Labor Department will require states to share unemployment data

This is a shift from the previous regulation. Since 2006, states could voluntarily share unemployment data with federal officials for oversight and audits. Now they must. The change amends Title 20 CFR part 603, which governs confidentiality of unemployment compensation information. Federal officials—including the Department's Office of Inspector General (DOL-OIG), the Department itself, and other federal agencies—can now require states to hand over records they previously could withhold. States cannot refuse on confidentiality grounds.

The change stems from pandemic-era fraud. During COVID-19, the Department's Office of Inspector General identified $45.6 billion in potentially fraudulent unemployment benefits paid across six high-risk areas. An estimated $191 billion in total pandemic-period benefits may have been paid improperly, with a significant portion attributed to fraud. The DOL-OIG has repeatedly warned that its access to state data could end at any time and pushed the Department to make disclosures mandatory.

The preamble cites the DOL-OIG's concern directly: "Since 2020, DOL-OIG has repeatedly expressed its concern to the Department that its access to confidential UC information for purposes of UC program oversight and audits could end at any time and recommended a change to the regulations to make clear that such disclosures are required. The rule responds to that recommendation.

The Department argues this is necessary to hold states accountable. The preamble states: "Oversight and audits of UC programs by the Department, DOL-OIG, and other Federal officials help detect fraud vulnerabilities and identify possible solutions, which is necessary to hold State UC agencies accountable for administering UC programs consistent with Federal law requirements. The rule also notes that "State UC operations have evolved since this regulation was first promulgated, States have faced increased fraud incidents, including sophisticated multistate fraud schemes by organized criminals."

The authority for this amendment comes from the "methods of administration" provision in section 303(a)(1) of the Social Security Act, which requires states to provide in their laws, as a condition to receive administrative grants, such "methods of administration" as the Secretary determines to be "reasonably calculated to insure full payment of unemployment compensation when due."

The rule does not create a national unemployment claims database, despite the August 2025 proposed rule mentioning one. The Department said it will issue a separate supplemental notice of proposed rulemaking on that topic later, after gathering more input. The preamble states: "The Department has determined it is appropriate to solicit further input on the topic of a national UC claims database. Therefore, if such a database is to be pursued, the Department will issue a Supplemental Notice of Proposed Rulemaking on this topic."

Forty commenters responded to the proposed rule in August 2025. Some advocacy organizations asked for a longer comment period—arguing for 60 days instead of 30—and requested the Department consult more broadly with states, local governments, tribal governments, and immigrant populations. One advocacy organization noted that only two responses to a 2023 request for information addressed reducing fraudulent payment, and argued the August 2025 NPRM needed "more current, timely feedback from experts and advocates. Another commenter asserted that the Department failed to consult with impacted parties such as states, local governments, or tribal governments. An advocacy organization suggested the Department engage with impacted immigrant populations and provide transparency about data collection and use. The Department declined to extend the comment period, citing prior engagement through a 2023 request for information on the same topic.

The document does not specify what happens if a state fails to amend its laws by the September 16, 2027 deadline, or whether federal funding could be withheld. It also does not detail which specific federal officials beyond the DOL-OIG can demand the data, or what categories of information states must disclose. For questions, the Department lists Michelle E. Beebe, Administrator of the Office of Unemployment Insurance, at (202) 693-3029 or via email at the address in the Federal Register notice.

General information, not legal, immigration or tax advice. Confirm the details with Labor Department before you act.