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Employment Considerations During the Government Shutdown

As the government shutdown continues, employers, particularly federal contractors and grant recipients, may face difficult workforce decisions. If you are considering reduced work hours, furloughs or layoffs, here are key issues to keep in mind:

Wage and Hour Issues

• Exempt employees (FLSA and state law): Exempt employees must be paid their full salary for any week in which they perform work, regardless of hours. If no work is performed during an entire week, salary is not required.

• Rolling furloughs: For exempt employees, furloughs should be scheduled in full-week increments to comply with wage rules.

• Use of PTO: Unless state law provides otherwise, employers may require employees to use PTO or other banked time for partial- or full-day absences during a shutdown, so long as they receive their full weekly salary.

• Salary reductions: Employers may reduce exempt salaries due to economic conditions if sufficient notice is given, weekly pay remains at least $684, no employment contract or union agreement prohibits it, and state law permits it.

• Non-exempt employees (generally hourly): Must be paid only for hours worked. Employers may reduce wage rate and/or hours unless restricted by state law, contract, or collective bargaining agreement.

Union Obligations

Employers should review collective bargaining agreements, as they may contain provisions on furloughs, layoffs, or related actions. In many cases, employers must bargain with the union over these decisions or their effects.

WARN Act Requirements

Layoffs or furloughs may trigger notice obligations under the federal WARN Act. Covered employers generally must provide 60 days’ notice of a “plant closing” or “mass layoff” that results in an “employment loss,” defined as:

1. Termination

2. A layoff exceeding six months

3. A reduction in work hours of more than 50% in each month of six months

Limited exceptions exist, such as “unforeseen business circumstances,” but notice must still be given as soon as practicable.

Many states also have “mini-WARN” statutes with their own requirements, so it is important to review applicable state law.

Other Considerations

• E-Verify: The system is expected to be unavailable during the shutdown. Employers must continue to complete Form I-9s, but will not be able to verify new hires until E-Verify resumes.

• Agency delays: Federal agencies such as the Department of Labor and EEOC will face delays or suspensions in operations.

• Nondiscrimination: Ensure that terminations, furloughs and layoffs are not implemented in a discriminatory manner or disproportionately affect protected classes.

• Contract and grant funding: Contractors and grant recipients should review their funding documents and consult their contracting or awarding official with questions about contract or grant status.

The government shutdown creates additional challenges for employers, particularly federal contractors and grant recipients. The Shulman Rogers Labor and Employment team is here to help navigate these issues. Please contact us with any questions.