Skip to content

Fear and Furloughing in the US: Federal Contractors and the Shutdown

As the government shutdown extends into its fourth week, some federal contractors who have contracts with shut down or severely crippled government agencies have likely started seeing – or will begin seeing soon – the ripple effects of the shutdown. With agencies operating with skeleton crews or not operating at all, those effects will likely take the form of payment disruptions.

We would like to remind our federal contractor readers that the shutdown does not alter or affect your requirement to comply with all applicable labor and employment laws, such as wage and hour laws and OFCCP and OSHA regulations. Although the EEOC is mostly shut down (it is still accepting new charges and filings, but otherwise closed) and E-Verify is unavailable, the DOL, OFCCP, OSHA, USCIS, and the NLRB all remain open and operating at normal capacity.

Given that the government shutdown is likely to affect your ability to pay your employees, and may result in furloughs or layoffs, there are some things to consider before laying employees off. First, if you are working under a formal stop work order, you will have a contractual obligation to resume performance when the order expires or is lifted. Remember to take this into account before laying anyone off (also, if employees are truly idled and there is no other work to assign them during a stop work order, the cost of maintaining those employees may be recoverable).

Additionally, if a layoff is necessary due to the continued government shutdown, you must still comply with the WARN Act and its state analogues. As a reminder, WARN requires certain employers to provide employees 60 days’ notice in some circumstances that involve layoffs of 50 or more full-time employees at a single site, or in certain circumstances when 50 or more full-time employees have their hours cut by more than 50 percent. Given the uncertainty surrounding the length of this shutdown – it is already the longest in our nation’s history – you may be faced with difficult decisions regarding your workforce. And if you think the shutdown might force you to implement a reduction in force, it’s important to consider potential WARN implications as early in the process as possible.

Subscribe to Managing the Modern Workplace to receive weekly email updates.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.