Government shutdowns have become part of doing business for federal workers, government contractors, and companies that serve them. Last week, federal agencies began to reopen after 43 days – the longest government shutdown to date. But with funding only guaranteed until the end of January, another possible shutdown looms on the horizon. Those who may be affected should plan accordingly.
While the effects of short-term shutdowns can often be worked around, longer-term shutdowns have an ongoing ripple effect. Contractors may be idle, affecting payments, cash flow, and performance timelines. Delayed or cancelled contract work can have a knock-on effect on pipelines or income. Layoffs and furloughs are also common, especially the longer a federal shutdown continues. Additionally, day-to-day activities such as travel and purchases can be impacted, adding to the cost of doing business.
Shutdowns also create uncertainty and hesitancy across GovCons and businesses affected directly or indirectly by shutdown events. When businesses don’t know how long a shutdown will continue, or face the prospect of additional future shutdowns, they need to find ways to continue doing business effectively and economically.
If your business is affected by shutdowns, or might be in the future, here’s what to consider:
Know your Compliance Issues.
Whether staff have been laid off entirely, furloughed, or are using PTO to bridge the shutdown, it’s vital to know the state and federal wage payment laws that apply in your situation. Being mindful of wage and hour issues, providing advance notice for layoffs in adherence to WARN laws, and complying with union agreements all matter. Working with an attorney experienced in the interplay between labor law and government contracts can be beneficial in seamlessly and efficiently navigating these complex issues.
Move Quickly and Plan Ahead.
Employment regulations and cashflow needs might be top of mind when dealing with a shutdown, but government contracting comes with additional complexities. Know the stakeholders who are involved with your contracts and ensure that communication happens quickly and proactively. Consult both with the Government and any subcontractors or prime contractors to understand obligations, expectations, and whether you’ll be paid for idle days. Make sure staff know whether they should be working or idle to avoid wage-related miscommunications.
Take a Risk Management Approach.
If contract performance is going to be delayed due to a shutdown, avoid pursuing “at-risk” work and obtain written guidance from your contracting officer. Document communications and costs, and track how you’ve been impacted in writing. Plan for how you’ll resume operations in a seamless manner, especially if you don’t know how long the shutdown will continue. Strive to keep staff available and on good terms so that they can quickly return to work when needed, and design business processes so that they can be monitored in real-time and ramped up or down as needed. Consider future business diversification as well.
Seek Legal and Accounting Guidance.
Government shutdowns are increasingly a feature of the system, so if you’re working in government contracting, avoid being on the back foot. Work closely with an experienced accountant and attorney to build risk management into your business approach and protect your business from shutdown risks. An attorney who is experienced in government contracting can also offer guidance about wage issues, contract obligations, essential documentation, and efficiently returning to work after a shutdown has been lifted. For tailored legal guidance in the event of a shutdown, contact the attorneys at Warner PLLC today.
