General Practice, Solo & Small Firm DivisionMagazine

by Sherwood K. Zink and Howard Bernstein

© American Bar Association. All rights reserved.

Sherwood K. Zink and Howard Bernstein are lawyers with the Wisconsin Department of Workforce Development.

New federal welfare law has signaled a not-so-quiet revolution in our nation's welfare programs. The Personal Responsibility and Work Opportunity Reconciliation Act of 19961 (PRWORA) gives states the leeway to reform their own programs to move people from welfare to work.

Loaded with block grants, PRWORA is a massive act covering funding and mandates for: aliens and immigrants, child care, child support, child welfare, education, food stamps, housing, jobs, Medicaid, nursing, homes, nutrition, Supplemental Security Income, and Temporary Assistant to Needy Families (TANF).

A key part of PRWORA is the change of federal Aid to Families with Dependent Children (AFDC) funding from matching funding to the TANF block grant. States now receive a fixed amount based on what they spent on public assistance programs in 1994, instead of a percentage of what they spend on welfare. TANF replaces the AFDC. Highlights of TANF are:

Nationwide 60-month time limit on benefits. A state may not use TANF funds to provide any benefits to any family with an adult member who has received a total of 60 months (five years) of public assistance.

Work requirement. Adults in families receiving assistance must work after two years on assistance. They are required to participate in work activities for 24 months (subject to good-cause exemptions), and if they are not working, they must be participating in community service within two months of receiving benefits (unless a state opts out of this requirement). States must also meet annual work participation rates. Permitted work activities are subsidized and unsubsidized employment, work experience, on-the-job training, job-search and job-readiness assistance, community service programs, vocational education, job-skills training, education related to employment, and secondary school or general equivalency diploma (GED).

Teen parent limitations. Unmarried minor parents must reside in their parents' household, with a legal guardian, or in another supervised living arrangement. If they have minor children at least 12 weeks of age, the minor parent must be in educational activities directed toward a high school diploma or the equivalent; or be in state-approved alternative education or training.

Child support program participation. A parent receiving benefits must cooperate in establishing paternity or in establishing, modifying, or enforcing a support order, except for good cause. As a condition of receiving assistance, the family must assign any child support rights to the state. States are also required to establish paternity and establish and enforce child support orders for recipients of Medicaid, Institutional or Substitute Care, and for all others upon request. Other provisions are:

  • Child support disregard. States are required to disregard and pay to the family the first $50 in assigned child support payments collected each month.
  • Paternity establishment. Expands the in-hospital voluntary paternity establishment program.
  • Central registries. States must have central registries of child support orders and centralized collection and disbursement of support.
  • Expedited child support enforcement. States must have expedited procedures.
  • Federal case registry and national directory of new hires. Establishes a federal computer tracking system to track delinquent parents across state lines for the direct withholding of child support from wages. (Employers must now report all new hires to state agencies.)
  • Interstate cases. Provides for uniform rules, procedures, and forms for interstate cases.
  • New mandatory state child support enforcement laws. Requires states to revoke drivers and professional licenses, expand wage garnishment, and seize assets.

Limitations on drug felons. States must permanently deny cash assistance and food stamp benefits to convicted drug felons. Other members of the family can receive these benefits.

Aliens' benefits restrictions. Eligibility of aliens and naturalized immigrants for federal benefits are dramatically reduced.

Medical assistance. State Medicaid programs must cover: members of families receiving TANF, other low-income families, children and pregnant women, low-income Medicare beneficiaries, and recipients of Supplemental Security Income. Federal law also permits states to cover the "medically needy" as well as persons who are in nursing homes or other institutions. In addition to TANF, Medicaid eligibility is based on AFDC income and resource eligibility requirements in place on July 16, 1996, although states may terminate adults from Medicaid eligibility who are terminated from TANF for failure to work.

Supplemental Security Income. The Social Security Administration must exclude maladaptive behavior as a mental disability in children.

Aid to Families with Dependent Children

AFDC, previously known as Aid to Depen-dent Children (ADC), evolved out of the New Deal public relief program for widows and orphans. In Wisconsin, as in every other state, it became an "entitlement" (which meant that applicants who met the specified eligibility criteria were guaranteed program benefits) of money or vendor payments to families with minor children "...deprived of parental support or care by reason of...death, continued ab-sence..., unemployment or incapacity...; if the family was financially deprived due to lack of income or resources."2 The family also received various related benefits such as food stamps and medical assistance.

