As the federal government shutdown continues, California employers face a range of disruptions — from paused federal contracts to delayed agency responses and compliance backlogs. While the headlines focus on furloughed federal employees, private-sector employers are feeling the effects too.
- Federal Contracts and Payments
Businesses with federal contracts or subcontracts may experience suspended projects, delayed payments, or halted funding. These disruptions can lead to staffing reductions or temporary furloughs, particularly in sectors like construction, defense, and research.
If you haven’t received a stop-work order, then assume it’s business as usual. If you do receive a stop-work order, make sure to document all of your work and expenses accrued during the shutdown because you may be entitled to reimbursement for certain items once normal service is resumed.
- Regulatory and Compliance Delays
The Department of Labor (DOL), EEOC, and NLRB are operating with limited staff during the shutdown, slowing investigations, wage claim processing, and compliance actions. California employers should anticipate longer wait times and paused case resolutions. In addition, there will likely be a significant backlog of cases that may take months to work through.
Applicants should anticipate delays in obtaining business loans.
- WARN Act Obligations
If the shutdown forces layoffs or furloughs, California employers must comply with the California WARN Act, which applies to businesses with 75 or more employees. Advance notice requirements remain in effect — even if the cause is outside the employer’s control.
- Immigration and Employment Filings
E-Verify is unavailable during the government shutdown. Employers cannot enroll in the system, create or manage new cases, access existing cases, or use E-Verify customer support services. Employers should manually verify I-9 documents.
Employers handling visa sponsorships or employment eligibility filings may encounter federal processing delays. Submit time-sensitive filings early and prepare for possible disruptions to onboarding timelines.
Keep in mind that US Immigration and Customs Enforcement (ICE) continues to conduct workplace enforcement actions, including raids and I-9 Notices of Inspection
- Broader Economic Effects
Roughly 150,000 federal employees in California are directly impacted by the shutdown. Reduced spending by these workers affects local economies, particularly service, hospitality, and retail businesses.
What Employers Should Do
- Review your exposure to federal contracts and funding streams.
- Plan for regulatory delays and adjust project timelines.
- Ensure compliance with federal and California WARN Act notice obligations.
- Communicate openly with employees about operational impacts.
- Stay informed as the situation evolves.
About Withrow Employment Law, PC
Withrow Employment Law, PC advises California employers on labor law compliance, HR strategy, and risk management. Our firm helps businesses stay compliant and resilient through regulatory uncertainty and operational challenges.
📞 Contact us today to schedule a consultation about how the federal shutdown may affect your business.
Withrow Employment Law, PC – Practical Legal Guidance for California Employers.