What Does a Federal Government Shutdown Mean for Compliance?

Corinne Nierzwicki
Executive Production Editor
Loyola University Chicago School of Law, JD 2018

For the first time since 2013, on Saturday, January 20th, 2018, the U.S. government ran out of money when Congress failed to pass a spending bill to fund the federal government. Much of the federal government’s operations have ground to a halt due to the lack of funding. Because Congress is seemingly at an impasse over immigration policy, the shutdown may last several days, if not weeks. In light of Loyola’s upcoming symposium exploring what happens when regulation is not enforced, it is interesting to consider how, in a similar vein, the shutdown affects compliance.

What Is a Federal Government Shutdown?

The government, like anything else, needs money to operate. It is up to Congress to pass budget appropriations to fund the U.S. government. Congress, per its last continuing resolution from December, had until Friday, January 19th to pass an appropriations bill to keep the government from shutting down. However, Congress failed to do so. Until Congress passes an appropriations bill and President Trump signs such a bill into law, the government will remain in a shutdown.

During a shutdown, nonessential U.S. government operations cease functioning. Federal employees in nonessential roles are furloughed, meaning the employees are sent home without pay. During the government shutdown in 2013, about 40% of the civilian federal workforce was furloughed. It is up to Congress to decide whether furloughed employees are paid during the shutdown. During the 2013 shutdown, Congress ultimately paid the furloughed employees.

While many agencies and programs will not continue during the shutdown, some federal employees in essential roles will work to keep certain federal agencies and programs operating during the shutdown. Excepted employees—those who are exempted from a shutdown—likely will be paid, but employees may need to be compensated through back-pay after the shutdown. Social Security, federal health care programs, federal prisons, the U.S. Post Office, airports, the military, and Congress itself are some of the entities and programs that are expected to largely remain operating during the shutdown. However, most agencies will be closed during the shutdown.

How Will The Shutdown Affect Compliance?

Several major federal regulatory agencies, including the Food & Drug Administration, the Securities & Exchange Commission, the Department of Education, the Department of Labor, the Department of Health & Human Services, the Occupational Safety & Health Administration, and the Internal Revenue Service, are expected to furlough large numbers of their federal employees. This leaves much of the regulatory frameworks in various industries effectively unenforced. However, this does not mean that compliance programs in organizations can ease on the gas, so to speak.

There are several reasons why organizations should continue to comply with federal regulations as if the federal government was fully operating. First, even if agencies are not fully operating to enforce its regulations, the regulations still are on the books during the shutdown; Congress not appropriating money to the government does not change the Code of Federal Regulations or interpretive rules that businesses must follow. Second, policies and procedures can be legally binding upon an organization such that the organization still has to comply with federal regulations embedded in their policies and procedures even in the environment of a government shutdown. Third, shutdowns historically are short-lived. Since 1976, there have been 18 federal government shutdowns; the average shutdown has been less than 7 days. Of those 18 shutdowns, thrice the shutdown lasted 1 day, and the longest shutdown was only 21 days. Thus, organizations should not expect the shutdown to be a long “break” from enforcement. Finally, it goes against the very idea of ethical culture that compliance could “take a vacation” because certain enforcement agencies are not acting at full capacity; management or a compliance program instilling the idea on the workforce that they do not have to worry about compliance during the shutdown is not the type of compliance leadership that an ethical organization would maintain. It is essential for organizations to continue operate their compliance and ethics programs despite the government shutdown.

The Journal of Regulatory Compliance’s Symposium

If you are interested in how compliance is affected when regulation is not enforced, please consider attending the Journal of Regulatory Compliance’s symposium on that very topic on February 16, 2018 at the Loyola University Chicago School of Law in Chicago, Illinois. We will be exploring various aspects of what happens when regulations are not enforced and what that ultimately means for compliance.