US Government Reopens: What to Know

With the federal government reopening, US agencies are resuming operations while beginning to tackle the challenges created by the shutdown. This LawFlash provides a rundown of how government bodies are addressing these concerns in areas including contracts, healthcare, state, digital assets, labor, trade, environmental, security, and more.

The federal government reopened on November 13, following the passage of a continuing resolution and a three-bill FY26 “minibus” appropriations package. The negotiated end to the longest shutdown in US history will fund the government at current rates through January 30, 2026.

Notably, the Supplemental Nutrition Assistance Program (SNAP), administered through the Department of Agriculture, is fully funded through September 30, 2026, thus alleviating many concerns for food, beverage, agricultural, and supply chain businesses.

Additionally, the legislation rescinds all federal government reductions in force that were imposed after September 30, 2025 and sets up a vote in the US Senate on the future of the Affordable Care Act (ACA) premium tax credit subsidies by mid-December.

As Congress spends the next several weeks on the remaining FY26 appropriations and other legislative priorities, such as the National Defense Authorization Act, agencies have resumed operations and are addressing backlogs and other challenges created by the shutdown.

GOVERNMENT CONTRACTS AND FUNDING AGREEMENTS

Companies selling to or collaborating with the US government are returning to pre-shutdown operations. However, many of these companies incurred significant costs winding down and ramping up operations as a result of the shutdown due to a pause in work and necessitating personnel actions.

Additionally, if contractors were unable to access government facilities or receive direction from government personnel to perform their duties, they may have been limited in the amount of work they could complete. Conversely, some contractors may have experienced an expansion in their scope of work to address the unavailability of staff at certain agencies during a shutdown.

The shutdown may also have impacted contract deadlines and may necessitate acceleration and overtime pay now that performance has resumed to avoid contract penalties or default. These factors—which may have ranged from maintaining an idle workforce, reducing the size of the workforce, demobilizing and remobilizing equipment, or performing out-of-scope tasks—could each result in expenses that may be recoverable from the government now that it has reopened.

Depending on the nature of the contract, the work at issue, and the impacts of a shutdown, a claim for reimbursement can take many forms. Importantly, though, most paths to relief impose fairly tight timelines for providing notice to government agencies. For example, the standard changes clauses in the Federal Acquisition Regulation (FAR) (FAR 52.243-1; FAR 52.243-2) require contractors to assert their right to an adjustment within 30 days of an order from a contracting officer that creates a constructive change.

Similarly, the Suspension of Work clause (FAR 52.242-14) that applies to fixed-price construction contracts can bar recovery of costs incurred more than 20 days before the contractor notified the government in writing of the government’s “act or failure to act” that triggered the harm.

Other clauses that could provide bases for remedies, such as the Government Delay of Work clause and the Stop Work Order clause, impose similarly short 20- and 30-day deadlines. See FAR 52.242-15(b)(2); FAR 52.242-17(b).

Therefore, assessing increased costs associated with the shutdown and determining whether relief may be sought from the US government should be a consideration that is top of mind now that the government has reopened, particularly as the clock for some expenses may have started as early as when the shutdown began on October 1.

HEALTHCARE

Notwithstanding the protracted government shutdown of 43 days with the ACA enhanced premium tax credits a central focus of the Democrats, the Continuing Resolution (CR) did not extend those tax credits, though Senate Majority Leader John Thune pledged to have a vote on the issue in mid-December. President Donald Trump has been sending signals that he may not support extending those ACA premium tax credits and instead the White House and some within Congress have floated a Health Savings Account approach alternative. The ACA premium tax credits expire December 31, 2025. House Speaker Mike Johnson has not committed to a floor vote before the tax credit expiration date.

Various extensions or renewals of expiring healthcare programs were also included in the CR, including the Hospital-at-Home initiative. Medicare flexibilities for telehealth were extended, retroactive to October 1, through January 30, 2026. The CR also included some relief on Medicare physician payment cuts related to a 2% federal budget sequestration.

With the next funding deadline for many programs of January 30 looming, there remains a significant policy and legislative gap to navigate.

SHUTDOWN IMPACT ON STATE AND LOCAL GOVERNMENTS

State and local governments are highly dependent on federal funding. Much of that was suspended due to the lapse in appropriations during the shutdown and is paid out on a monthly basis. This causes particular issues for Medicaid fraud prosecutions because federal funds account for approximately 75% of state budgets for that type of fraud.

In some states, the state simply picked up the costs and will now receive those funds under the CR. In others, operations were slowed or stopped, as the state lacked the cash balance to maintain full discretionary activities. Those activities will now pick up again and continue at least through January 30, 2026, when the current CR covering the US Department of Health and Human Services, which includes Medicaid, ends.

DIGITAL ASSETS (CFTC AND SEC)

The federal government’s reopening after the shutdown will support the work of the Commodity Futures Trading Commission (CFTC) and US Securities and Exchange Commission (SEC) in furthering the US administration’s goal to enhance the United States’ prominence in the digital assets industry. Draft legislation concerning market structure is working its way through Congress and would make the CFTC a significant regulator of digital assets (e.g., digital commodities and spot markets) as well as assign an important role to the SEC (e.g., investment contracts).

The nominee for chair of the CFTC had his nomination hearing this week and, if confirmed, would bring knowledge and experience in the area given his current role as head of the SEC’s crypto task force.

The SEC has remained active—for example, Chair Paul Atkins’ announcement on the last day of the shutdown reflected plans for enhancing legal and regulatory clarity over activities within its jurisdiction.

