Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Trump administration settles with unions in case challenging mass firing of federal workers during 2025 shutdown, (Sep 28, 2026)
Organizations Mentioned:Altshuler Berzon, LLP
By Brandi O. Brown, J.D.
Under the agreement, litigation is paused and guidance directing agencies to fire employees during shutdowns has been abandoned.
A settlement agreement has been announced in a lawsuit brought by labor unions that challenged the Trump-Vance administration’s unlawful mass firing of federal employees during the 2025 government shutdown.
In the lawsuit, initially filed just as the shutdown was about to commence and later amended, the labor unions alleged that OMB and OPM exceeded statutory authority, acted contrary to law, and acted in an arbitrary and capricious manner in issuing the OMB Lapse Memorandum and associated OPM Guidance and Instructions directing federal agencies to engage in RIFs during a federal government lapse in appropriations. They also alleged that that OMB, OPM, and the named agencies violated the Appropriations Clause, exceeded statutory authority, acted contrary to law, and acted in an arbitrary and capricious manner by administering RIFs during the lapse in appropriations and that they acted in violation of the federal legislation that ended the lapse in appropriations, prohibited implementation of RIFs through January 30, 2026, and required the rescission of previously noticed RIFs.
“Federal employees should never have to wonder whether a government shutdown will cost them their paycheck and their career,” said NAGE National President David J. Holway. “A shutdown already creates tremendous financial uncertainty for workers and their families through no fault of their own. Threatening their jobs on top of that is unacceptable.”
Prior injunctive relief. Previously, the U.S. District Court for the Northern District of California issued a preliminary injunction preventing the administration from issuing or enforcing RIF notices at federal agencies where the unions represent employees. It later issued injunctive relief stopping the government from firing employees in violation of the shutdown-ending federal legislation and requiring reinstatement of any separated employees.
Provisions of settlement. The agreement announced late last week pauses current litigation and requires that federal agencies be informed within 30 days that the memo and guidance directing them to fire employees during federal government shutdowns has been abandoned.
Agencies also must remove references to the rescinded documents from their websites and revise contingency plans to eliminate provisions allowing reduction-in-force activities during funding lapses unless expressly authorized by law. Through December 31, 2026, any agency seeking to restore such provisions must provide plaintiffs with 30 days' notice and publicly disclose the change before it takes effect.
Case in abeyance for now. The parties will place the case in abeyance, and the case will be dismissed with prejudice once all fiscal year 2027 appropriations are enacted or December 31, 2026 arrives, whichever comes first. However, if an agency notifies plaintiffs that it intends to change a contingency plan before dismissal, plaintiffs may ask the court to lift the abeyance and resume litigation. Each side will bear its own fees and costs.
The lawsuit was brought by AFGE and AFSCME on September 30, 2025 and was later expanded to include employees represented by NFFE, NAGE, SEIU, NTEU, AFT, and IFPTE. The unions are represented by Altshuler Berzon LLP, Democracy Forward, and Democracy Defenders Fund.
“Federal workers keep our country running and serve our communities every day. They should be able to do their jobs and provide for their families without the threat of losing their livelihoods to score political points,” said SEIU International President April Verrett. “This settlement is a victory for working people and a reminder of what happens when workers stand together and refuse to be treated as disposable. No matter who sits in the White House, public servants deserve what every worker deserves: money to provide for their families, power over the decisions that shape their lives, and respect for the work they do. When we stand together, we can make sure they get it.”
The case is No. 3:25-cv-08302.
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