As the government shutdown drags into its third week, federal contractors are growing a storm of legal and financial risks. While federal employees are guaranteed back pay under a 2019 law, contractors are left navigating a murky landscape of delayed payments, suspended work orders, and potential labor violations.
“This is really causing a lot of issues for contractors and their employees,” said Andrew Turnbull, a labor law expert at Morrison & Foerster, in an interview with Federal News Network. Even employers trying to do the right thing may stumble into legal trouble.
Wage Law Risks Multiply
At the heart of the crisis is the Fair Labor Standards Act (FLSA), which mandates minimum wage and overtime protections. Contractors who furlough employees or reduce hours without proper documentation risk violating federal labor laws.
For example, if a contractor tells employees to stay home without issuing a formal stop-work order, they may still be liable for wages. “Intentions don’t protect you from liability,” Turnbull warned. “Documentation and clarity do.”
The longer the shutdown continues, the more likely contractors are to face audits, lawsuits, or penalties. And unlike federal agencies, contractors don’t have the luxury of guaranteed funding or legal immunity.
Contract Suspensions and Operational Chaos
Many agencies have suspended contracts or paused performance, leaving contractors in limbo. Without clear guidance, companies are unsure whether to continue work, furlough staff, or terminate agreements.
This uncertainty is especially dangerous for small businesses and subcontractors, who often lack the legal teams or cash reserves to weather prolonged disruptions. “We’re seeing a lot of confusion around what constitutes essential work,” said Turnbull. “And that confusion can be costly.”
Some contractors have continued working in good faith, hoping for retroactive payments. But experts caution that this strategy is risky. “There’s no guarantee of reimbursement,” Turnbull emphasized. “You could be working for free.”
No Back Pay, No Safety Net
Unlike federal employees, contractors are not covered by laws guaranteeing back pay. This means thousands of workers—janitors, security guards, IT specialists—may never be compensated for lost time.
The Professional Services Council has called for legislative reform, urging Congress to extend back pay protections to contractors. “This is a fairness issue,” said Stephanie Kostro, the council’s president. “Contractors are essential to government operations. They deserve the same protections.”
But so far, no bill has passed. And with political gridlock deepening, contractors are left exposed.
Compliance Under Pressure
Legal experts advise contractors to take immediate steps to protect themselves:
- Review labor classifications and contracts to ensure compliance with wage laws.
- Document all communications with agencies, especially around work suspensions or performance changes.
- Avoid informal furloughs without written stop-work orders.
- Consult legal counsel before making employment decisions tied to the shutdown.
“You can’t afford to guess your way through this,” Turnbull said. “The risks are too high.”
A Wake-Up Call for the Industry
The shutdown is revealing deeper vulnerabilities in the federal contracting ecosystem. Many companies operate on thin margins and tight timelines, making them especially sensitive to funding disruptions.
It’s also exposing gaps in legal literacy. “A lot of contractors don’t realize how complex employment law becomes during a shutdown,” said Turnbull. “They think it’s just about getting paid. But it’s also about how you treat your workers.”
What Comes Next?
If the shutdown continues, experts predict a wave of litigation and regulatory scrutiny. Contractors who mishandle furloughs or fail to meet wage standards could face investigations from the Department of Labor.Meanwhile, advocacy groups are pushing for clearer guidance and emergency relief. “We need a playbook for shutdowns,” said Kostro. “Contractors shouldn’t be left to figure this out alone.”
