Government Shutdown Review: What Happens Next for Federal Contractors?

The government shutdown of 2013 lasted 16 days. Fortunately, we have just heard that the House, Senate, and the Executive Office have found common ground and the government has reopened after day 3.

There's still a chance, however, that after February 8th, we could find ourselves in a similar situation again. Given the uncertainty of what the next few weeks will bring, we share the following considerations that may be helpful for our clients and colleagues.

Although a government shutdown impacts a government contractor of any size with non-essential employees, it is a much greater challenge for a small company with limited resources.

Communicating the impact to your people in an authentic manner to all employees will go a long way in establishing trust. This will help employees better understand the ‘why’ behind operational decisions that impact their pay and future employment.

How Federal Contractors Can Begin to Prepare for an Impending Shutdown:

Stay in contact with the contracting officer to ensure you are kept abreast of how the delivery of your contract will be impacted.

• Will there need to be essential personnel left on site to keep the business operating or will there be a complete shutdown of the operation?
• If you institute furloughs, ensure you are not required to pay out accrued leave based on any individual state mandates in place for the states in which the company operates.
• Since the Fair Labor Standards Act (FLSA) only deals with "protected leave" such as FMLA for example, there is no federal government mandate regarding the payment of leave in the event of a shutdown, but there may be state mandates in place.
• If furloughs are instituted ensure you follow the published guidelines for exempt employees and consider the partial workweek exemptions in place for exempt employees. Refer to the Department of Labor Wage and Hour Division's Fact Sheet #70 FAQ's Regarding Furloughs for additional information.

For contracts awaiting award notice:

• If you have begun to staff new contracts in anticipation of the contract award, ensure any offer letters that are extended include language stipulating employment is "contingent" upon the contract award.

Identify key personnel and execute a retention plan.

• Is it possible to sub out employees to colleagues to get you through a period of uncertainty or to leverage contingent retention bonuses?
• Communicate your bench strategy:
• How will employees be compensated?
• Can they leverage their PTO?
• Will you issue partial or full furloughs- if so, which employees will be impacted?
• Map out the impact on employee benefits that a reduction in work schedule may trigger.
• Consider enforcement of non-competes and policy reviews of those whose hours will be reduced or eliminated.
• Review employment offers, employment contracts and commission plans for potential conflicts.

If a layoff cannot be avoided, consider using Rapid Response (available through the Department of Labor at no additional cost) as a resource.

• We hope it will not be necessary, but in the event of an extended shut down, today employers with 100 or more full-time employees are required to follow published guidelines for compliance with the WARN Act (Worker Adjustment Retraining Notification), in the event of a layoff of 50 or more people at one single site.

Again, communication is exceptionally critical during this time of uncertainty. We encourage you to set up a regular communication schedule to notify employees of pending changes or escalations. Being authentic in what you do and don’t know, will go a long way to build and maintain trust.