A Federal study commission, which reported on the nationwide State plans for unemployment insurance, recommended that railroad workers be covered by a separate plan because of the complications their coverage had caused the State plans. Congress subsequently enacted the Railroad Unemployment Insurance Act in June 1938. The Act established a system of benefits for unemployed railroad workers, plus a free placement service, to be financed by a payroll tax of 3 percent payable entirely by employers, and administered by the RRB. After some minor changes in the following year, the law went into operation on July 1, 1939. Sickness benefits were added in 1946.
Benefits were payable to qualified railroad employees according to a scale of daily rates geared to base-year earnings. Initially, the daily rates ranged from $1.75 to $3 and were payable for a maximum of 80 days in each benefit year, after an initial waiting period. In 1940, the maximum daily rate was raised to $4 and the maximum duration to 100 days in 20 weeks; the waiting period was reduced from 15 days to 7 days and a uniform benefit year was established.