As budget negotiations break down and a federal government shutdown appears likely, unemployment insurance (UI) benefits and Unemployment Compensation for Federal Employees (UCFE) can be a lifeline for federal workers and contractors. If Congress fails to pass either appropriations bills for specific agencies or a Continuing Resolution, workers at agencies whose funding lapses will stop receiving pay, and in most cases will be unable to report to work. Many of these workers will need help just to get by.
While federal workers are often thought to be reasonably well compensated middle- and upper-middle-class workers—with savings and other resources to match—that is not true for all. The base federal pay scale in 2023 doesn’t even hit $15 per hour until Grade 4 or 5, depending on the step. Likewise, many federal contractors aren’t making enough to live comfortably and set money aside. When the Biden administration ordered a $15-per-hour minimum wage (now $16.20 per hour), five states challenged even that basic floor. Unemployment is especially important for federal contractors, as they are far less likely to receive back pay than federal employees once the shutdown is over.
It is important for federal workers and contractors who may be living paycheck to paycheck to understand that they have a right to apply for unemployment benefits—even if they believe they will get their jobs back. Federal contractors are eligible for benefits under their state UI program, while federal workers can apply for UCFE, which is a federal/state program in which eligibility and benefits are mostly determined by state law, and applications are filed with the state UI agency. The Office of Personnel Management has issued guidance for furloughed workers, and this information is generally applicable to employees and contractors alike.
One of the most important things that federal workers should be aware of is that they may not be able to access online forms once a shutdown is in place, so they should print their SF-8 or SF-50 forms ahead of the shutdown, and contractors should make sure they have eighteen months of proof of income ahead of time, if they anticipate a shutdown. If a worker does not have an SF-8 or SF-50, past guidance from the U.S. Department of Labor has encouraged state agencies to accept affidavits, so it is advisable for workers to make sure they have access to any proof of income that they have now to be able to adequately represent their income when it is time to apply for benefits.
It is critical that workers understand that if they apply for and receive benefits, but later receive back pay (as most federal employees, but not most contractors, have after previous shutdowns), they will have to repay the UI benefits they received. However, that doesn’t mean that workers should not apply for benefits in the first place. Unemployment Insurance exists as a failsafe for workers who are not getting paid, through no fault of their own. This is not only to alleviate suffering for these workers and their families, but to help maintain local economies as well. While the state laws vary, if a furloughed worker is provided their back pay after the shutdown ends, they will be found to have a UI “overpayment,” which the state will then seek to recover. The state UI agency will issue a notice requesting repayment and seek other means to recover the benefits, if necessary. Thus, once back pay is awarded, workers should repay the state workforce agency as soon as possible, as the agency could still charge penalties for not repaying overpayments in a timely manner.
Another important issue for furloughed employees is that essential employees who are not getting paid but still have to report to work are not eligible for UCFE. This proved to be a hardship for workers during the previous lengthy government shutdown, especially workers lower on the pay scale. For example, Transportation Security Administration (TSA) agent salaries average between $38,000 and $62,000 per year, depending on the state, according to job site ZipRecruiter.com. However, in response to the lengthy 2019 shutdown, absent the option of covering them through UCFE, both the District of Columbia and Maryland passed legislation covering them under a parallel state-funded program. These bills provide a good model for legislation in other states, should they choose to pursue it. It is important to remember, though, that UI administrative dollars can only be used to administer UI, so any state following this model would have to identify funds to use to supplement the state agency to pay benefits.
Finally, unemployment compensation is meant to keep workers attached to work. For that reason, there is a core requirement for eligibility that claimants are able for work, available to work, and actively seeking work. Every state has work search requirements, but most states waive them for temporarily furloughed workers, since maintaining stability and attachment to work for them runs counter to the idea of requiring a weekly work search. However, if a claimant is in a state where work search is waived, that does not mean that the claimant can skip their weekly or biweekly certification process. Claimants should still follow all instructions from their UI agency about recertification.