Unemployment insurance (UI) was created as a safety net, a temporary support for workers who lose their jobs through no fault of their own and are actively seeking new employment. In recent years, some policymakers have explored ways to expand the program’s use beyond that original purpose, including proposals to allow striking workers to collect unemployment benefits.
That effort now runs squarely into federal law.
On Jan. 8, the U.S. Department of Labor (DOL) issued guidance to state unemployment administrators clarifying that federal eligibility requirements are mandatory. States must follow them to remain eligible for federal funding and to preserve the federal tax credits employers receive under the Federal Unemployment Tax Act (FUTA). Failure to comply could jeopardize both.
At the center of the guidance is a foundational rule: individuals receiving unemployment benefits must be able to work, available to work, and actively seeking work. States do not have discretion to waive these requirements, including for workers engaged in a labor dispute.
The guidance further instructs states to assess whether a claimant has “withdrawn from the labor market,” including situations where a worker is picketing rather than conducting a genuine job search. Participation in a strike, by itself, does not satisfy the requirement to actively seek employment. Remaining in contact with a union or waiting for a strike to resolve does not qualify as a job search.
Most notably, the Department states plainly that a state would violate federal law by exempting striking workers from job-search requirements.
That clarification directly addresses proposals considered in Connecticut in recent years. In 2025, lawmakers passed legislation allowing striking workers to collect unemployment benefits. Governor Ned Lamont vetoed the measure, describing it as “a bridge too far” and noting that the unemployment trust fund exists to support people who are out of work involuntarily. The Department of Labor’s guidance confirms that the concern was not only fiscal — it was legal.
The distinction matters. A strike is a voluntary action taken as part of a labor negotiation. Unemployment insurance exists for the opposite situation: when work disappears unexpectedly and workers must search for a new job. Treating the two as equivalent would fundamentally change the nature of the program and require employers to subsidize labor disputes in which they are directly involved.
The DOL guidance does not state that striking workers can never qualify for unemployment benefits. Rather, it emphasizes that they cannot receive special treatment. They must meet the same standards as any other claimant, including actively seeking and being willing to accept suitable employment. If participation in a strike replaces a genuine job search, eligibility ends.
This clarification undermines the central premise of strike-related unemployment proposals. A strike depends on workers withholding their labor and remaining available to return once negotiations conclude. Requiring claimants to apply for and accept other employment changes the dynamic entirely. At that point, the situation resembles ordinary unemployment — the scenario the system was originally designed to address.
The issue is not new. Over several legislative cycles, proposals have surfaced under different labels, including unemployment benefits for strikers. When that ran into trouble, it became a separate taxpayer-funded account to “support” workers during strikes. While the framing has shifted, the underlying concept remains the same: using public systems to offset the financial pressure of a strike.
The federal guidance also highlights the broader risk of noncompliance.
Federal unemployment law is tied directly to federal funding and to employer tax credits. FUTA establishes a federal unemployment tax of 6 percent on the first $7,000 of wages per employee.
Additionally, Congress built in a huge incentive for states to run their unemployment systems properly.
Employers receive a credit of up to 5.4 percentage points if their state complies with federal unemployment law, reducing the effective rate to 0.6 percent. That credit is why most companies never actually pay the full 6 percent.
In real dollars, that means the difference between paying $420 per worker and paying $42 per worker. Multiply that across thousands of employees and thousands of businesses, and the stakes become obvious.
If a state falls out of compliance, the credit can be reduced or eliminated, resulting in an automatic federal tax increase on employers statewide.
And that’s only half the damage. The federal government funds much of the administrative infrastructure that operates state unemployment systems, including staff salaries, claims processing, computer systems, and fraud detection. Fall out of compliance, and that funding is on the chopping block too.
Taken together, the consequences extend beyond any single policy debate. Departing from federal requirements could raise employer taxes and undermine the systems that ensure unemployment benefits are paid accurately and efficiently.
Unemployment insurance plays a vital role in helping workers transition back into the labor market. Preserving that role requires adherence to the program’s core principles. Expanding it to cover voluntary work stoppages would blur essential distinctions, introduce legal risk, and shift costs in ways the system was never designed to accommodate.
The Department of Labor’s guidance makes one thing clear: unemployment insurance is a safety net for job loss, not a tool for financing labor disputes.
