In 1963, President Lyndon Johnson signed into law the Federal Unemployment Tax Act (FUTA), which taxed businesses and used the revenue from the tax to create an Unemployment Insurance system. People who are laid off are given assistance from this pool while they search for a new job. In 1994, the Family and Medical Leave Act (FMLA) was signed into law by President Clinton guaranteeing those who need to take a leave of absence for a medical or family crisis assistance while away from work for up to 12 weeks during a 12-month period. In December 1999, the Department of Labor (DOL) issued the Birth and Adoption Unemployment Compensation Rule (BAA-UC) to use Unemployment Insurance funds to provide for paid family leave. While no state has enacted the BAA-UC rule, many states, New Jersey in particular, have considered doing so.
The following publication of the BAA-UC rule, the Chamber and other groups sued DOL charging that the proposal violates the Federal Unemployment Tax Act and the Social Security Act, both of which permit unemployment benefits to be paid to unemployed workers only. The Chamber also argued that the proposal runs counter to the intent of Congress when it established a voluntary, unpaid leave of absence program (the Family and Medical Leave Act) for employees to care for a new or adopted child. Other violations cited in the lawsuit include failure to consider the impact on small businesses under the Regulatory Flexibility Act and procedural violations of the Administrative Procedure Act. Unfortunately, however, the suit was dismissed without prejudice on ripeness grounds because no state had enacted a BAA-UC rule.
In December 2002, DOL proposed repeal of the Clinton-era rule. The Chamber has filed comments in support repeal and awaits DOL final rule revoking the BAA-UC regulation.
LPA v. Herman - NCLC Brief
U.S. Chamber Position
The Unemployment Compensation fund exists to assist those who are unemployed and unable to find work. Employees who have taken a leave of absence are not unemployed and, thus, the regulation unlawfully extends unemployment compensation to those who are employed but have taken a leave of absence. If money is allocated to assist these employees, states will not have funds to assist unemployed workers when they need it most - in a time of recession when they are unable to find other work.
U.S. Chamber's division on Labor, Immigration, and Employee Benefits, January 2003.