The Department of Labor has issued a final rule delaying by one year the compliance date for states to adopt merit staffing models in delivering services under the Wagner-Peyser Act Employment Service program. Effective January 21, 2026, this rule shifts the deadline from January 22, 2026, to January 21, 2027, providing states additional time amid ongoing regulatory reviews. The move stems from President Trump's Executive Order 14192, which emphasizes reducing regulatory burdens, and supports a proposed rule that could remove the merit staffing mandate entirely. This development affects how states administer labor exchange services, potentially easing administrative pressures while the department finalizes its policy direction. As a condition of federal grant funding, the staffing requirement has evolved over decades, reflecting shifts in federal oversight of workforce programs.
Background on Wagner-Peyser Act and Staffing Requirements
The Wagner-Peyser Act, enacted in 1933, created the Employment Service program to facilitate labor exchanges by matching job seekers with employers. Administered through state workforce agencies, the program operates nationwide and receives federal funding under grant agreements that require compliance with departmental regulations. Historically, the Department of Labor relied on authority in sections 3(a) and 5(b) of the act to mandate that states use merit staff—government employees hired and managed under principles outlined in 5 CFR part 900, subpart F—for delivering these services. This approach aimed to ensure consistency and accountability in public employment offices.
In the early 1990s, the department granted flexibility to Colorado and Massachusetts to deviate from merit staffing. Michigan received similar approval in 1998 following litigation in Michigan v. Herman, where a federal court settlement allowed alternative models. The 2014 Workforce Innovation and Opportunity Act amended the Wagner-Peyser Act but did not explicitly require merit staffing. Subsequent regulations in 2016, effective October 18, 2016, maintained the merit staffing provision at 20 CFR 652.215, exempting only those three states.
A significant shift occurred with the 2020 Final Rule, effective February 5, 2020, which eliminated the merit staffing requirement to align with Workforce Innovation and Opportunity Act goals and provide states greater flexibility in staffing. Several states adopted varied models, as reflected in their approved state plans. However, the 2023 Final Rule, effective January 23, 2024, reinstated the mandate, requiring most states to use merit staff for labor exchange services under 20 CFR 652.215, with compliance due by January 22, 2026. This rule also updated monitor advocate system regulations in parts 653 and 658 but preserved the core staffing directive.
Key Players and Policy Context
The Employment and Training Administration within the Department of Labor oversees the Employment Service program, with Kimberly Vitelli, administrator of the Office of Workforce Investment, listed as the contact for further information. State grantees, including workforce agencies in all 50 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands, are directly impacted as recipients of federal funds under 29 U.S.C. 49e.
President Trump's Executive Order 14192, issued January 31, 2025, plays a central role, establishing a policy to alleviate regulatory burdens. This order prompted the department's July 1, 2025, proposed rule to eliminate the merit staffing requirement, with public comments closing September 2, 2025. The delay aligns with this ongoing rulemaking, allowing states to maintain current staffing without immediate reconfiguration. Perspectives vary: proponents of flexibility argue it enables efficient service delivery tailored to local needs, while advocates for merit staffing emphasize uniformity and protection against politicization, as historically supported by departmental interpretations.
Reasons for the Delay and Supporting Rationale
The final rule amends 20 CFR 652.215(d) to extend the compliance period, citing the need to reduce burdens on states during the pending rulemaking. The department notes that states have operated without a uniform staffing mandate since the 2020 rule, and the two-year grace period post-2023 has not yet required changes. By delaying enforcement, the rule avoids potential confusion if the proposed elimination proceeds.
In the supplementary information, the department addresses reliance interests, stating that the extension imposes no new requirements and outweighs any burdens from short-term implementation. It classifies the action as deregulatory under Executive Order 14192, relieving states of immediate compliance costs. For instance, states using non-merit models since 2020 can continue without disruption, potentially saving on hiring, training, and administrative adjustments.
Procedural and Regulatory Considerations
Issued without prior notice or public comment, the rule invokes the Administrative Procedure Act exemption under 5 U.S.C. 553(a)(2) for matters relating to grants. The department argues that the staffing requirement is a condition of federal grant funding, affecting how states expend funds and deliver services. This aligns with precedents like the Department of Housing and Urban Development's 2020 use of the exemption for grantee obligations.
The regulatory impact analysis estimates minor costs, such as $836 for states' human resources managers to review the rule, based on a loaded hourly wage of $92.90 and 10 minutes per jurisdiction. Cost savings from the delay are anticipated but not quantified, as they depend on individual state circumstances. The rule does not trigger requirements under the Regulatory Flexibility Act, Unfunded Mandates Reform Act, Executive Order 13132 on federalism, or the Paperwork Reduction Act, given its procedural nature and lack of new mandates.
Implications and Perspectives
Short-term implications include continued flexibility for states, potentially stabilizing workforce service delivery amid economic uncertainties. Long-term, the delay could foreshadow permanent removal of the merit staffing rule, influencing how states integrate Employment Service with other programs under the Workforce Innovation and Opportunity Act.
Different viewpoints emerge without endorsement: some stakeholders, including state administrators, welcome the relief to focus on service efficiency. Others, such as labor advocates, may view it as undermining program integrity, echoing concerns from the 2023 rule's reinstatement. Legal precedents like Michigan v. Herman highlight the tension between federal oversight and state autonomy, a dynamic that persists in ongoing debates.
In summary, this delay provides breathing room for states while the department navigates deregulation. Potential next steps include finalizing the proposed rule, which could eliminate the merit staffing mandate and reshape Employment Service operations. Challenges may arise if conflicting priorities emerge, such as ensuring equitable service access or addressing workforce shortages. Ongoing debates will likely center on balancing federal standards with state flexibility in an evolving labor market.
