Naperville Business Lawyer Discusses the Effect of the Government Shutdown on Federal Contractors

The shutdown of the federal government is now in its third week. While President Donald Trump continues to fight with Congress over funding for a physical barrier along the border between the United States and Mexico, an estimated 800,000 federal employees have either been furloughed or forced to work without pay. Most of these employees will probably receive back pay when the shutdown is resolved. However, there is another group of workers who have been affected by the shutdown who might never see any compensation.

In my practice as a business law attorney, I have worked with many clients whose businesses are contracted to provide products or services to the federal government. It is companies like these and their employees who must figure out a way to make ends meet until the federal government gets up and running again.

Companies Can Pay Employees to Wait or Lay Off Staff

In most cases, a company that contracts with the federal government has two choices during a shutdown. The company could continue to pay its employees out of its own financial reserves while employees work within the company—participating in training or internal compliance duties. Few companies, however, have enough to reserves to do so for very long. Many contractor companies are small to medium-sized businesses with very small margins for wasted resources. Additionally, the government is not likely to reimburse such payments.

The other choice that contractor companies have is to lay off workers during a shutdown. While this may reduce the economic strain on the company, there is no guarantee that the workers will be available to be rehired at the end of the shutdown. Of course, layoffs are also difficult on the employees themselves—many of whom work for fairly low wages and live paycheck to paycheck. Furthermore, the government does not provide a window for restarting federal contracts, which means companies are expected to be ready to go immediately upon the shutdown ending.

Getting Compensated

There are certain contractors that are considered to be essential to federal government, and their employees are expected to continue working during a shutdown. Employees of essential contractors will eventually get paid for the work they do, but reimbursements are often slow. Some companies have reported waiting for almost a year for the government to issue back payments. Wait times such as these can be devastating for a company that might already be strapped for cash.

This week, Democrats in the U.S. Senate called for legislation that would provide back pay for contractors who were furloughed during the current shutdown. The House has introduced similar legislation, and President Trump has reportedly expressed his support of the idea. As yet, it is not clear if or how the proposed bills would streamline the reimbursement process.

A DuPage County Business Lawyer Can Help

If your company provides contracted services for the federal government, an experienced Naperville business lawyer can provide the guidance you need at a difficult time. Call 630-228-9413 for a confidential consultation at the Gierach Law Firm today.

Sources:

NBC News

Time

WTOP News