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Small Contractors Face Most Pressure as Shutdown Drags On

Jan. 10, 2019, 11:40 AM

Contractors with small, specialized practices could be at risk of losing employees and may have to move workers to other projects or use the downtime for training, as the partial government shutdown that began Dec. 22 continues.

“If this drags on for weeks or months, people will be out of sorts. They will have exhausted their annual and sick leave” and will be less inclined to be loyal to their employers, Venable LLP attorney Dismas Locaria told Bloomberg Law.

Contract employees with in-demand skills such as cybersecurity specialists likely will be the first to jump ship, said Locaria, a partner in Venable’s Washington-based Government Contracts Group.

Larger contractors with diverse customer bases—particularly those who do work for state and local governments or private-sector companies as well as the federal government—may be able to keep their employees working despite the shutdown by moving them to other projects or using the time for training, Locaria said.

Herbert Watson, president and CEO of Seventh Sense Consulting, a minority- and veteran-owned business that provides contract management support to several federal agencies, told Bloomberg Law Jan. 9 that work for about 15 out of his firm’s 130 workers has been directly affected by the shutdown.

“We’ve had to look at creative ways to take care of people,” Watson said. “It’s doable right now” but furloughs could be ahead for some employees if the shutdown continues, he said.

Counting Federal Contractors

New York University Professor Paul Light, who’s written a series of books on the “true size of the federal government,” estimates that a total of about 4.1 million people work for federal contractors, including both blue- and white-collar employees.

Exact numbers are hard to find, as the government doesn’t directly track the number of contract employees, he said. Light is also a senior fellow at the Volcker Alliance, a New York-based nonprofit that promotes effective government.

Hundreds of thousands work for the departments of Agriculture, Commerce, Homeland Security, Housing and Urban Development, Interior, Justice, State, Transportation, and Treasury, which have been shut down because of a lack of funding, Light told Bloomberg Law. Other agencies, such as the departments of Defense, Labor, and Veterans Affairs, are funded for the remainder of fiscal year 2019 and aren’t part of the shutdown.

By contrast, about 800,000 federal workers—out of a total civilian workforce of 2.1 million—work for the agencies affected by the shutdown, Light said. This includes roughly 420,000 who are working without pay and another 380,000 who have been furloughed, or told not to work.

‘Making the Case’ for Back Pay

Contractors want to keep their employees working, Alan Chvotkin, executive vice president and counsel for the Professional Services Council, a contractor association based in Washington, told Bloomberg Law. That’s because, unlike federal workers, there’s no mechanism for providing pay to contract employees regardless of whether they work, he said.

The council is looking for support in Congress for paying the employees even if their work is disrupted by the shutdown, but it’s complicated, Chvotkin said.

“Giving back pay to federal employees is a relatively simple matter” because the government is their direct employer, he said. “Dealing with thousands of contractors with employees in different pay status is complicated.”

Del. Eleanor Holmes Norton (D-D.C.) on Jan. 8 introduced legislation that would provide back pay to low-wage retail, food, custodial, and security service contract workers who aren’t getting paid during the current federal government shutdown. The legislation has 12 original co-sponsors, all of whom are Democrats.

“Unlike federal employees, who have always been made whole after a shutdown, many low-wage workers, who are the focus of our bill, earn little more than the minimum wage and receive few, if any, benefits,” Norton said in a statement.

Low Wages for Cafeteria Workers

Cafeteria workers at federal buildings make under $32,000 per year, Rachel Gumpert, a spokeswoman for UNITE HERE, which represents about 500 such workers, told Bloomberg Law.

Some of these contract employees also are in danger of losing their health insurance, if the shutdown goes past the end of January, Gumpert said.

Lisa Earle, a UNITE HERE Local 23 member who works for a Smithsonian contractor, said in a statement from the union that she lives paycheck to paycheck.

“It’s not fair that politicians playing games put me out of work, and it’s even worse that my coworkers and I may never get back pay for the shutdown when we’re just as impacted as all other federal workers,” Earle said.

To contact the reporter on this story: Louis C. LaBrecque in Washington at llabrecque@bloomberglaw.com

To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com