Trump Administration Rescinds Shutdown Mass-Layoff Policy in Settlement With Federal Unions

The administration agreed on September 26, 2026, to rescind the policy behind roughly 4,200 reduction-in-force notices issued to federal employees during the 43-day 2025 shutdown, settling a lawsuit by the American Federation of Government Employees. Under the deal, OPM and OMB have 30 days to tell agencies the shutdown-era RIF guidance is rescinded, affected employees are to be reinstated, agencies must strip RIF language from shutdown contingency plans, and future changes require 30 days' notice to unions and public posting. The original notices, spanning Commerce, Education, DHS, HUD, Treasury, EPA and HHS, had already been blocked by a San Francisco judge's preliminary injunction and a congressional ban on implementation through mid-February 2026.

The episode tested whether a lapse in appropriations can be used to drive permanent workforce reductions rather than bridge a temporary funding gap, bearing on civil-service protections and Congress's power of the purse. A negotiated rollback, after a court and Congress had already blocked enforcement, leaves the underlying legal question about the administration's authority unresolved rather than settled by judgment.

The settlement holds the lawsuit in abeyance through year-end, letting the unions reopen it if a future shutdown produces similar layoff notices.