Is the Partial Government Shutdown Affecting Your Company?

As the partial federal government shutdown continues, more companies are being affected, directly and indirectly, and business owners, executives and human resources professionals need to be very careful about how they respond. Potential areas of concern include, but are not limited to, the following:

1.  Fair Labor Standards Act ("FLSA"). Complying with FLSA during the partial government shut down may be tricky and employers should keep the following rules in mind:

a. Employees must be paid on their usually scheduled payday. Delaying a pay date for a day or two may sound like a good idea for companies that are experiencing cash flow issues due to the shutdown, but, for private employers, such delays violate FLSA and may also violate state law. Furthermore, if a pay date falls on a holiday, employees must be paid on the business day preceding the holiday.

b. Exempt employees are entitled to their regular salary for each workweek in which they perform any work, even if their work is reduced due to the partial federal government shutdown. If an employer does not plan on paying the exempt employee, it must be careful that the employee does not perform any work during that time (i.e., no responding to e-mails, answering company phone calls or attending meetings).

c. Employees who work during the government shutdown are entitled to be paid as they were before the shutdown.

d. In response to the shutdown, it may be necessary to put some employees on part-time status. An exempt employee's salary still needs to equal at least $455 per week to meet the FLSA exemption for salaried employees. Furthermore, an employer should not frequently change an exempt employee's schedule and corresponding salary: doing so could jeopardize an exemption because the employee is being treated as an hourly employee.

NOTE: Employers should carefully review employment agreements, government contracts and union contracts prior to a temporary lay-off or reduction in hours. A government contract, for example, may have a provision regarding operations during a government shutdown that could limit an employer's ability to lay off employees or reduce their hours.

2. WARN. The WARN Act requires employers with 100 or more full-time employees to provide 60 days' advance notice before a plant closing or a mass layoff. The WARN Act defines a "plant closing" as a "shutdown of a single site of employment" that results in employment loss for 50 or more employees at that site. It also defines the term "mass layoff" as a reduction in force resulting in a loss of employment for at least 33 percent of certain active employees and at least 50 employees from a "single site of employment" in any 30-day period. Failure to provide the required WARN Act notice could expose an employer to damages, civil penalties, and an award of attorneys' fees. Many states also have laws with similar provisions. Any layoff should be reviewed carefully to ensure it complies with federal and state law.

3.  E-Verify and I-9s. Even though E-Verify is temporarily shut down, employers are still expected to complete the I-9 verification process. During the shutdown, employers will be unable to run new hires through, or take any other action in, E-Verify, and the requirement that employers verify all new hires within three days of hire has been suspended.

Employers must, however, continue to complete Form 1-9 for all new hires within three days of hire. Files for new hires impacted by the shutdown should contain notes that E-Verify was not run in a timely manner due to the shutdown. Such documentation may be needed in the event of a government audit.

The partial government shutdown is having widespread effects and many companies may be faced with difficult business decisions. To avoid potential legal liability and unintended consequences, employers are strongly advised to exercise caution and engage qualified legal counsel for assistance.