As of October 1, 2025, we are in federal government shutdown. 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. Contractors now must consider how to handle the complex employment issues that come with a government shutdown. 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.

With a few exceptions, to be exempt from the overtime provisions of the federal Fair Labor Standards Act (“FLSA”), an executive, administrative, or professional employee must be paid on a salary basis of at least $684 per...

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