AFDC was a cash benefit based on family size minus other income the family received, paid to families with children deprived of the support of at least one parent due to death, divorce, separation, or continued absence. Two-parent households could be eligible if one of the parents was physically or mentally unable to provide care or support to the children; or if a parent who was the designated primary wage earner for the family was unemployed or working less than 100 hours a month. AFDC also required:

  • U.S. citizenship or legal alien status.
  • Cooperation with child support (all child support is assigned).
  • Social Security numbers for all family members.
  • State residency.

In Wisconsin, family income could not exceed 185 percent of the Federal Poverty Level (FPL) based on family size, and available assets could not exceed $1,000, excluding $1,500 vehicle equity and homestead property.3

Once a family was determined to be eligible for AFDC, its benefits could not be reduced or terminated until it had the right to a "fair hearing." A "fair hearing" is an administrative proceeding and final determination by an administrative law judge.

From AFDC to Wisconsin Works

Wisconsin Works (W-2) is the Wisconsin welfare reform program that has replaced AFDC. Effective September 1997, W-2 became the nation's first fully implemented reform. W-2 is based on a participant's contractual agreement to work.4

Eligibility. There is no entitlement to assistance. The program is available to all parents with minor children, low assets, and low income. Each W-2 eligible participant meets with a Financial and Employment Planner (FEP), who helps the person develop a self-sufficiency plan and determine his place on the W-2 employment ladder. Individuals participating in W-2 are guided first to the best available immediate job opportunity.

Options. The ladder consists of four levels of employment options, in order of preference:

  1. Unsubsidized employment. The W-2 agency supports the participants' efforts to secure employment.
  2. Trial jobs (subsidized employment). For those individuals who are unable to locate unsubsidized work, the FEP explores options for subsidized employment. Trial job contracts for three to six months are a way to help the employer cover the cost of training. Trial jobs are expected to result in permanent positions. Participants receive at least minimum wage for every hour of work.
  3. Community service jobs (CSJs). For those participants needing to practice the work habits and skills necessary to be hired by a regular employer, CSJs are developed in the participant's community. CSJ participants receive a monthly grant for up to 30 hours per week in work activities and up to ten hours a week in education or training.
  4. Transition. Transition is reserved for those who are unable to perform independent, self-sustaining work. W-2 transition participants receive a monthly grant for up to 28 hours per week participating in work or other developmental activities up to their ability and up to 12 hours per week in education or training.

W-2 participants are limited to 24 months in a single work option category, other than unsubsidized employment. The maximum lifetime participation limit is 60 months in work option components. Extensions may be available on a limited basis when local labor market conditions preclude opportunities.

Other services. Families may also receive medical assistance coverage (some may need to pay a "premium") and may also qualify for food stamps, low-income heating assistance, and child care assistance. Other supportive services include: job access loans, employment skills advancement program, Children's Services Network, and Community Steering Committee.

  • Job access loans help applicants meet expenses related to obtaining or maintaining employment. These are short-term loans that must be repaid in cash, or through a combination of cash and volunteer services.
  • Employment skills advancement grants are grants of up to $500 for education and training expenses. The grant represents money matched by the applicant after meeting other eligibility criteria.
  • Children's Services Network brings together all of the community resources (administered outside of the W-2 agency) that are available to help low-income families.
  • The Community Steering Committee assists the W-2 agency in creating employment and training opportunities for W-2 participants, and seeks out innovative ways to address child care and transportation barriers on behalf of W-2 participants.
  • Child care is available to all low-income families (at or below 165 percent of FPL) who need child care in order to work or participate in Learnfare or a W-2 employment position. Parents at all income levels are expected to share the cost of child care expenses through a co-payment to the child care provider. An added category of child care service is provisional child care, which allows an applicant to use a family member or neighbor to provide child care at a lower cost, but still be eligible for help in paying that provider. The provider still must meet basic minimal regulatory requirements.

Administration. The state contracts for the administration of W-2 in the community with either a county, tribe, or private contractor. The participant is able to access all of the W-2 and supportive services she needs at one location. If a family is eligible for W-2, the family members work with one FEP who will assist them in all aspects of achieving self-sufficiency. The FEP determines eligibility for W-2 and related supportive services, defines work options, and provides intensive case management services for the family.

