Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF LABOR AND INDUSTRY

STATE OF MONTANA

In the matter of the adoption of NEW RULES I through VI, regarding incumbent worker training grants program

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION

TO: All Concerned Persons

1. On March 22, 2010, at 10:00 a.m., the Department of Labor and Industry (department) will hold a public hearing to be held in the first floor conference room 104, Walt Sullivan Building, 1327 Lockey Avenue, Helena, Montana to consider the proposed adoption of the above-stated rules.

2. The department will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the department no later than 5:00 p.m., on March 16, 2010, to advise us of the nature of the accommodation that you need. Please contact the Workforce Services Division, Department of Labor and Industry, Attn: Dave Morey, P.O. Box 1728, Helena, MT 59624-1728; telephone (406) 444-3478; fax (406) 444-3037; TDD (406) 444-5549; or e-mail [email protected].

3. GENERAL STATEMENT OF REASONABLE NECESSITY: The proposed new rules provide the initial implementation of the Incumbent Worker Training (IWT) program, which was established by Chapter 325, Laws of 2009 (Senate Bill 388). In order to develop the rules, the department held two teleconference meetings with the various stakeholders and received substantive comments, which assisted the development of these proposed program rules. Department representatives also met with representatives of the Department of Commerce, Montana State University and the Governor's Office, to devise a workable appeals process. There is reasonable necessity to adopt the proposed new rules in order to provide employer applicants and the economic development bodies that review and provide recommendations regarding the award of IWT grant funds, provide an explanation of the application process and establish criteria for the award of grants. In addition, there is reasonable necessity to provide, as part of the initial implementation of the IWT program, an appeals process to provide due process rights to employer applicants that are aggrieved by a department decision regarding the employer's grant application.

This general statement of reasonable necessity applies to the new rules, and is supplemented by statements following the individual rules.

4. The proposed new rules provide as follows:

NEW RULE I DEFINITIONS (1) "BEAR program" means a business expansion and retention program, as provided by 53-2-1216, MCA, and recognized pursuant to [NEW RULE II].

(2) "Department" means the Department of Labor and Industry.

(3) "Employer" means, as provided by 53-2-1216, MCA, a business entity that:

(a) employs 20 or fewer employees in this state in one location but no more than 50 employees statewide; and

(b) is registered with the Secretary of State to conduct business as a sole proprietor, if required, or as a corporation, a partnership, a limited liability company, or an association.

(4) "MMEC" means the Montana Manufacturing Extension Center at Montana State University - Bozeman.

(5) "Recommending entity" means a recognized BEAR program, a SBDC, or the MMEC.

(6) "SBDC" means a small business development center operating as such pursuant to 13 CFR part 130.

AUTH: 53-2-1220, MCA

IMP: 53-2-1215, 53-2-1216, MCA

REASON: There is reasonable necessity to adopt NEW RULE I in order to identify and define various terms used throughout the proposed rules.

NEW RULE II RECOGNITION OF A BEAR PROGRAM (1) In order to qualify as a recommending entity, a BEAR program must be recognized, as provided by 53-2-1216, MCA, by:

(a) the Governor's Office of Economic Development;

(b) the Department of Commerce; and

(2) In order to be recognized, a BEAR program must:

(a) have been established and trained by the Montana Economic Developers Association; and

(b) have requested, in writing, recognition from any of the three agencies identified in (1).

(3) Written recognition of an eligible BEAR program by any of the three agencies identified in (1) constitutes recognition by all of the agencies. An agency denying a written request for recognition shall promptly explain the basis for the denial in writing.

(4) A recognized BEAR program may lose its recognition status if all three agencies unanimously agree that the BEAR program is no longer actively providing assistance to employers via the use of assessments, interviews, and surveys, or is otherwise failing to undertake it's responsibilities as a recommending entity. The department will promptly communicate the loss of recognition to the BEAR program in writing, and explain the basis for the decision.

AUTH: 53-2-1220, MCA

IMP: 53-2-1216, MCA

REASON: There is reasonable necessity to adopt NEW RULE II in order to describe the process by which a BEAR program becomes recognized, which is a prerequisite for a BEAR to become a recommending entity.

NEW RULE III GENERAL REQUIREMENTS (1) The department provides grant funding on a first-come, first-served basis, in accordance with the day of receipt of an application for funding by the department. Facsimile transmissions are accepted.

