Thirty Days’ Notice

Last autumn, during the 43-day lapse in appropriations, the Office of Management and Budget told agencies to plan layoffs in programs whose funding had lapsed, and the agencies started sending the notices. About 4,200 federal employees received them, GovExec reported. Ten days ago the administration signed a settlement saying the policy behind those notices is gone.

The agreement, dated 23 September, ends AFGE v. Office of Management and Budget, the lawsuit a coalition of federal employee unions brought in federal court in San Francisco against OMB, the Office of Personnel Management and 39 other departments and agencies. Its first paragraph is a representation by the government: “The Lapse Memorandum and associated Guidance and Instructions have been rescinded in full and are no longer operative.” Every notice issued between 1 October and 12 November 2025 has been withdrawn, it says, and everyone separated under one has been reinstated. “They backed down,” Everett Kelley, president of the American Federation of Government Employees, told GovExec.

Most of that had already happened. Judge Susan Illston enjoined the lapse-related layoffs on 28 October 2025, and on 17 December ordered the notices rescinded. The bill that ended the shutdown barred layoffs through 30 January and required earlier notices to be rescinded, and the settlement records that the State Department, the General Services Administration and the Small Business Administration have paid back pay to the people they separated, under section 116 of Public Law 119-37 and the December order. The government appealed Illston’s orders and on 31 December asked the Ninth Circuit to dismiss its own appeal, which it did. In March it told the court the guidance “has been formally rescinded.” What the settlement adds is a set of promises about the next lapse, and each of them comes with a date.

What the agencies promised

Within 30 days, OMB and OPM are to tell agency heads in a published memorandum that the old guidance is rescinded, and the agencies are to take references to it off their websites. Within the same 30 days each agency is to strip from its shutdown contingency plan any language that “provides for initiation of RIFs during a lapse in appropriations” or that treats the work of carrying out layoffs as an activity allowed to continue during a lapse, “unless performing such work during a lapse in appropriations is expressly authorized by statute.”

The plans can be changed back. The unions “acknowledge that such operative contingency plans can change to include such language,” the agreement says, but a change “shall only take effect 30 days after the agencies provide notice of the change to Plaintiffs and publish the proposed change publicly.” If an agency gives that notice before the case is dismissed, the unions may ask the court to reopen it. Nothing in the agreement is an admission by either side.

The calendar

Then come the dates. The notice paragraph “shall continue to apply only to contingency plans operative through December 31, 2026.” The case is to be dismissed with prejudice on “the earlier of December 31, 2026, or the passage and enactment of fiscal year 2027 appropriations for all Federal Agency Defendants.” On 28 September Illston put the case on hold, with a joint status report due on 4 December and a status conference at 3pm on 11 December.

That is the day the government’s money runs out. Congress passed the stopgap for the new fiscal year a month early: the House agreed to the Senate’s version 370 to 48 on 1 September, and the President signed the Continuing Appropriations Act, 2027 the next day. Section 106 makes its funding available until whichever comes first of a full-year bill or “December 11, 2026.” None of the twelve regular appropriations bills for the year has become law. By the House Appropriations Committee’s count on 1 October, three have passed the House, and its Republicans say the Senate has not marked up one.

Put the two documents side by side and the protection has a shape. If funding lapses again when the stopgap expires after 11 December, the settlement’s terms are still running, and any agency that wanted layoff authority in its plan on the first day of that lapse would have had to give notice by about the middle of November, in public, with the unions entitled to go back to Illston. A lapse in January would fall after the notice paragraph expires and, if the parties follow the agreement, after the case has been dismissed. After 31 December the protection is whatever the law itself says, and no court has finally decided that: Illston’s rulings were preliminary injunctions.

The words in the statute

The settlement’s one exception points to Congress. Layoff work during a lapse is permitted where a statute expressly authorises it, and Congress can, in the same way, forbid it. It did so last year, in the bill that ended the shutdown, which barred layoffs through 30 January. The current stopgap contains nothing similar. The phrase “reduction in force” does not appear in Public Law 119-103. Its personnel provision, section 112, lets agencies spend faster on pay to avoid furloughs, which is a different thing.

So the next ten weeks decide more than the budget. If Congress passes full-year bills for every agency in the case before the end of the year, the case ends and the question waits for the next lapse. If it passes another stopgap, the rule against layoffs in a lapse will rest on an agreement that expires on 31 December and on whatever the next spending bill says about it.

Sources

The settlement agreement was read in full as published by Democracy Forward, one of the unions’ counsel; the joint motion to hold the case in abeyance and Judge Illston’s order of 28 September were read on CourtListener (No. 3:25-cv-08302, N.D. Cal.). The procedural history of the 2025 injunctions, the appeal and the government’s March motion is as the settlement recites it. The text of Public Law 119-103, its legislative history and the House vote are from Congress.gov. The number of notices issued in 2025 and the quotation from Everett Kelley are from GovExec; the House and Senate progress of the full-year bills is from the House Appropriations Committee’s release of 1 October; that none has been enacted is from Congress.gov’s list of public laws.