balances in accounts established under section 202(b) (i.e., state extended benefit accounts) for up to 6 months after a state "off" indicator ends the extended benefit period, if the individual meets applicable eligibility requirements under the act. (As background, extended benefits provide up to 13-20 additional weeks of unemployment compensation, depending on state unemployment rates, during designated high-unemployment periods.)

This section establishes requirements for states to coordinate the payment of extended unemployment compensation—additional weeks of benefits available after regular unemployment insurance is exhausted—with regular unemployment compensation when (1) an individual remains entitled to extended compensation after their benefit year expires and (2) they qualify for a new benefit year in which the weekly regular benefit amount is at least $25 less than in the prior benefit year. For such individuals, states must use one of the following methods, if permitted by state law: (1) establish a new benefit year but defer regular compensation until all extended compensation is exhausted; (2) defer establishing a new benefit year until all extended compensation is exhausted; (3) pay regular compensation at the new benefit year rate plus extended compensation equal to the difference between the new rate and the prior benefit year rate; or (4) determine extended compensation eligibility without regard to regular compensation rights if the individual elects not to file a new regular compensation claim.

This section applies the interstate portability requirements for regular unemployment compensation—prohibiting denial or reduction of benefits solely because an individual files an interstate claim or resides in another state—to extended benefits under the Federal-State Extended Unemployment Compensation Act of 1970 in the same manner.

This section revises the Federal-State Extended Unemployment Compensation Act of 1970 to streamline state requirements and triggers for the extended benefits (EB) program, which provides up to 13 additional weeks (or 20 weeks in high-unemployment states) of unemployment insurance beyond regular benefits during periods of elevated unemployment, as follows: (1) simplifies state law requirements under sec. 202(a) by eliminating certain subparagraphs and paragraphs, including references to a prior trigger structure; (2) eliminates the mandatory 13-week "off" period between extended benefit periods under sec. 203(b)(1); (3) simplifies the insured unemployment rate (IUR) trigger under sec. 203(d) by requiring only that the IUR equal or exceed 5% for the most recent 12 weeks (eliminating prior lookback averaging and alternative calculations); and (4) expands the compensation included in the IUR rate calculation under sec. 203(e)(1)(A) to encompass extended compensation, unemployment compensation for federal civilian employees, and unemployment compensation for ex-servicemembers (in addition to regular compensation).

This section exempts payments to states under the Federal-State Extended Unemployment Compensation Act of 1970 from sequestration reductions. (The Federal-State Extended Unemployment Compensation Act of 1970 authorizes states to provide extended unemployment benefits—beyond regular benefits—during periods of high unemployment, with the federal government reimbursing 50% or 100% of those costs depending on the trigger.) This exemption applies to any sequestration order issued on or after the date of enactment.

This section establishes the effective date for amendments made by this title (excluding §§104 and 109) as weeks of unemployment beginning on or after January 1, 2027 (or earlier if established by state law, but in no case earlier than 60 days after enactment).

This section requires state unemployment insurance laws to provide a minimum duration of regular unemployment compensation benefits of at least 26 weeks—specifically, no variable duration formula with maximum weeks of fewer than 26, and, for states using a maximum benefit entitlement, no entitlement less than 26 times an individual's weekly benefit amount—as a condition for federal certification under FUTA (i.e., full employer tax credit). (Thus, noncompliant states must amend their laws by January 1, 2027, or earlier to retain certification.) The requirement applies to weeks of unemployment beginning on or after the earlier of a state's compliance date or January 1, 2027.

This section requires, as a condition for Federal Unemployment Tax Act (FUTA) certification, that state unemployment insurance laws provide an individual's weekly benefit amount equal to the lesser of (1) the state's maximum weekly benefit amount or (2) an amount equal to at least 75% of the individual's total earnings in the highest-earnings quarter of the base period divided by 13. The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state amends its statutes, regulations, or policies to comply or January 1, 2027.

This section establishes a floor on each state's maximum weekly unemployment benefit amount at no less than two-thirds (2/3) of the state's average weekly wage (as determined by the Secretary of Labor on October 1 of each calendar year and applied to claims effective on or after January 1 of the subsequent calendar year). The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state changes its statutes, regulations, or policies to comply or January 1, 2027.

This section requires states, as a condition for receiving federal unemployment tax credits under the Federal-State Unemployment Insurance Program, to (1) permit individuals seeking at least the lesser of 20 hours or one-half of their base-period weekly hours to satisfy state unemployment compensation requirements relating to ability and availability to work, active work search, or refusal of work; (2) allow claims for partial unemployment benefits in weeks where earnings are less than the weekly benefit amount and the individual continues seeking additional part-time or full-time work; and (3) disregard at least one-third of the weekly benefit amount in earnings when computing partial unemployment benefits. The requirements apply to weeks of unemployment beginning on or after the earlier of the date of state conformance or January 1, 2027.