(2) The department shall review the expenditures of the incumbent worker training program throughout the fiscal year. One-fourth of the total annual grant funds shall be available during each quarter-year of the program. When funds allotted for a quarter are depleted before the end of the quarter, the department may suspend the grant program until the beginning of the next quarter and consider pending applications at the start of the next quarter. The department shall carry-over to the next quarter any funds not expended by the end of a quarter.

(3) The department shall accept only those grant applications and approval recommendations for incumbent worker training submitted to the department by a recommending entity. Only those grant applications that have been approved by a recommending entity are eligible for funding.

(4) The department shall verify the completeness of applications and ensure that each recommending entity has meaningfully evaluated each application in accordance with the incumbent worker training program grant award criteria, provided by 53-12-1218, MCA.

(5) The department shall enter into funding agreements for incumbent worker training with the employers upon grant application approval. Funding agreements must contain the following:

(a) the terms of the grant;

(b) a schedule for direct payment to the eligible training provider, when applicable;

(d) the grant reporting requirements of the employer.

(6) Grant funding may be made at a ratio of no more than four grant dollars for each one dollar of eligible matching share paid by the employer.

(7) Matching share paid by the employer may include:

(a) cost of tuition, fees for certified education, or skills-based training;

(b) employee wages for the time of actual training and travel time to and from training;

(c) direct employee benefits for actual training and travel time, excluding mandatory payroll taxes, premiums for workers compensation, and unemployment insurance;

(d) cost of educational materials, training supplies, or lab fees; and

(e) travel and lodging costs required for training, calculated at the current state of Montana rate. A minimum of 50 percent of out-of-state travel costs, if any, must be paid by the employer as matching share.

(8) Incumbent worker training grant funds may pay for:

(a) certified education or skills-based training for permanent employees;

(b) educational materials, training supplies, or lab fees; and

(c) travel and lodging costs required for training, calculated at the current state of Montana reimbursement rate for state employees. Grant funds may pay for no more than 50 percent of out-of-state travel costs.

AUTH: 53-2-1220, MCA

IMP: 53-2-1217, 53-2-1218, MCA

REASON: There is reasonable necessity to adopt NEW RULE III as the proposed rule is necessary to clarify worker training costs that are eligible for IWT grant funding and to explicate the employer-paid costs that qualify for the matching share requirements. Section 53-2-1217, MCA, requires that each grant recipient enter into a funding agreement with the department prior to the release of grant dollars. The proposed rule specifies the contents of a properly executed agreement.

Equitable distribution of available grant funds was not explicitly addressed by the 2009 Montana Legislature. Stakeholders proposed three major options to the department: (1) distribute grant funds on a first-come, first-served basis statewide until the fund is depleted; (2) distribute grant funds on a first-come, first-served basis by quarter year or another time period; and (3) distribute grant funds by geographic region. While the department recognizes that grant funding is limited, the demand for incumbent worker training services is unknown at this time. The department considered the merits of each approach and determined that quarterly spending would likely offer the most equitable distribution scheme. Quarterly distribution of grant funds preserves opportunity for grants over the entire program year and was the preferred alternative of the interested parties. Geographical distribution was rejected as a rational grant dispersal formula because the department is unable to anticipate the level of demand in each region at this time.

NEW RULE IV GRANT APPLICATION PROCEDURES (1) The department shall make available the incumbent worker training grant application form, which a business entity and recommending entity must complete in conjunction for the purpose of applying for a grant award.

(2) A business entity may submit an application to a recommending entity. The recommending entity shall verify that the business entity is an employer that meets the definition of [NEW RULE I] and that the information contained in the application is accurate and complete. The recommending entity shall evaluate the application based upon the incumbent worker training program grant award criteria provided in 53-2-1218, MCA, and makes a recommendation as to:

(a) whether a grant should be awarded; and

(b) the proposed amount of the grant award.

(3) Applications submitted to the department for grant funding must be signed and dated by both the employer and an authorized representative of the recommending entity.

