The U.S. Employment Service: Service Delivery and Merit Staffing

The U.S. Employment Service: Service Delivery and Merit Staffing

June 23, 2022
The U.S. Employment Service: Service Delivery and
Merit Staffing
Introduction
The ES is federally funded, primarily by appropriations
Since the establishment of the Employment Service (ES) in
from the Federal Unemployment Tax Act (FUTA). The ES
1933, there has been congressional and executive branch
is the central component of most states’ workforce
interest and activity around the staffing requirements in the
development systems, as services are universally accessible
delivery of ES services. In particular, there has been a long-
to all jobseekers and employers. Reflecting this central role,
standing dialogue on the best way to ensure uniformity of
the Workforce Innovation and Opportunity Act (WIOA; 29
service delivery and standards of efficiency across states in
U.S.C. §3101 et seq.), enacted in 2014, requires ES offices
the ES—through public sector workers hired on the basis of
to be integrated by being physically located with One-Stop
merit (merit staff) or through non-state or non-public sector
centers and prohibits standalone ES offices. In addition,
workers. In 2020, the Department of Labor (DOL) changed
because ES staff conduct the work test for the receipt of
its longstanding regulations on ES staffing; in 2022, DOL
unemployment benefits, ES is also a critical component of
proposes to partially reverse those changes. In 2022, the
the Unemployment Insurance (UI) system.
House passed a reauthorization of the Workforce
Innovation and Opportunity Act (H.R. 7309) that includes
Current ES Staffing Requirements
merit staffing requirements in the ES.
The Wagner-Peyser Act does not use the term merit staff in
the ES; using merit staff in the ES began shortly after the
This In Focus summarizes the major statutory and
act passed in 1933 and continued until 2020. Initial
regulatory developments related to the use of merit staff in
discussions in the 1930s around setting staffing standards in
ES offices since the enactment of the Wagner-Peyser Act,
the ES were informed by concerns about favoritism and
the law that created the ES.
partiality in the provision of employment services,
The Employment Service
especially given patronage systems then operating in
several states and localities.
In response to exceptionally high unemployment during the
Great Depression, the Franklin D. Roosevelt Administration
Current staffing requirements for the ES are based on a
and Congress proposed and enacted numerous New Deal
combination of law and regulations. Under DOL
programs to address unemployment and to improve the
regulations finalized in 2020, labor exchange services
efficiency of the U.S. labor market. The decentralized and
authorized through the ES may be provided through a
uneven nature of labor exchange services in the United
variety of staffing models. States may choose to provide ES
States in the early 1930s led to proposals for the federal
services by state merit-staff employees; they are not
government to take a more active approach in matching
required to do so.
unemployed workers with employment opportunities.
Merit Staff Definition
Building on prior experience with labor exchange services,
While no specific merit standards are described in the
the Wagner-Peyser Act (29 U.S.C. §49 et seq.) was enacted
Wagner-Peyser Act, such requirements are typically
in 1933 to establish a more uniform federal-state system of
adopted to ensure (1) hiring is based on competence rather
public employment service offices from the existing mix of
than patronage, (2) execution of services is impartial and
state and local offices. The act created the ES within DOL
nonpartisan, and (3) administration of services is not
to promote the establishment and maintenance of the
affected by favoritism. The Intergovernmental Personnel
federal-state public employment service.
Act of 1970 (IPA; 42 U.S.C. §4701 et seq.) authorized the
The Wagner-Peyser Act and federal regulations require that
Office of Personnel Management (OPM) to prescribe
each state, in order to receive related federal appropriations,
personnel standards consistent with merit principles for the
must operate a labor exchange system that has, at a
administration of certain federal programs, including those
minimum, the capacity to
funded by the Wagner-Peyser Act. In implementing the

IPA, OPM noted that the quality of public services can be
assist job seekers in finding employment,

improved by developing personnel systems consistent with
assist employers in filling jobs,