This section amends the federal requirements for certifying state unemployment compensation laws under Section 3304(a) of the Internal Revenue Code of 1986 by adding two new paragraphs to the list of standards states must meet. (1) New paragraph (25) requires states to use a base period consisting of 4 completed calendar quarters preceding the effective date of the claim that includes the most recently completed calendar quarter before the start of the benefit year to determine eligibility; or, for individuals not qualifying under that base period, to use an alternative base period meeting the same criteria. (2) New paragraph (26) requires states, for individuals otherwise ineligible due to unpaid leave or reduced pay for medical, parental, or caregiving purposes during the base period or incapacity due to illness, injury, or disability, to determine eligibility using the state's standard or alternative base period plus at least 4 additional consecutive quarters immediately preceding it. (Thus, these changes expand the lookback period for wages to better capture recent employment or accommodate work disruptions.) The amendments apply to claims with an effective date on or after the earlier of the date a state updates its statutes, regulations, or policies to comply or January 1, 2027.

This section amends federal conformity requirements for state unemployment insurance laws to prohibit disqualification from unemployment compensation for separations from employment due to a compelling reason, as defined by the Secretary of Labor to include the following: (1) illness or disability of a qualified family member (i.e., a spouse or domestic partner, child, parent, sibling, grandparent, grandchild, or equivalent family relationship); (2) accompanying a spouse outside the individual's commuting area due to the spouse's job relocation; (3) workplace relocation outside the commuting area; (4) loss of child care for a child with no reasonable alternative; (5) unusual health or safety risk in the job; (6) reasonable belief that the employer violated state or federal laws on wages, hours, working conditions, collective bargaining, harassment, discrimination, retaliation, or accommodations; or (7) other state-determined reasons. The amendments apply to weeks of unemployment beginning on or after the earlier of a state's conforming change to its statutes, regulations, or policies, or January 1, 2027.

This section requires state unemployment compensation laws to provide benefits to individuals who voluntarily separate from employment if the separation is attributable to the individual being a victim of a qualifying act of violence or harassment (e.g., domestic violence, dating violence, sexual assault, stalking, sexual harassment, or other harassment), as verified by sufficient documentation such as a sworn statement with identification, police or court record, or professional documentation. Victims include those directly experiencing such acts and individuals whose family or household members are affected; states may adopt broader definitions, incorporating those from the Violence Against Women Act of 1994 where applicable. The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state changes its statutes, regulations, or policies to comply or January 1, 2027.

This section establishes a new requirement under the Federal Unemployment Tax Act (FUTA) that states pay unemployment compensation immediately for the first week of otherwise compensable unemployment, without a waiting week (i.e., the initial week of eligibility for which benefits are typically not paid). The requirement applies to weeks of unemployment beginning on or after the earlier of the date a state conforms its laws or January 1, 2027.

This section requires state unemployment compensation laws to deem an individual's completion of a temporary employment assignment an involuntary layoff for eligibility purposes, regardless of whether the individual contacts the employer afterward. The requirement applies to weeks of unemployment beginning on or after the earlier of the date a state conforms its law or January 1, 2027.

This section requires state unemployment compensation laws to provide for payment of allowances under a self-employment assistance program (as defined in IRC §3306(t)) (i.e., allowing eligible claimants to receive benefits while starting a business, in lieu of job search requirements), as a condition for certification under the Federal Unemployment Tax Act and for administrative grants under SSA §303(a). The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state enacts conforming changes or January 1, 2027.

This section requires states to provide short-time compensation under their unemployment insurance laws (i.e., work-sharing programs that pay prorated benefits to employees facing reduced hours as an alternative to layoffs), as a condition of certification for federal payments under the Federal Unemployment Tax Act (FUTA) and Social Security Act. (1) It revises the definition of such programs in IRC §3306(v) by increasing the maximum allowable reduction in employee regular hours or wages to 80 percent (from 60 percent), effective on enactment; and (2) permits employers to file weekly claims on behalf of employees. The requirements apply to weeks of unemployment beginning on or after the earlier of the date a state amends its laws to comply or January 1, 2027 (except the percentage increase).

This section requires states to provide unemployment compensation to otherwise eligible individuals who earned at least $1,000 in covered wages during the highest quarter of the base period and at least $1,500 in covered wages during the base period (i.e., as a condition for certification of state unemployment insurance laws under the Federal Unemployment Tax Act). States may reduce these dollar thresholds. The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state changes its statutes, regulations, or policies to comply or January 1, 2027.

This section requires states to classify individuals performing services as employees (not independent contractors) for unemployment insurance purposes unless they meet a three-part test: (1) the individual is free from control and direction in performing the service, both contractually and in fact; (2) the service is performed outside the usual course of the employer's business; and (3) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature. The requirement applies to weeks of unemployment beginning on or after the earlier of the state's compliance date or January 1, 2027.

This section eliminates the exclusion from the Federal Unemployment Tax Act (FUTA) definition of employment for (1) services by students enrolled full-time in higher education work-study programs combining academic instruction with work experience and (2) services by students in cooperative education programs at secondary, undergraduate, or postgraduate institutions, effective for service performed on or after January 1, 2027. (Thus, employers must pay FUTA taxes on such wages, and the students become eligible for unemployment compensation.)