(4) The recommending entity shall submit a cover letter to the department with each completed grant application. The cover letter must address, at a minimum, an analysis of the following:

(a) the goals of the proposed training of incumbent workers;

(b) the anticipated economic benefits from the training; and

AUTH: 53-2-1220, MCA

IMP: 53-2-1217, 53-2-1218, MCA

REASON: There is reasonable necessity to adopt NEW RULE IV as the proposed rule is necessary to delineate the responsibility of the department to make the application form available to the public and the responsibility of the BEAR, SBDC, or MMEC to apply for a grant on behalf of the employer. The department will not conduct an independent analysis of grant applications, but will verify the completeness of applications and verify that the recommending entity has conducted a meaningful evaluation of the application, in accordance with the grant award criteria of 53-12-1218, MCA. The rule clarifies that the employer is responsible for providing all required information for an application to the recommending entity, and that the recommending entity is responsible for verification of the accuracy and completeness of that information prior to submission of a grant application to the department. The funding recommendations of the recommending entity must be described in a cover letter to the department and explicitly address the grant award criteria established by 53-2-1218(3)(a) through (f), MCA.

The department determined that it is reasonable and necessary to require both the employer and the designated representative of the recommending entity to sign and date a grant application prior to submission to the department. This is a universal requirement of other job training programs the department administers and ensures accountability on the part of all parties.

NEW RULE V EVALUATION CRITERIA AND LIMITATIONS (1) The department shall award incumbent worker training grants to employers in accordance with the grant award criteria set forth by 53-2-1218, MCA, and the approval of a recommending entity.

(2) Continuing education that is a regular and customary requirement for maintenance of an employee's professional or occupational licensure does not qualify for incumbent worker training grant funding.

(3) The department shall award grant funding only to employers who have demonstrated that incumbent worker training is an integral part of a plan for worker retention, skill improvement, and wage enhancement.

(4) The department shall award incumbent worker training grant funding on a prospective basis only and may not award grant funding to an employer for training that occurred prior to the date upon which the employer and recommending entity signed the completed grant application.

AUTH: 53-2-1220, MCA

IMP: 53-2-1217, 53-2-1218, MCA

REASON: There is reasonable necessity to adopt NEW RULE V as the proposed rule reiterates that IWT grant awards are intended for those employers who meet the funding criteria of 53-2-1218, MCA. IWT grant funds may only be used for training that "is not normally provided or required by the employer and, as far as may be determined, by the employer's competitors," according to 53-2-1218, MCA. The department determined that educational requirements for continued occupational or professional licensure is training that is normally "required by the employer. . . and the employer's competitors." Therefore, the propose rule prohibits the use of IWT funds for mandatory continuing education for licensed occupations.

The department determined that the Legislature intended the IWT grant awards to be used for prospective training only. The proposed rule clarifies that reimbursement for training that occurred prior to the date that an employer's application was signed and submitted to the department by a recommending entity does not comport with legislative intent and, therefore, is not allowed. The date upon which a grant application is signed and submitted to the department is the key date for determining whether training is prospective, regardless of whether a final funding decision by the department is delayed due to quarterly funds running out or due to a pending appeal.

NEW RULE VI APPEAL PROCEDURE (1) An employer has the right to appeal when a recommending entity:

(a) fails to take action on a grant application for more than 30 days after submission by the employer;

(b) decides not to recommend grant funding for incumbent worker training; or

(2) The employer first must seek informal administrative review of a funding recommendation by submitting a written request for review, a copy of the grant application, and a copy of the notice letter to the appropriate entity, as follows:

(a) funding decisions of a BEAR program must be submitted for review to the Montana Economic Development Association, MEDA-BEAR Working Group, 118 E. Seventh Street, Suite 2A, Anaconda, MT 59711; (406) 563-5259;

(b) funding decisions of a SBDC must be submitted for review to the Department of Commerce, SBDC Lead Center, Business Resources Division, Room 116, P.O. Box 200505, Helena, MT 59620-0505; (406) 841-2769; and

(c) funding decisions of MMEC must be submitted for review to the Montana Manufacturing Extension Center, P.O. Box 174255, Bozeman, MT 59717; (406) 994-3876.

(3) The entity providing administrative review shall evaluate the funding decision and send a written notice of findings and recommendations to the employer and the department within 30 days of receipt of the request for review.

(4) Within 20 days of the mailing of the notice of findings and recommendations by the entity providing administrative review, the department shall consider the findings and recommendations and make a final decision on the grant application and notify the parties in writing.

