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Government Shutdown Would Pose a Myriad of Issues for Employers

Written by Jillian M. Collins

If Congress fails to pass an appropriations bill by midnight tonight, the government will partially shut down and private sector employers along with federal employees will be greatly impacted by reduced government services and furloughs. Here is a rundown of some employment-related issues associated with any shutdown.

  • The Department of Labor and National Labor Relations Board will operate at significantly reduced staffing levels. More than 13,000 of the DOL’s approximately 16,000 employees will be furloughed; the NLRB will furlough 99% of its employees. Employers should be aware that these staff reductions will temporarily cease all non-emergency occupational safety and health inspections, wage and hour audits, hearings and appeals at the DOL, and representation elections, trials and hearings at the NLRB. These delays will provide employers facing regulatory action with more time to prepare for audits, hearings, etc., but it is a double-edged sword, as they will also protract these actions. It is unclear how the delays might impact statutes of limitation for claims that the DOL or NLRB could have otherwise pursued during the shutdown. Federal labor and employment laws, however, remain in effect, and employers must continue to comply with all such laws and regulations.
  • U.S. businesses will not be able to access E-Verify, the system that allows employers to voluntarily determine the eligibility of prospective employees to work in the United States. More than 400,000 employers are enrolled in the E-Verify system, according to the White House, and the system shutdown will delay an employer’s ability to process new employee paperwork and may lead to employers shelving new hire plans.
  • Unemployment benefits (as well as other government benefits such as Medicare and Social Security) will continue despite any shutdown. Employers must stay compliant on these matters, including by providing information to state agencies and appearing for any necessary hearings.
  • The Affordable Care Act’s state-run exchanges would open as scheduled Tuesday. President Obama has said that they will open “no matter what, even if there is a government shutdown.” All employers covered by the Fair Labor Standards Act are still required to inform their employees about the Health Insurance Marketplace and subsidies by Tuesday. See our previous post on this notice requirement here.
  • Federal employees will be placed on temporary non-duty, non-pay status effective Tuesday. Congress will determine whether furloughed employees receive back pay for the furlough period. This decision could be extremely costly for taxpayers depending on the length of the shutdown. If Congress decides against providing back pay to furloughed employees, those employees also cannot “make up” for any loss in pay by requesting paid time off, because federal law does not allow the government to incur any additional obligations (such as employee PTO) during the shutdown.
  • All other Federal employees who continue to work during the shutdown will not be paid until after Congress passes (and the President signs) a new appropriations law (or other continuing resolution), meaning that Federal employees could go weeks without being paid depending on the length of the shutdown.
  • Federal employees’ health benefits coverage will continue even if an agency does not make the premium payments on time. But because Federal employees will occupy a non-pay status, the employee share of health care premiums will accumulate and be withheld from pay once the employee returns to pay status. Thus, employees may face larger deductions than normal when they return to work and receive their first paychecks.

The longer the shutdown lasts, the greater the impact will be on private sector employers, federal employees and the economy in general. The last government shutdown, which took place 17 years ago cost taxpayers more than $1.25 billion dollars, including lost revenue and fees and back pay to workers who were furloughed. We will continue to monitor events closely and update this post as necessary.

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