This section requires states to provide a dependents' allowance of $25 per dependent per week (CPI-indexed annually thereafter, rounded to the nearest dollar) to individuals receiving unemployment compensation who have dependents, as a new condition for certification of state unemployment insurance laws under IRC §3304(a)(35). (As background, states must comply with §3304(a) requirements to receive federal administrative grants for their unemployment insurance programs, which provide temporary wage replacement to eligible workers who lose jobs through no fault of their own.) It (1) defines dependents to include children under age 18 or full-time students under 24 in the claimant's care, eligible foster children, disabled immediate family members in the claimant's care, nonworking senior family members or spouses in the household, and others as determined by the Secretary of Labor; (2) permits withdrawals from federal unemployment accounts for these payments; and (3) directs the Secretary of Labor to issue regulations within three months of enactment. The requirements apply to weeks of unemployment beginning on or after the earlier of state compliance or January 1, 2027.

This section requires states to provide unemployment compensation to otherwise eligible individuals separated from employment due to a labor dispute if (1) the individual was locked out by the employer; (2) the dispute results from the employer's failure to conform to the provisions of a labor contract; (3) the dispute results from the employer's failure to conform to any state or federal law relating to wages, hours, working conditions, or collective bargaining; or (4) the individual and others of the same grade or class are not participating in, financing, or directly interested in the dispute. The requirement applies to weeks of unemployment beginning on or after the earlier of the date the state changes its statutes, regulations, or policies to comply or January 1, 2027.

This section revises the unemployment compensation denial rule applicable to employees of educational institutions (i.e., teachers and other school staff) during breaks between academic years or terms. Specifically, if compensation is denied due to reasonable assurance of employment in the subsequent year or term but the individual is not offered an opportunity to perform such services, the individual is entitled to retroactive payment for each week for which a timely claim was filed and compensation was denied solely for that reason. (As background, current law allows states to deny such benefits when employees have reasonable assurance of returning to work after the break.) The amendments apply to weeks of unemployment beginning on or after the earlier of the date a state updates its statutes, regulations, or policies to comply or January 1, 2027.

This section amends section 3304(a) of the Internal Revenue Code of 1986 to require states to pay emergency enhanced unemployment compensation (EEC) pursuant to new section 3304B and, in paragraph (20) preceding clause (i), inserts a reference subjecting the benefit amount requirement to paragraph (37) and section 3304B. New IRC §3304B defines EEC as the additional unemployment compensation paid to individuals in a state during an emergency period—any period in which a public health emergency is declared under section 319 of the Public Health Service Act (42 U.S.C. 247d) with respect to the state (including nationwide) or a major disaster or emergency is declared by the President under sections 401 or 501, respectively, of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170, 5191)—resulting from applying 100 percent (from at least 75 percent) under IRC §3304(a)(20)(B)(i). (As background, IRC §3304(a) sets certification requirements for state unemployment compensation laws to receive full employer tax credit under the Federal Unemployment Tax Act; paragraph (20) addresses benefit amount computations potentially linked to extended benefits financing.) The section further (1) directs the Secretary of Labor to reimburse states 100 percent of EEC paid to individuals and additional administrative expenses, with payments certified to the Treasury Secretary, deposited in state accounts in the Unemployment Trust Fund (usable only for EEC), and funded by indefinite appropriations from the general fund; and (2) applies fraud and overpayment rules, making fraudulent recipients ineligible for further EEC, subject to prosecution under 18 U.S.C. §1001 (knowingly false statements punishable by fine, up to 5 years imprisonment, or up to 8 years if involving terrorism or specified sex offenses), and requiring repayment (waivable if non-fraudulent and inequitable) recoverable by state agencies over 3 years via deductions from future benefits (with notice and fair hearing rights).

This section requires states to provide weekly jobseeker allowances to eligible individuals pursuant to new Internal Revenue Code (IRC) §3304C as a condition for certification of their unemployment compensation laws under IRC §3304(a). New IRC §3304C defines an eligible individual as one who, for the week, (1) is unemployed or partially employed (including self-employment); (2) is able to work and available for at least 8 hours per week (with exceptions for locality limits, caregiving, approved training, jury duty, temporary layoff, or illness/injury) and is actively seeking suitable work by making employer contacts, maintaining records, and registering for employment services (with special rules for self-employed individuals and exceptions for approved training, temporary layoff with return expectation, definite start date, jury duty, or compelling reasons); (3) is at least 19 years old (or 18 if in state foster care) or has a high school diploma or equivalent; and (4) has adjusted gross income for the prior tax year not exceeding the Social Security contribution and benefit base (with exceptions for households experiencing recent job separation, divorce, or death within 6 months); and who has not refused suitable work (defined to exclude unreasonable health/safety risks, mismatched skills/location, or other Secretary of Labor criteria). Standards are established by the Secretary of Labor.