(5) Within 20 days of the mailing of the notice of the final decision of the department, the employer may submit a written request to the department for a contested case proceeding, pursuant to Title 2, chapter 4, MCA, to challenge a department action to deny a grant application or to provide less grant funding than requested.

(6) The employer bears the burden of demonstrating that the action by the department constitutes an abuse of discretion.

(7) A BEAR program which is aggrieved by a decision to either deny recognition or to remove recognition pursuant to [NEW RULE II] may submit a written request to the department for a contested case proceeding, pursuant to Title 2, chapter 4, MCA, within 20 days of being notified of the decision to deny or remove recognition.

AUTH: 2-4-201, 53-2-1220, MCA

IMP: 2-4-201, 53-2-1218, MCA

REASON: There is reasonable necessity to adopt NEW RULE VI to provide an appeal process to ensure that the due process rights of all employers are protected. The proposed rule obligates the recommending entity to explain the explicit reason(s) for each recommendation for ITW grant funding, grant denial, or funding at a lower amount than requested by the employer. The Montana Legislature did not specify time limits for the recommending entity to consider and process an application for grant funding. The proposed rule sets forth a 30-day requirement for the BEAR, SBDC, or MMEC to take action on an IWT grant application. Within 30 days of the submission of an application by an employer, the recommending entity must either complete its review, evaluation, and submit a grant application and cover letter to the department or, alternatively, notify the employer that an application is incomplete or that the recommending entity will recommend grant denial or grant funding at a lesser amount than requested.

The first step in the appeal process is informal administrative review of the decision of the recommending entity. The cooperating agencies of government that oversee the work of the BEAR programs, SBDC, and MMEC are the Montana Economic Development Association, Department of Commerce, and Montana State University, respectively. Each agency agrees to participate in the IWT program by conducting an informal administrative review of a recommendation that the department deny a grant application or reduce the funding requested by the employer.

Considering the findings and recommendations of the reviewing entities, the department will make a final decision on grant funding, which the employer may appeal using the contested case proceeding.

There is also reasonable necessity to provide for due process for a BEAR program which is aggrieved by an agency decision to deny or withdraw recognition of the BEAR program as a recommending entity.

5. The department lacks data upon which to provide an estimate of the number of persons who are likely to be affected by the ITW grant program, or the number of employers that will apply for or receive a grant. The department estimates that there are approximately 23,000 businesses in Montana that have 50 or fewer employees in the state, which is one of the statutory criteria contained in the definition of "employer". Based on data from a pilot project in the Billings area, the department estimates that the average amount of the grants is approximately $800. The amount of money available for IWT program grants for the current biennium is approximately $1,200,000.

6. Concerned persons may present their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Workforce Services Division, Department of Labor and Industry, Attn: Dave Morey, P.O. Box 1728, Helena, Montana 59624-1728; by facsimile to (406) 444-3037; or by e-mail to [email protected], and must be received no later than 5:00 p.m., March 29, 2010.

7. An electronic copy of this Notice of Public Hearing is available through the department's web site at http://dli.mt.gov/events/calendar.asp, under the Calendar of Events, Administrative Rules Hearings Section. The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems, and that a person's difficulties in sending an e-mail do not excuse late submission of comments.

8. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices, and specifies the particular subject matter or matters regarding which the person wishes to receive notices. Such written request may be mailed or delivered to the Department of Labor and Industry, attention: Mark Cadwallader, 1327 Lockey Avenue, P.O. Box 1728, Helena, Montana 59624-1728, faxed to the department at (406) 444-1394, e-mailed to [email protected], or may be made by completing a request form at any rules hearing held by the agency.

9. The bill sponsor contact requirements of 2-4-302, MCA, do apply and have been fulfilled. Senator Kim Gillan, the primary sponsor of Senate Bill 388, was contacted by the department on November 2, 2009, in writing and by telephone, and notified that work was beginning on the substantive content and wording of the proposed new rules presented in this notice. Senator Gillan offered useful comments during the rule-drafting process. All comments received from Senator Gillan were taken into account in drafting the proposed rules.

10. The department's Hearings Bureau has been designated to preside over and conduct this hearing.

/s/ MARK CADWALLADER /s/ KEITH KELLY

Mark Cadwallader Keith Kelly, Commissioner

Alternate Rule Reviewer DEPARTMENT OF LABOR AND INDUSTRY

Certified to the Secretary of State February 16, 2010