Special Alert: Employment Effects of the Federal Government Shutdown on CA Employers

On October 1, 2025, the federal government officially shut down after Congress failed to pass funding legislation, pausing a range of non-essential government services. While this shutdown has significant implications for federal contractors, it may also affect other private employers.

Potential Layoffs

Employers facing potential layoffs due to the shutdown must be mindful of notice requirements:

• Federal WARN Act: Generally, federal WARN requires employers with 100 or more employees to provide 60 days' written notice before a plant closing or mass layoff.
• California WARN Act: California’s-WARN Act applies to employers with “covered establishments” in California. Generally, a “covered establishment” is a facility that has (or has had) 75 persons in the preceding 12 months. Prior to a mass layoff at a covered establishment, or termination or relocation operations at a covered establishment, employers must provide at least 60 days' written notice to affected employees and their union representatives, and to the Employment Development Department, local workforce investment board, and chief elected official in the affected city and county.

Employers facing events potentially covered by federal or California WARN should immediately and carefully analyze their notice obligations.

Business Shutdowns

For employers considering partial or full-week business shutdowns, specific wage and hour laws apply depending on the employee’s classification. It is important to note that for exempt employee salary deductions, California generally follows the same rules as federal law.

For non-exempt employees, employers are only required to pay them for the actual hours worked. However, exempt employees must receive their full salary for any week in which they perform any work, regardless of the number of days or hours worked. Therefore, salary deductions depend entirely on the shutdown's length and whether any work was performed during the “workweek,” as defined.

Full-Week Business Shutdowns

For a full week shutdown where no work is performed, employers are not required to pay exempt employees their salary. You may give exempt employees the option to use their vacation during the shutdown, or require it with reasonable advance notice.

Partial-Week Business Shutdowns

For a partial-week shutdown, employers must pay exempt employees their full salary, even if the employee only worked, for example, one hour that week.

Regulatory and Investigative Delays

The government shutdown will significantly slow the enforcement and investigatory roles of Department of Labor (DOL), Equal Employment Opportunity Commission (EEOC), and National Labor Relations Board (NLRB) due to all non-essential staff being furloughed. Because of this, nearly all non-urgent ongoing and new cases, audits, and investigations (including workplace, wage and hour, discrimination, or union-related claims) are typically paused or significantly slowed. Additionally, agencies will not issue new guidance or rulemaking during this time.

E-Verify Interruptions

For employers enrolled in E-Verify for I-9s, be aware that the system is typically taken offline during a government shutdown. When this happens, you cannot create new E-Verify cases, manage existing cases, or resolve Tentative Nonconfirmations (TNCs). The U.S. Citizenship and Immigration Services (USCIS) usually responds by temporarily removing the three-day E-Verify case submission rule and extending deadlines for addressing TNCs. It is important to remember that employers cannot take adverse action against employees with unresolved E-Verify cases due to system unavailability.

Additionally, even though the requirement to create the E-Verify case is suspended while the system is down, employers are still required to complete the I-9 document examination (physical or remote alternative) on time. For remote employee verification, E-Verify employers in good standing can still use a permanent remote I-9 process that includes a live video session to examine employee documents.

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Article reposted with permission from our sister association Cascade Employers Association, and revised for California.