New WIOA Waiver Flexibility Opens a Window for Workforce Reform

In November, the U.S. Department of Labor (DOL) opened a rare window for states to modernize their workforce systems—without waiting for Congress. New guidance from the DOL’s Employment and Training Administration (ETA) significantly expands state flexibility to request waivers under the Workforce Innovation and Opportunity Act (WIOA), creating a meaningful but time-bound opportunity for states to rethink how the system serves workers, jobseekers, and employers.

The guidance builds on information ETA issued in May 2025, which highlighted several priority waiver opportunities, including flexibility to expand use of transitional jobs and incumbent worker training. More broadly, DOL encourages states to use waivers to advance the administration’s Talent Strategy Plan, which emphasizes industry-driven strategies, worker mobility, integrated systems, accountability, and flexibility and innovation.

As ETA Deputy Assistant Secretary Marek Laco reiterated during a recent Jobs for the Future webinar, “What this looks like in each state is going to differ, but we want workforce leaders at state and local levels to go big and really be bold and innovative about how they are going to approach this—with the bottom line of delivering better outcomes through our public workforce system.”

In this blog, we offer a look back at how WIOA waivers have historically driven reform and recommend five strategies states can use now to modernize their workforce systems. Our recommendations are informed by JFF’s decades of experience advancing demand-driven, worker-centered workforce systems.

Why Waivers Matter: A Brief History

WIOA was designed to give states substantial flexibility in shaping their workforce development systems. The U.S. secretary of labor’s waiver authority, defined in the legislation, allows DOL to waive certain requirements under Title I and Title III (Wagner-Peyser). Governors may submit waiver requests at any time, either through modifications to their Unified or Combined State Plans or via standalone waiver plans.

Historically, the waiver process has functioned as what could be called a policy laboratory. Many flexibilities first tested under waivers in the Workforce Investment Act, WIOA’s predecessor, were later codified in WIOA. These updates included increased use of individual training accounts (ITA) for out-of-school youth and the expansion of local workforce boards’ ability to offer training for incumbent workers. But flexibility alone doesn’t guarantee better outcomes. That’s why the current guidance—which emphasizes the importance of achieving measurable improvements and reporting results in WIOA annual reports—is critical to ensuring that waivers generate evidence that can inform future statutory reform.

Five Opportunities for States to Modernize WIOA Through Waivers

JFF has long advocated for a workforce system that is demand-driven, worker-centered, and accountable for results. Not every waiver will make sense in every state, but we see particular promise in areas where expanded flexibility can meaningfully advance system modernization. We offer these five recommendations as starting points for states that are ready to use waiver authority not just to patch over WIOA’s deficiencies, but to lead.

1. Expand Industry-Aligned Training—Before and After Displacement

Employers are navigating a complex web of rapid technological change, supply-chain realignment, and accelerating adoption of artificial intelligence (AI), and those changes potentially threaten the job security of workers whose roles include tasks that could be automated. But our public workforce system too often responds to these challenges only after workers are displaced.

WIOA already allows states to use funds for training people who are currently employed, and the guidance encourages its continued and expanded use of this option to help employers and workers adapt to new technologies like AI. For employers, taking advantage of waivers allowing incumbent worker training under WIOA is a proactive competitiveness strategy, enabling them to retain talent by offering workers opportunities to build the latest in-demand skills before they’re at risk of displacement.

The guidance also supports expanded flexibility in the way training is delivered by allowing the use of training contracts instead of the traditional individual training account voucher model for services directly aligned with the needs of local employers. ITAs enable individual workers to choose the training they want to pursue, while contracts allow workforce boards to partner with providers to deliver cohort-based or employer-driven training at scale—often more efficiently and with clearer accountability for outcomes than is possible with ITAs.

Together, these flexibilities give states a stronger set of tools to scale proven sector-based and employer-led training models. These waivers also offer a practical path to modernization for states whose goals include expansion of apprenticeship programs, rapid reskilling of the workforce, or implementation of AI-enabled industry strategies.

2. Increase Work-Based Learning Opportunities

Work-based learning—including Registered Apprenticeship, pre-apprenticeship, on-the-job training (OJT), and transitional jobs—remains one of the most effective pathways to stable, high-wage employment. Recent DOL guidance encourages states to more fully embed these models within WIOA, particularly for young people and individuals facing barriers that limit their access to employment.

