Federal Shutdown Layoff Guidance Is Rescinded
Government contractors and vendors should watch for replacement guidance, since the withdrawn documents had shaped federal planning for funding lapses.
Updated on Nov. 2, 2026 in Remote Work
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The Office of Management and Budget and the Office of Personnel Management formally rescinded three 2025 documents that had addressed layoffs of federal workers during a government shutdown. The withdrawal follows a settlement in a lawsuit brought by the American Federation of Government Employees, and it applies to federal agencies rather than private employers.
Why it matters
The rescission removes written federal guidance that had considered issuing layoff notices during a funding lapse, which shaped how agencies planned for future shutdowns. For operators, it is a concrete example of how a legal settlement can reverse an employment-related directive that had been issued by federal leadership.
Three guidance documents were rescinded in full through memo M-27-01, which was issued October 23, 2026. The memo covers reductions in force during a lapse in appropriations, and the source does not provide a broader count of affected federal positions.
The players
Office of Management and Budget (OMB)
The federal agency that oversees executive branch budgeting and management, whose rulemaking and guidance direct how federal agencies plan spending and staffing.
Office of Personnel Management (OPM)
The federal agency that manages the civil service workforce, setting personnel rules and guidance that govern federal hiring, pay, and workforce reductions.
American Federation of Government Employees (AFGE)
A large labor union representing federal employees, which served as lead plaintiff in the lawsuit that led to the settlement.
The details
The withdrawn documents included a September 24, 2025 OMB email that had instructed agencies to consider issuing layoff notices to employees in certain unfunded programs if a funding lapse began October 1, 2025. Two late-September 2025 OPM documents had said agencies could direct employees to carry out layoff administration work as excepted activities during a shutdown. The rescission followed a settlement in the AFGE lawsuit, which had been filed in federal court in Northern California and which led to a temporary restraining order blocking shutdown-related layoffs in October 2025.
Timeline
September 24, 2025: OMB email instructing agencies to consider shutdown layoff notices was sent.
September 30, 2025: AFGE lawsuit was filed in the Northern District of California.
October 1, 2025: Potential funding lapse date referenced in the withdrawn guidance.
October 2025: A temporary restraining order blocked shutdown-related layoffs.
October 23, 2026: OMB and OPM issued joint memo M-27-01 rescinding the guidance.
Market Landscape
The rescission is a federal personnel action that sits within the continuing pattern of litigation shaping how federal workforce reductions are handled during funding lapses. It does not establish a precedent for private employers, which operate under separate federal and state employment rules.
Operators in sectors that rely on government contracts or federal staffing should note that shutdown-planning guidance has been withdrawn and may be reissued in a different form. Businesses that depend on federal payment timing should review contract terms that could be affected by a future funding lapse.
The takeaway
Federal workforce guidance can change quickly after litigation, so businesses that contract with federal agencies should track any replacement memos from OMB or OPM. Operators should review how funding-lapse provisions in their government contracts would apply if a shutdown occurs.
Further reading
For broader context on how workforce policies are changing across employers, see Remote Work coverage on We are Main Street.
Source note: This article includes information reported by NJTODAY.
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