Unions win settlement forcing Trump administration to rescind shutdown mass-firing policy

Federal employee unions have won a settlement requiring the Trump administration to rescind the guidance it used to fire roughly 4,200 workers during last fall’s 43-day government shutdown, according to Federal News Network and Government Executive. The agreement, signed September 25, resolves a lawsuit brought by the American Federation of Government Employees, the National Federation of Federal Employees and the National Treasury Employees Union against the Office of Management and Budget.

Under the settlement, OMB and the Office of Personnel Management must notify every federal agency within 30 days that guidance authorizing reductions in force during a lapse in appropriations has been rescinded. Agencies must strip language permitting shutdown-related layoffs from their contingency plans, including provisions that had classified RIF administration itself as “excepted work” exempt from the shutdown. Any agency that later wants to reinstate the authority must give the unions 30 days’ notice and publicly post the revised plan.

The layoffs at issue went out during the 43-day shutdown that ran through the fall of 2025, hitting the Environmental Protection Agency and the Departments of Commerce, Education, Health and Human Services, Homeland Security, Housing and Urban Development, and the Treasury. Government Executive reported that a federal judge in San Francisco issued a preliminary injunction blocking enforcement of the RIF notices, and that the spending package which ended the shutdown barred agencies from carrying them out. A later funding bill extended that protection through mid-February 2026. Under the new settlement, all of the roughly 4,200 notices are rescinded and the employees who were separated have been reinstated to their positions.

AFGE National President Everett Kelley called the outcome a vindication of the union’s legal fight. “Today, working people won,” Kelley said, according to Federal News Network. “The administration tried to turn a shutdown into an excuse to fire the public servants who keep this country running, and we said no.” In a separate statement carried by Government Executive, Kelley put it more bluntly: “We fought back, we held the line, and they backed down.”

Other union leaders who joined the case echoed that assessment. NFFE National President Randy Erwin called the administration’s original shutdown firings “highly illegal” and “a new low.” NTEU National President Doreen Greenwald said the settlement protects “a government that works for the people it serves.” American Federation of Teachers President Randi Weingarten, whose union was among those pursuing related litigation, called the result “yet another rebuke to this administration’s illegal attacks” on the federal workforce.

Litigation stays open through the end of the year

The case, filed as American Federation of Government Employees et al. v. Office of Management and Budget et al., is not being dismissed outright. Government Executive reported that the lawsuit will be held in abeyance through the end of 2026, giving the unions a mechanism to reopen it if the administration does not follow through on the settlement’s terms. The 30-day notice requirement for any future attempt to revive shutdown RIF authority is designed to give the unions advance warning before another lapse in government funding.

The settlement does not change the underlying legal authority of the executive branch to conduct reductions in force outside of a shutdown, and it does not address severance, back pay beyond reinstatement, or the roughly two-week gap in pay and benefits that separated workers experienced before the injunction took effect. It applies specifically to the shutdown-contingent RIF guidance issued by OMB and OPM last year, which the settlement now requires both agencies to formally withdraw within 30 days of the September 25 signing.