Request By:
Mr. Fred B. Creasey
Executive Director
Kentucky Association of Counties
P.O. Box 345
Frankfort, Kentucky 40602
Opinion
Opinion By: Steven L. Beshear
You seek an opinion as to who is the employer for unemployment insurance coverage of employees in public employment under the CETA (Comprehensive Employment and Training Act) program.
The program is a federally-sponsored one which attempts to employ usually underemployables in government, in non-profit, charitable positions, and, hopefully, bring such persons, ultimately, into the general job market.
As we understand the program's operation in Kentucky, there are five Prime Sponsor organizations which supervise the program. One covers the Louisville-Jefferson County area; one the Kenton County area; one, called the Bluegrass Employment Training Program, which covers four central Kentucky counties around Lexington, the Eastern Kentucky Concentrated Employment Program, covering the eastern part of the state; and, finally, one called Balance of State, which covers the bulk of the program.
Ordinarily, the federal government supplies grant money to the Prime Sponsors. The latter then enters into contractual arrangements with the various local governmental agencies (and private, non-profit clientele groups as well). The local unit of government locates and presents to the Prime Sponsor for enrolling participants to be employed. The employee must meet certain requirements to be eligible, and the position itself must meet certain requirements before it would be eligible for approval.
In the past, as we understand it, the federal government reimbursed the Division of Unemployment Insurance for any unemployment benefits paid to an employee who was laid off. Of course, since the programs are limited in time, these CETA employees are inevitably laid off.
Ordinarily, such employees would be excluded from unemployment insurance benefits because they fall within the exceptions set out in KRS 341.055(2) as ". . . part of an unemployment work-relief or work-training program assisted or financed in whole or in part by any federal agency or an agency of a state or political subdivision thereof. . . ." However, the federal regulations relating to CETA require that such employees receive the same benefits as other employees working for an employer.
Since other employees are entitled to unemployment benefits, CETA employees are likewise so entitled.
Congress has now decided that the federal government will not refund unemployment benefits, whereas before, it did. However, the CETA employee is still entitled to such benefits.
If the federal government cannot reimburse these costs, who is responsible -- the local unit or the Prime Sponsor? We believe the CETA Prime Sponsors are liable for the unemployment insurance benefits, and it would appear CETA funds can be used to pay these costs. See Section 676.40-1(g) and 676.41-1(b) of the CETA May 20, 1980, Regulations (Federal Register, Vol. 45, No. 99, Tuesday, May 20, 1980, Part IX, Department of Labor).
In support of our conclusion, our research indicates that, while in some cases with certain Prime Sponsors, payments to CETA employees emanate from the Prime Sponsor directly; in other cases, the Prime Sponsor reimburses the local governmental unit. Thus, the "who pays the employee" test is not in any respect determinative as to who is the party ultimately responsible for the unemployment insurance benefits.
The references we cite for support to our determination that it is the Prime Sponsor who is responsible for the unemployment insurance benefits rather than the local governments are found in part in the May 20 CETA Regulations, supra, and also in large measure in the CETA contract between the Commonwealth of Kentucky, the Department for Human Resources (the Prime Sponsor) and the local units of government. First, in the "Comments" section of the Federal Register, which precedes the Regulations as such, at Page 33848, it is indicated that the term "Employing Agency" was substituted for the term "Prime Sponsor. " The term "Employing Agency" is defined in Section 675.4 Definitions at Page 33855 to read:
"Employing Agency means any public or private nonprofit employer which employs PSE or work experience participants and which establishes and maintains the personnel standards applicable to those participants covering such areas as wage rates, fringe benefits, job titles, and employment status."
"Prime Sponsor" is defined at page 33857 to mean, "A recipient of financial assistance designated pursuant to Section 676.5." A "Program Agent" is defined to mean:
"(a) A unit of general local government with a population of at least 50,000 within the jurisdiction of a single prime sponsor.
(b) A combination of units of general local government (preferably contiguous) with a total population of at least 50,000 within the jurisdiction of a single prime sponsor which possesses:
(1) The legal authority to receive funds and to transact business throughout its jurisdiction in accordance with the Act and regulations; and
(2) The administrative capability to plan, administer, and operate an employment and training program."
These references to the Regulations are clearly consistent with references to the Regulations are clearly consistent with the conclusion that the Prime Sponsor is the employer, and the local governmental units serve the role of employment program administrators for the Prime Sponsor.
That the local governments are simply the program administrators or the conduit through which the Prime Sponsors carry out their employment program mission per the federal law is evidenced in the form contract between the Prime Sponsor and the local units of government, a copy of which was forwarded to us. The Prime Sponsor contracts with a local governmental unit to perform the function of providing employment and training opportunities for persons eligible to participate in a CETA program. The local governments agree to perform this function for the Prime Sponsor by maintaining various records supervising participants enrolled in the program, ensuring statutorily adequate work sites, reporting training-related injuries to the Prime Sponsor, etc. The Prime Sponsor is responsible for, by paragraph 3, subsection (1), the following:
"(1) Recruiting, certifying, and enrolling participants determined to be eligible for the specific CETA Title under which this project is funded and who meet the criteria for the specific target group(s) for which the project is designed."
In subsection (7) of the same paragraph 3 we find this obligation of the Prime Sponsor:
"(7) Monitoring and evaluating the project for compliance with the provisions of this contract and the overall effectiveness of project operations."
Then, in subsection (11) of paragraph 3, the Prime Sponsor agrees to "providing Workmen's Compensation coverage for CETA participants enrolled pursuant to this agreement."
Paragraph 4 of the contract, contains language concerning the amount the local government gets paid for the performance of the function, meaning the administration of the CETA program at the local level. Moreover, paragraph 7 states that the Prime Sponsor "is liable for reimbursing the Second Party (local government) for the employer's share of Social Security contributions pursuant to Section 418, 42 U.S. Code. . . ." While the local government is to be for Social Security purposes the "employer of record," we think the employer in fact is the Prime Sponsor, and the fact the Prime Sponsor reimburses the "employer of record" for the Social Security expenses is evidence of that fact.
Thus, we believe in considering all these factors and references, that it is the opinion of this office the Prime Sponsors, and not the local units of government, are the "employer" for purposes of payment of unemployment insurance benefits to CETA employees. We believe that the local governmental units are the mere administrators or facilitators of the CETA programs, and the control over the program is vested in the Employing Agency or, that is, the Prime Sponsor and for purposes of the unemployment insurance compensation for CETA workers, are the employers so as to be liable for the unemployment insurance benefits that may be collected by CETA participants.