Bloomberg News

No Reprieve for Contract Workers’ Wages Lost in Shutdown

October 14, 2013

Federal Trade Commission in Washington D.C.

The shutdown brought most business at several federal agencies to a halt, and triggered stop-work orders on thousands of U.S. projects.A sign explains that only exempted employees could remain at work at the Federal Trade Commission in Washington D.C. Photographer: Julia Schmalz/Bloomberg

Eliza Montgomery works as a scientist at NASA’s Kennedy Space Center helping figure out how to grow lettuce in zero gravity.

That project came to a halt on Oct. 1 with the partial U.S. government shutdown, when Montgomery and her fellow workers were sent home. Unlike the federal employees she works alongside, Montgomery is a contractor and there’s little chance she will ever recoup wages lost during the budget fight.

“It’s going to get complicated,” said the 36-year-old single mother from Mims, Florida. “I’m only buying the essentials, because I don’t know how long this will go on.”

The shutdown brought most business at several federal agencies -- including NASA -- to a halt, and triggered stop-work orders on thousands of U.S. projects. Even when federal workers return, any prospective deal to restore back pay won’t apply to the millions who toil as cooks, cleaners, researchers and analysts on a contract basis.

“It’s been a crazy time because there’s uncertainty about what the rules of the game are,” Elizabeth Ferrell, a partner at McKenna Long and Aldridge LLP in Washington, said in an interview. “This uncertainty is terrible for government, terrible for workers and terrible for the contractors.”

There are an estimated 7 million full-time equivalent jobs tied to U.S. government contracts, Paul Light, a public policy professor at New York University, said in a phone interview. The estimate includes those who work outside of government for private firms, as well as those who work inside government agencies “sitting side by side next to federal employees,” Light said.

Defense Recall

The House of Representatives has passed a bill to provide retroactive pay to workers directly employed by the government, once it is resolved. The administration of President Barack Obama “strongly supports” the measure, which is pending in the Senate.

As Obama and Congress keep wrangling over a deal to raise the $16.7 trillion debt limit and fully fund federal activities, the shutdown of U.S. facilities continues into a third week, leaving hundreds of thousands of full-time federal workers still at home.

Defense Secretary Chuck Hagel on Oct. 5 recalled at least 90 percent of about 350,000 civilian workers the Department of Defense furloughed five days earlier. That helped some defense companies keep their own contract workers on the job.

‘Ego Game’

Other hourly workers haven’t been as lucky.

John Anderson is a cook at the National Museum of the American Indian, earning $10.50 an hour from the company that operates the cafeteria. The day the museum shut, he and the other employees were given a simple message: stay home.

Anderson says he doesn’t resent the calls for full-time federal workers to get back pay and places the blame for the crisis on Congress: “I feel like I am a pawn in an ego game,” Anderson said in an interview. “We’re barely making it day to day.”

Some of the largest government contractors are having their employees work on other projects, enroll in training courses or take paid leave, according to Alan Chvotkin, executive vice president of the Professional Services Council, an Arlington, Virginia-based trade group that represents more than 300 vendors including CACI International Inc. and Booz Allen Hamilton Holding Corp. (BAH:US)

As time goes on “regrettably, a number of employers are putting their employees on leave without pay,” Chvotkin said. “They are doing all they can to keep them whole.”

Ripple Effect

Economists said this week that an extended period of government inactivity would have a ripple effect on the U.S. economy. The shutdown has already provoked Bank of America (BAC:US) Merrill Lynch economists to slice their forecast for U.S growth this quarter to 2 percent from 2.5 percent. A monthlong impasse could cut activity more deeply and undermine financial markets, according to Gustavo Reis, a senior international economist at BofA Merrill Lynch.

Claudia Payne, a contractor to the Federal Aviation Administration, is preparing for a month out of work. Her firm is letting her use up vacation time, and even borrow 40 hours of future vacation in order to continue getting paid. Yet by the end of October, she will be without a paycheck, and still face an $800 health-care premium bill.

Then there’s the prospect of trying to catch-up once work resumes, and no vacation time during her children’s holidays at the end of the year. “How are we going to be able to afford Christmas, because I’m certainly going to be in the hole,” the Cheverly, Maryland resident said.

Vacation Time

Montgomery, the NASA contractor, also used up her accumulated vacation time before being forced onto unpaid leave this week. “Only things that can give me credit problems are getting paid now,” she said.

Some companies are returning their employees to work, after the Department of Defense recalled most of its employees on Oct. 5, according to Chvotkin. Other agencies are set to begin furloughs or phase in deeper cuts, which could lead to contractor layoffs. And efforts to keep paying employees may end at some firms.

About 120 of the 600 federal contract employees at accountant firm Grant Thornton LLP have been told to “stand down,” so far, said Srikant Sastry, managing principal for the company’s public sector practice. The shutdown is costing Grant Thornton $500,000 a week, because “we’re still paying” workers without getting paid by the government, he said.

As for the long-term impact? Sastry said: “It does make me think twice about hiring.”

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Kathleen Miller in Washington at kmiller01@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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