5 Actions Employers Should Address with Employees as the Government Shutdown Looms

At midnight September 30, the federal government will run out of funds and contractors will start receiving stop-work orders for all work deemed non-essential. At the time of publication, compromise in Congress looks unlikely, and a protracted shutdown likely. In order to minimize costly personnel missteps, federal government contractors should consider the action items listed below BEFORE the government shuts its doors. For more comprehensive information on considerations for government contractors during a shutdown, please read our client alert “September 2025: Reducing the Negative Impacts of a Government Shutdown for Federal Contractors.”

1. Communicate with Employees. Employers should let employees know what to expect should the company receive a stop-work order for the contract on which they are working. This should include instructions to stop all work unless explicitly instructed to do so. It also might include whether employees will be furloughed or laid off, limits on paid time off utilization, and access to unemployment. Finally, employees should have a complete understanding of when and how they will be called back to work.
2. Salaried Employees. Salaried employees must be paid for a full work week regardless of quality or quantity of work, with few exceptions.  Because most of these employees will have worked for two (2) days this week, these employees will be entitled to a full week of pay unless you require them to take paid time off or they are laid off.  Additionally, the same concern could arise when an employee returns to work if the return is mid-week.
3. Benefit Limitations. The shutdown could be over in three days or three weeks. Because the federal government will not be processing invoices, employers should plan for how long they can afford to allow use of paid leave and whether they will furlough or lay off employees.  Employers must also decide how to manage employee-elected benefits.
4. State Laws. The state where the employee is performing work may have rules about a paid time off application, wage payment, or layoff notifications. Please work with your human resources professionals and legal counsel to determine pitfalls.
5. Prepare for Attrition and Return. Given the recent instability in the contract landscape and depending on the length of the shutdown, it is not uncommon for some employees to look for and find alternative employment. However, the federal government will expect contractors to be ready to return when the shutdown is over. Contractors should be mindful that they will not have much time to plan to return once Congress acts.

PilieroMazza attorneys are monitoring the situation closely and are committed to helping government contractors navigate the challenges and uncertainty they’re facing at present and on the horizon. Please contact Nichole Atallah, Sarah Nash, or another member of our Labor & Employment Group if you have any questions or need assistance.

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If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.