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Statement of Need: The current regulation for determining the State in which a CWC is established (the paying State) was issued in 1974 to replace a complicated set of tests for determining the paying State. It was intended to speed payments to eligible claimants by streamlining a manual process which relied on mailing paper forms between States. Before 1974, it could take weeks or months to determine which State should be the paying State for a particular claim. In 1974, UC claims were filed in person. Therefore, a simple solution was to make the paying State the State in which the claimant was physically present, which is where he or she would file the claim. All of the claimant’s wages would be transferred to this State, whose law would govern eligibility and the amount of benefits. An unintended consequence of this arrangement is that the paying State is not always a State in which the individual had insured wages. Since this definition was codified, a practice called "forum shopping" has developed. In forum shopping, a claimant who has worked in more than one State travels to a State with a higher weekly benefit amount to file a CWC claim, even though the claimant has never worked in that State. This practice occurs because weekly benefit amounts vary greatly among States. States with higher weekly amounts have reported a number of instances where individuals traveled to these States for the purpose of filing a CWC and then immediately returned home. That cross-country travel is faster and more affordable has facilitated this practice. The Department believes that forum shopping is undesirable for two reasons. First, it unfairly advantages claimants who work in multiple States over those who work in just one state. Second, it results in higher benefit charges to former employers than would otherwise occur. Now that the technology exists to overcome the administrative difficulties that resulted in the current definition of paying State, the Department believes it is appropriate to more tightly conform the regulations to UC’s character as wage insurance by making the paying State any State where the individual earned insured wages. Most claims are now filed by telephone or via the Internet, and States can now instantly access each other’s wage information and transfer wages electronically for CWCs. Information about the weekly benefit amounts and other eligibility requirements of various State laws is now easily accessible.

Summary of the Legal Basis: This regulation is authorized under section 3304(a)(9)(B) of the Federal Unemployment Tax Act (FUTA) (26 U.S.C. 3304(a)(9)(b)).

Alternatives: The Interstate Benefits Committee of the National Association of State Workforce Agencies met to discuss options to address “forum shopping.” No recommendations were made.

Anticipated Costs and Benefits: Preliminary estimates of costs and benefits have not been determined at this time and will be determined at a later date, if necessary.

Risks: This action does not affect public health, safety, or the environment.