Government Shutdown: Paperwork Problems Now, Economic Effects Possibly Coming Later

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By Martin Berman-Gorvine  

Oct. 3 --For human resources professionals, the effects of the partial government shutdown are hard to avoid and will become more serious the longer the political stalemate in Washington drags on, observers agree.

“For HR professionals across the country, it is important to be open with employees at this time and seize the opportunity to discuss the state of the economy and help ensure events like this do not greatly impact employee morale,” Jim Link, chief HR officer, North America, at employment services provider Randstad US, said in an Oct. 3 e-mail to Bloomberg BNA. “With any major economic event, it is always best to engage with your staff often to put any potential uneasiness to rest.”

Contractors and Other Employers Affected

Government contractors “need to keep in mind wage and hour rules or you may find yourself the defendant in a wage and hour claim” in the event workers have to be furloughed, the Society for Human Resource Management pointed out in an Oct. 1 e-mail to members.

SHRM also advised its members to “generally, keep in mind that employers are still obligated to meet statutory deadlines and compliance requirements of the underlying statutes.”

But the shutdown's effects are also being felt in private industry not directly connected to the federal government. For example, hiring is affected, SHRM said, noting that E-Verify will not be available during the government shutdown (see article in this issue).

SHRM also noted that the Internal Revenue Service “will cease some of its key functions such as audits, examinations of returns, processing of paper returns and call-center operations for taxpayers with questions.”

A Compliance Mess

When it comes to HR compliance matters, the effects of the shutdown hit right away in a tangible way, according to a management attorney. “The implications we saw were immediate and widespread, since all the federal agencies were shut down except for protection of safety and individual rights,” Khristan Heagle, a partner with New York City-based Klein Zelman Rothermel LLP, told Bloomberg BNA in an Oct. 3 interview.

The closure of the Equal Employment Opportunity Commission “means they will docket new charges to preserve individual rights in filing them but will not investigate them,” Heagle said. “All the mediations have been cancelled and FOIA [Freedom of Information Act] requests will not be processed.”

The Department of Labor “is working at 50 percent capacity,” while the Occupational Health and Safety Administration is closed except for an emergency toll-free number for reporting workforce fatalities, hospitalizations or imminent danger, Heagle said.

While Klein Zelman Rothermel is a management-side labor law firm and “usually does not need an agency response” to proceed with legal filings for its clients, Heagle sounded anything but happy about the government shutdown. “I have several OSHA cases active right now, and there is no one to contact,” she said. The agency cannot do inspections or hold informal conferences, she added.

“It's very disconcerting because you have situations out there where there are safety violations and they will not be addressed until after the shutdown is over,” Heagle said.


“For HR professionals across the country, it is important to be open with employees at this time and seize the opportunity to discuss the state of the economy and help ensure events like this do not greatly impact employee morale,” said Jim Link of Randstad US.  

Heagle said that employers dealing with any federal agencies should proceed as they normally would as much as is possible. For pending cases, she said, “I think I would attempt to adhere to every deadline despite the shutdown.” If that's not possible because an agency is shut down, Heagle said, “we would recommend filing a letter explaining why you can't adhere to that deadline.”

Long-Term Economic Effects?

Long-term economic effects of the shutdown are likely to be negligible outside the Washington area, according to a study released Oct. 1 by Michael J. Hicks, director of the Center for Business and Economic Research at the Miller College of Business at Ball State University in Muncie, Ind.

According to Hicks's analysis of the 17 government shutdowns that occurred between October 1976 and January 1996, “the economic effects of a shutdown are not immediate, but may occur within weeks of the event.” The analysis found that “any economic impact is concentrated in places where employment is dominated by federal workers.” For the capital's greater metropolitan area, the employment loss is “roughly 3,100 jobs during a typical shutdown,” Hicks calculated.

But with President Obama now explicitly tying the shutdown to the Oct. 17 deadline the Treasury Department has set for Congress to increase the government's debt limit or risk a U.S. default, concerns are growing that the broader economy might not escape the effects of Washington's political deadlock.


To contact the reporter on this story: Martin Berman-Gorvine in Washington at

To contact the editor responsible for this story: Simon Nadel at