Dispute resolution. A new fact-finding process replaces the AFDC "Fair Hearing." Applicants or participants who wish to dispute an agency decision request the W-2 agency to review the action. W-2 provides for:

1. Petition for fact-finding review (first level). Individuals who believe that an agency decision regarding W-2 services is incorrect (e.g., employment positions, child care, emergency assistance) may request a fact-finding review by the W-2 agency. W-2 payments will not be continued pending the fact-finding decision.

Individuals who disagree with the agency's decision regarding medical assistance or food stamp benefits must file a separate request for a fair hearing. Participants must follow the fair hearing timeframe. If the medical assistance or food stamp issue is resolved during the fact-finding review, the agency will assist the individual in filing a voluntary withdrawal of the fair hearing request.

2. Departmental review (second level). The Department of Workforce Development (DWD) may review the decision if the participant petitions within 15 days of the W-2 agency decision, or the W-2 agency requests it. This review is a limited review of the record and the decision of the fact finder.

W-2 benefits will not continue while the review is pending. If DWD reverses a W-2 agency decision, benefits can be restored to the date of the initial decision.

Many of the current issues emerging in the legal debate over the new welfare reform laws are simply new aspects of issues that have been around for a long time, such as the application of the Due Process Clause, the distinction between a wage and a welfare grant, and the validity of residency requirements.

The "no entitlement" concept. The concept that everyone is "entitled" to welfare has been a frequent target of welfare reform legislation. It has been criticized as fostering the attitude that work is not necessary. In reaction to this, both PRWORA and Wisconsin state law now specifically provide to the contrary.

The Social Security Act § 401(b),5 as created by PRWORA, states: "This part shall not be interpreted to entitle any individual or family to assistance under any State program funded under this part."

The Wisconsin Statutes § 49.141(4) provides: "Notwithstanding fulfillment of the eligibility requirements for any components of Wisconsin works, an individual is not entitled to services or benefits under Wisconsin works."

What is the actual effect of these provisions? It seems to be quite clear that they cannot affect a person's constitutional rights to due process and equal protection. If your client is denied a status or benefit that has been allowed for others who are similarly situated on an apparently arbitrary basis, the government cannot simply state that your client is not entitled to anything under the law. The law still does provide an entitlement to nonarbitrary and nondiscriminatory governmental decisions.

However, the "no entitlement" language is not meaningless. Suppose a participant in a "workfare" program like Wisconsin's W-2 is assigned to a lower-level training program that pays less than a community service job, and the participant appeals the assignment and wins an administrative ruling that she should have been assigned to the better-paying position. Under an "entitlement" program, there might now be an argument that the participant is entitled to back pay for the time that she wasn't in the community service job but could have been. Under W-2 and other "no entitlement" programs, it is clear that the participant's assignment will be changed but she will not be paid for hours that she has not worked.

Residency requirements. Residency requirements have been an active issue in the welfare reform debate because of legislative concerns that a state may become a "welfare magnet," attracting new low-income residents because of the relative size of the benefits provided. PRWORA authorizes states to treat new residents for one year under the welfare rules, including benefit amounts, of the states from which they have moved.6

Wisconsin imposes a residency requirement for its W-2 program: "An individual is eligible for a Wisconsin works employment position and a job access loan in a month only if all of the following nonfinancial eligibility requirements are met:...(d) The individual has resided in this state for at least 60 consecutive days prior to applying under § 49.141(3) and, unless the person is a migrant worker, has demonstrated an intent to continue to reside in this state."7

Other states that have enacted residency requirements relating to welfare benefits include California, Pennsylvania, Rhode Island, Minnesota, New York, and Massachusetts. Many of these laws have been challenged and are now subject to preliminary injunctions against enforcement on the basis of Shapiro v. Thompson8 and related decisions. Shapiro held that state statutes that imposed a one-year residency requirement for AFDC eligibility were unconstitutional because they were not supported by a compelling state interest, and that such requirements placed a penalty on the exercise of the fundamental right to interstate travel.

