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Potential Government Shutdown – What Every Federal Contractor Needs to Know

Source: Proskauer


We appear to be on the precipice of another federal government shutdown. Absent a political compromise, the federal government’s funding will run out on September 30, 2023. During previous government shutdowns, government agencies and departments issued stop-work orders, grinding work on government projects and contracts to a halt. Contractors were then faced with the difficult task of remaining in compliance with their obligations to their employees while work and funding for those contracts has ceased.


With a possible shutdown on the horizon, contractors are beginning to consider how to handle these complex employment issues. Although the discussion below is not intended to be comprehensive, it discusses many of the significant employment-related issues a shutdown presents for contractors.


Wage and Hour Considerations


During a shutdown, non-essential government employees are typically furloughed, and many contractors implement furlough programs for their own employees. Contractors must remain mindful of obligations under both federal and state wage and hour laws when placing employees on furlough. For example, a contractor that begins a furlough mid-week may consider not paying its employees for the days during that week the employees are on furlough. However, doing so for employees exempt from overtime under federal and state laws could place their exempt status in jeopardy.


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