Expanding youth access: One high-impact way to increase training opportunities for young people is to take advantage of the waiver allowing in-school youth to access ITAs—an option historically limited to young people who aren’t in school. This waiver allows regional workforce boards to offer high school students opportunities to participate in occupational training, including pre-apprenticeship and Registered Apprenticeship programs. If implemented well, this approach can strengthen young people’s transitions into the workforce by enabling them to engage in meaningful career exploration at an earlier age than many currently do. It can also better align WIOA youth investments with employer needs. The guidance also encourages coordination with career and technical education programs funded under Perkins V, ensuring that WIOA resources complement, rather than duplicate, existing career pathways ecosystems.

Scaling OJT and transitional jobs: Additionally, the guidance endorses increased use of on-the-job training and transitional jobs by allowing states to use up to 50% of WIOA Rapid Response funds in the first year of availability to broaden statewide employment and training activities. This builds on earlier ETA guidance urging states to seek waivers to expand transitional jobs and increase the amount by which they could reimburse employers for the wages of employees in OJT programs—approaches that both align with the administration’s focus on boosting labor-force participation and worker productivity.

States can take advantage of these options to embrace paid, employer-connected work experiences as core strategies. This approach enables people to earn money while building in-demand skills and gaining experience that’s relevant to the labor market—opportunities that are particularly valuable for individuals who may struggle to access or persist in traditional training programs.

3. Support Retention and Address the ‘Benefits Cliff’

Many people successfully complete training but struggle with job retention due to factors outside their control, including lack of access to transportation, child care costs, or the abrupt loss of public benefits as their earnings rise to certain levels (the “benefits cliff” effect). To drive long-term success, DOL proposed a new waiver that would allow participants in WIOA Adult and Dislocated Worker programs to receive supportive services for up to 12 months after they complete a training program. This is a meaningful shift toward a retention-focused workforce system.

Extended supportive services can improve employment stability and earnings, reduce the impact of benefits cuts that act as a disincentive to advancement to higher-paying jobs, and align workforce investments with the real-world challenges of labor-market transitions.

Without continued support, even people who experience successful training outcomes can face challenges in the first few months of employment. JFF encourages states to view the options available via this waiver not as temporary add-ons, but as core elements of a strategy for improving outcomes. To assess the success of such initiatives, states should collect data on job tenure, wage growth, and reentry into public assistance programs.

4. Improve Outcomes With Pay-for-Performance Models

True WIOA modernization requires states to pair innovation and flexibility with stronger accountability mechanisms. The expanded waiver guidance allows state and regional authorities to reserve up to 50% of Title I WIOA formula funds for pay-for-performance contract strategies. This waiver creates a significant opportunity to shift the system’s focus from inputs and compliance to outcomes that matter—such as job placement, retention, earnings, and advancement.

Done well, pay-for-performance strategies can help states test different models to determine which ones work best and generate valuable evidence to guide future reforms.

However, previous pay-for-performance efforts have produced mixed results, often due to insufficient data collection and analysis capacity, overly complex contracts, or misaligned incentives.

The expanded flexibility made possible by pay-for-performance waivers offers states a chance to do things differently, by starting with focused pilots, selecting outcome measures that reflect real labor-market success, and investing in robust data systems capable of generating evidence about best practices and return on investment for public workforce dollars.

5. Modernize Service Delivery Models to Better Meet People’s Needs

While the new guidance takes important steps forward, one gap remains: service delivery. Too much of the current system is still built around physical infrastructure and one-size-fits-all delivery models, which limit access to and awareness and personalization of services.

States need greater flexibility—and clearer pathways—to design service delivery models that meet the wide range of needs people may be experiencing. State WorkFlex plans offer an important tool to support this evolution; with ETA authorization, states can review and approve local waiver requests directly, enabling the implementation of more responsive, locally driven strategies without repeated federal approvals. WorkFlex plans are expected to remain in effect for the duration of a state’s approved WIOA plan, providing sustained flexibility rather than one-off exemptions.

JFF encourages states to take advantage of WorkFlex plans to shift from static, location-based service models toward more adaptable systems that reflect how workers and employers actually engage today. Local waivers can reduce duplicative infrastructure costs via colocation and community hub models, expand access through virtual and hybrid delivery, and better integrate workforce services with education, human services, and economic development systems.

Modernizing service delivery is no longer optional. It’s essential to the success of any effort to improve engagement, efficacy, and outcomes in the workforce system.

JFF has long advocated for a fully funded and transformed workforce development system—one that is proactive, agile, and accountable for results. Waivers alone can’t deliver that transformation, but they can help identify where statutory change is most urgently needed.

This moment calls for states to act with both urgency and discipline. If states seize this opportunity, WIOA waivers can do more than provide short-term flexibility; they can build the evidence base for the next generation of workforce policy.