The Court also stated that waiting periods or residency requirements are not per se unconstitutional, which has led to a series of cases on different types of waiting periods:

  • Memorial Hospital v. Maricopa County9 held unconstitutional an Arizona statute requiring that indigent persons must have resided within a county for one year to be eligible for free non-emergency medical care.
  • Sosna v. Iowa10 upheld an Iowa statute that required a married person to be a state resident for one year before petitioning for divorce.
  • Vlandis v. Kline11 upheld a durational residency requirement in relation to tuition.
  • Indigency itself is not a "suspect" classification in due process terms. A particular standard of living established through welfare benefits provided by the state is not a fundamental right. Dandridge v. Williams12 applied the "rationally related" test to uphold a state regulation that placed a ceiling on the amount of AFDC benefits payable to a family.


PRWORA § 104 (42 U.S.C. § 604(a)) enters into the ongoing debate about the respective roles of church and state by providing that a state may administer and provide program services through contracts with charitable, religious, or private organizations. The intent of the "charitable choice" provision is to allow states to contract with religious organizations on the same basis as any other nongovernmental provider without impairing the religious character of such organizations and without diminishing the religious freedom of the beneficiaries of the assistance.

In view of the complex and changing court decisions on the government's constitutional ability to administer public programs with the involvement of religious organizations, First Amendment issues may be anticipated as the states proceed under this provision.

In contrast to the preliminary injunctions against residency requirements under other state welfare laws, courts in Wisconsin have been reluctant to invoke Shapiro against residency requirements. In Jones v. Milwaukee County,13 a Wisconsin statute14 that required 60 days' residence to be eligible for general relief was found by the Wisconsin Supreme Court not to penalize an individual's right to travel and was not a violation of equal protection because it was rationally related to the state's reasonable objective of encouraging individuals to support themselves through employment.

In addition, the U.S. District Court for the Eastern District of Wisconsin denied a temporary restraining order against a "two-tier demonstration project."15 Under this demonstration project, effective July 1, 1994, applicants for AFDC during their first six months of residence in four Milwaukee-area counties received the benefit amount that they would have received in their former state of residence.16

Application of employment laws to welfare reform programs. The distinction between training programs and regular employment has important consequences. State and federal laws require that employees be paid for work performed and establish the minimum wage and the requirements for overtime pay.17 The issue as to who is an "employer," who is an "employee," or what constitutes "employment" has been a frequent subject of litigation in the context of these laws and also in the context of other employment-related laws, such as unemployment insurance, workers' compensation, occupational safety and health, family and medical leave, and fair employment.

Under previous federal employment and training laws, such as the Comprehensive Employment and Training Act (CETA) and Job Training Partnership Act18 (JTPA), the courts and agencies have recognized a distinction between employment and training intended to prepare a participant for actual employment:

  • Work payments made by a state welfare agency to participants in work training programs under Title V of the Economic Opportunity Act of 1964 and received in lieu of and in amounts not greater than welfare payments do not constitute wages subject to withholding.19
  • Stipends paid by a city to aid persons on probation in acquiring job skills for gainful employment do not constitute wages subject to withholding; payments are in the category of other relief payments made for the promotion of the general welfare.20
  • Payments to trainees in programs under CETA for services performed during on-the-job training are wages subject to withholding.21

In response to the new state and federal welfare reform laws, the Department of Labor (DOL) issued a document that it identified as a "guide" in May 1997: How Workplace Laws Apply to Welfare Recipients (the entire document is available at the DOL's web site: This document states the DOL's position that all federal employment laws, such as the Fair Labor Standards Act, the Occupational Safety and Health Act, unemployment insurance, and antidiscrimination laws, apply to welfare recipients as they do to other workers. However, an individual in training that meets the following criteria is considered a trainee and not an employee:

  • The training is similar to that given in a vocational school.
  • The training is for the benefit of the trainees.
  • Trainees do not displace regular employees.
  • Employers derive no immediate advantage from the trainees' activities.
  • Trainees are not entitled to a job after the training is completed.
  • Employers and trainees understand that the trainee is not paid.

The primary wage and hour issue under W-2 may be whether wage withholding is required for participants in community service jobs and transitional placements. Both levels are primarily intended to impart work readiness training rather than employ individuals to provide services, yet a basic goal of W-2 is to structure all activities to resemble "the real world of work" as much as possible. CL      

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