A lapse in federal funding appropriations triggers a government shutdown, a disruptive event that raises immediate and critical questions for the federal workforce, support staff, and the government contracting community. Understanding who remains operational, who is furloughed, and how compensation is handled is crucial for navigating this period of legislative impasse.
The status of a federal employee during a shutdown is determined by how their position and funding are classified under federal law, specifically the Antideficiency Act. The National Federation of Federal Employees defines the workforce into three primary categories: Excepted, Exempt, and Nonexempt.
The Three Classes of Federal Workers
1. Excepted Employees
These individuals are legally required to continue their duties because their work is deemed necessary to protect life or property, or involves constitutional functions. They are ‘excepted’ from the furlough process and remain on the job.
- Operational Status: Required to work.
- Compensation: Work without immediate pay. They receive backpay retroactively once new appropriations are signed into law by Congress.
- Examples of Excepted Roles: Secret Service agents, Coast Guard personnel, Transportation Security Administration (TSA) screeners, Air Traffic Control workers, active-duty Department of Defense members, FBI agents, and federal judges.
2. Exempt Employees
These employees are not affected by the lapse in annual appropriations because their salaries and operations are funded through separate mechanisms, such as revolving funds, multi-year appropriations, or pre-obligated contracts.
- Operational Status: Continue working and are paid as usual.
- Compensation: Unaffected by the shutdown.
- Examples of Exempt Roles: Positions funded by commercial contracts or self-generated revenue streams that operate outside the annual discretionary budget.
3. Nonexempt (Furloughed) Employees
These positions are funded entirely by annual appropriations that have expired. These employees are mandated to stop working, a status known as furlough.
- Operational Status: Furloughed (do not work).
- Compensation: Receive backpay retroactively once funding is restored.
- Examples of Nonexempt Roles: Procurement and administrative support staff within the Department of Defense, auditing professionals at the Department of Homeland Security (DHS), policy development roles within the Department of Justice, contracting personnel at the Department of State, and public affairs staff at NASA.
Mitigating Impact and Contractor Landscape
While most excepted employees must wait for legislative action to receive their backpay, certain agencies may employ specific internal budgeting strategies to ensure frontline personnel, particularly law enforcement, receive timely compensation. For example, the DHS has previously taken action to implement advanced pay measures for law enforcement officials, ensuring they receive their earnings without delay during the funding lapse.
For the government contracting industry, the operational reality is dual-natured:
- Stop-Work Orders: Contractors supporting non-essential or furloughed federal personnel face immediate stop-work orders, creating cash-flow problems and operational uncertainty across the supply chain.
- Continued Work: Contractors supporting excepted functions, or those whose contracts are funded by exempt appropriations (like multi-year procurement funds), often continue performing their duties.
The uncertainty of a shutdown—including historical precedents that have seen stalemates lasting over a month—poses significant operational and financial challenges that demand robust continuity planning across the federal and contractor landscape.