facilitate the match between jobseekers and employers,
employee recruitment based on knowledge, skills, and
 participate in a system for clearing labor between the
abilities;
states, and
 equitable and adequate compensation;
 meet the work-test requirements of the state
 employee training to ensure high performance;
unemployment compensation system.
 employee retention based on adequacy of performance;
 assurance of non-discrimination; and
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 employee protection against coercion for partisan
staff in the delivery of ES services by reconsidering its
political purposes.
previous rulemaking requiring state merit staff to deliver ES
services. The 2006 NPRM was withdrawn in 2009.
Evolution of Merit Staffing Requirements
Table 1 summarizes the major regulatory provisions in ES
Final Rule in 2020
staffing requirements from 1933 (enactment of the Wagner-
Peyser Act) through 2019, those provided in the 2020 Final
Effective January 1, 2020, DOL issued a Final Rule (2020
Rule, and those in the 2022 proposed rule.
Final Rule) that eliminated the merit staffing requirement
for the ES and allows all states to use non-merit staff in the
Table 1. Major Regulatory Provisions Pertaining to
delivery of ES services. DOL argued that the Wagner-
Employment Service Staffing Requirements
Peyser Act “does not contain a statutory requirement to
impose a merit-staffing requirement on States.” Instead, the
2022
2020 Final Rule noted that while DOL historically required
Provision
1933-2019
2020
(proposed)
state merit staff for administration of ES services, this was a
“policy choice” rather than a statutory requirement.
State Merit
Yes
No
Yes
Staff Required
In the 2020 Final Rule, DOL changed its longstanding
policy of requiring state merit staff to deliver ES services to
Demonstration
allow states to
States—Non-
Yes
Yes
No
Merit/Local
 align ES service delivery with WIOA, which does not
Merit Staff
require any particular staffing model;

Summary of
Uniform
Flexibility
Standardization,
develop “innovative and creative” approaches to deliver
Rationale
system of
and closer cross-training,
ES services and activities; and
service
alignment
and closer
 “free resources” to assist employers and jobseekers
delivery, non-
with
alignment with
more effectively.
discrimination, WIOA
the UI system
and
staffing
Proposed Rulemaking in 2022
protection
models
In April 2022, DOL issued a Notice of Proposed
against
Rulemaking (2022 NPRM) that would require states to use
political
state merit staff in the delivery of ES services. While the
influence
2020 Final Rule argued for closer alignment between the
Source: CRS analysis of 2020 Final Rule, 2022 Notice of Proposed
ES and WIOA, which does not require the use of merit
Rulemaking, and David E. Balducchi and Christopher J. O'Leary, The
staff, the 2022 NPRM stresses the importance of aligning
Employment Service-Unemployment Insurance Partnership: Origin,
the ES more closely with the UI system, which generally
Evolution, and Revitalization, W.E. Upjohn Institute for Employment
requires the use of merit staff to deliver services. DOL
Research, Upjohn Institute Working Paper 17-269, Kalamazoo, MI,
provides two main rationales for requiring state merit staff
April 2017, https://doi.org/10.17848/wp17-269.
to deliver all ES services:
From Enactment through 2019
 Stronger alignment between the ES and UI systems.
Through a series of statutory and regulatory actions, state
State merit staff ensure “surge capacity” in times of
merit staff were generally required for labor exchanges
stress on the UI system, as occurred particularly in the
funded through the ES from 1933 through 2019. Of note,
spike in 2020 in pandemic-related unemployment

claims. (The adjudication of UI claims must be
DOL policy since the time of enactment in 1933 through
performed by state merit staff and only ES state merit
2019 generally required merit staffing in the ES. DOL’s
staff who have been cross-trained may assist in UI
policy was based upon DOL’s authority to assist ES
offices by “developing and prescribing
claims processing and adjudication).
minimum
standards of efficiency ... and promoting uniformity in
 Accountability and uniformity. Uniform merit staff
[ES] administrative and statistical procedure”; and
standards would help “ensure that ES services are

delivered by qualified, non-partisan personnel who are
in the 1990s, DOL granted three demonstration states an
directly accountable to the State.”
indefinite waiver from the merit-staffing requirements
of the ES. Colorado, Massachusetts, and Michigan were
The 2022 NPRM would thus require the demonstration
authorized to run demonstration projects with alternative
states that currently use local merit staff to provide ES
service delivery (i.e., a non-state ES agency) for ES
services to reconfigure service delivery to state merit staff
labor exchange services. Subsequent litigation in the
only. While the 2020 Final Rule argued for closer
Michigan case led the U.S. District Court for the
alignment between the ES and WIOA, which does not
Western District of Michigan to rule that DOL’s
require the use of merit staff, the 2022 NPRM stresses the
construction of the Wagner-Peyser Act to require merit
importance of aligning the ES more closely with the UI
staffing was a “reasonable and permissible
system, which generally does require the use of merit staff
interpretation” of the act.
to deliver services.
In 2006, DOL issued a Notice of Proposed Rulemaking
(NPRM) that would have allowed states to use non-merit
David H. Bradley, Specialist in Labor Economics
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The U.S. Employment Service: Service Delivery and Merit Staffing

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