Trump Administration Settles Union Lawsuit, Rescinds Mass Layoff Policy for Government Shutdowns

The Trump administration agreed to withdraw guidance that allowed federal agencies to conduct reductions-in-force (RIFs) during government shutdowns, settling a lawsuit brought by a coalition of federal employee unions. The settlement rescinds RIF notices sent to about 4,200 employees during the 43-day shutdown in fall 2025, reinstates separated workers, and requires agencies to remove RIF authorization from their shutdown contingency plans. The case will be held in abeyance until the end of 2026, allowing unions to reopen it if the administration again attempts to use a funding lapse to fire employees. The reversal marks a concession after a federal judge had blocked the layoffs and Congress prohibited them in spending bills. The original guidance, issued in 2025, had directed agencies to use funding lapses as justification for mass layoffs, which led to the lawsuit.