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Federal employees awoke Tuesday morning to discover that the government had shut down for the first time in 17 years after Congress failed to agree on a new budget or extend the current one in a session that went past midnight on Monday.  As a result, more than 800,000 workers across the country have been immediately furloughed, while approximately a million more will report to work without pay to perform operations that have been designated as essential. The Department of Labor and related agencies, including the National Labor Relations Board and Equal Employment Opportunity Commission, will maintain only a skeletal staff during the shutdown to perform tasks “involving the safety of human life or protection of property.”  These offices will continue to accept and docket administrative filings, but all other activities will be suspended until a budget or continuing resolution is passed by Congress.  As such, employers will enjoy a brief respite from the pressure of government investigations and inspections.

Government contractors, however, face significant potential losses and disruptions from the closure, which many have already begun to feel over past weeks as they have been forced to redirect their resources and staff toward shutdown preparations. Many contractors have found it extremely difficult to assess the cost of a shutdown and determine which employees they will need to furlough. Some contracts are already covered in full by past appropriations bills and will remain unaffected, while others would have to be put on pause until further funding is available. Some private-sector workers, particularly those who contract with the Departments of Defense and Homeland Security, will be designated as “essential” in the coming days and will be exempt from furloughs altogether. Decisions regarding who reports to work and who stays home will have to be made on a contract by contract basis, a task which will be complicated even further by the fact that many of the agency officials responsible for administrating government contracts are likely to have been furloughed themselves.

At this point, all contractors can do is wait for direction from their partner agencies and hope the shutdown ends sooner rather than later, particularly in light of another congressional showdown over the debt ceiling fast approaching where the economic stakes are even higher.