Post-shutdown, the SEC and CFTC are now able to more actively resume their collaboration on the Project Crypto/Crypto Sprint initiative. However, there may continue to be delays while both agencies resume operations post-shutdown, which will include processing the backlog of pending matters and other priorities.

IMPACT ON NLRB PROCEEDINGS

During the shutdown, union elections and unfair labor practice investigations were suspended. Filing deadlines were tolled, meaning statutory timelines were paused and will now resume. Employers should expect hearings and elections to be rescheduled, but not immediately—weeks of delay are likely as the National Labor Relations Board (NLRB) prioritizes cases.

In fact, the NLRB faces a substantial backlog of postponed hearings, investigations, and decisions. High-profile or time-sensitive matters may receive priority, but routine cases could see extended timelines.

Further, with operations restarting, expect renewed outreach from regional offices and enforcement actions that were on hold. Employers should prepare for a surge in activity as the NLRB seeks to catch up.

Notably, the NLRB has been operating without a quorum for most of the year. The confirmation status of President Trump’s picks for two new Board members remains uncertain after the Senate failed to advance the nomination of one of those members last week. The NLRB could remain without the necessary three members through early 2026.

With the NLRB unable to make final decisions without a quorum—further exacerbated by the government shutdown—several states have enacted or are considering enacting laws intended to fill the labor enforcement void. While these laws likely are preempted by federal labor law and are being challenged, some employers may find themselves defending actions under these new state labor edicts.

FTC

Federal Trade Commission (FTC) Commissioner Melissa Holyoak, one of three appointments by President Trump to the FTC has resigned to accept an appointment as interim US attorney for the District of Utah and presumably as the nominee for the permanent position. She is the former solicitor general of Utah. Until her replacement is confirmed, the FTC will function with just the chair and one commissioner. We do not anticipate that this will change the FTC’s policy or case-related decisions.

DOJ

During the recent federal government shutdown, the US Department of Justice (DOJ) operated under its contingency plan, limiting most non-essential civil functions while continuing core law-enforcement work, including criminal investigations and prosecutions, and critical national-security operations remained staffed. However, many grant-making offices were shuttered, furloughing staff and delaying services. Antitrust and merger-review work carried on in a reduced capacity with more limited personnel. Since reopening, DOJ has been working to clear backlogs created by the lapse. Enforcement actions and investigations that were paused have resumed, statutory deadlines are being revisited, and the department is rapidly reengaging in civil litigation and grant management.

ENVIRONMENTAL PRIORITIES AND INITIATIVES

The Environmental Protection Agency (EPA) does not rely solely on annual appropriations to fund its operations and was able access funds from recent major spending laws appropriated to FY25, so-called “public law carryover” funds, to continue the implementation of the US administration’s environmental priorities and initiatives during the shutdown.

According to estimates provide by EPA union representatives, the US administration continued to fund approximately 40% of EPA staff to implement priority functions, including advancing new and existing chemical reviews, advancing repeal of the greenhouse endangerment finding, issuing new lead guidance (to replace guidance promulgated during the Biden administration), and advancing the proposal of a new definition of the “Waters of the United States,” which was released on November 17.

These continued operations mean that EPA is expected to resume normal operations and the administration’s environmental deregulatory initiatives without the delays that many predicted the shutdown would cause. However, the CR funding will lapse on January 30, 2026, which could present another hurdle to the implementation of those initiatives.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

The day-to-day work of the US Equal Employment Opportunity Commission (EEOC), including its investigations and enforcement activities, was largely paused as a result of the government shutdown. The resumption of government funding means those pending actions will resume. More importantly, however, the EEOC regained its quorum during the government shutdown with the confirmation of Brittany Panuccio as a commissioner. As we discussed in our previous LawFlash, Panuccio’s confirmation gives EEOC Chair Andrea Lucas greater ability to shape EEOC policy and enforcement priorities moving forward, particularly in the areas that interest the administration, such as diversity, equity, and inclusion, and religious discrimination and accommodation. We expect the EEOC’s reopening will be accompanied by increased activity from the agency in relation to those issues.

NATIONAL DEFENSE AUTHORIZATION ACT

Having passed a continuing resolution, funding the government through January 30, 2026, along with the first three FY26 appropriations, Congress can turn its attention to other pressing legislative priorities, including the FY26 National Defense Authorization Act. This annual “must pass” legislation establishes defense policies and priorities as well as authorizing programs and spending at the US Department of Defense for the 2026 fiscal year.

However, in addition to core legislative mandates, the National Defense Authorization Act also serves as a vehicle for a host of regulatory and policy riders. This year’s legislation is slated to introduce changes that could positively impact munitions and rare earth minerals suppliers and nontraditional defense contractors.

The legislation also contains provisions bolstering support for the defense industrial base and continues to emphasize the procurement of commercial products and services. As we have seen with the Federal Acquisition Reform Overhaul and the Department of Defense’s recent announcement of procurement changes (which we discussed in a previous LawFlash), the legislation seeks to codify a host of acquisition reforms, and similar to years past, it contains a number of policies enhancing the use of cybersecurity and the use of artificial intelligence throughout the department.

Both the Senate and House of Representatives have passed legislation that currently sits in reconciliation, and the legislation traditionally is signed into law by the end of the year.

NATIONAL SECURITY

In the national security and international trade space, certain regulatory processes came to a halt during the lapse in appropriations, and others continued but often at a slower pace. For example, the Committee on Foreign Investment in the United States (CFIUS) tolled all deadlines as required by its statute, but the US Department of the Treasury largely continued performing work as chair of CFIUS. Other CFIUS member agencies, however, either reduced or suspended their work on pending reviews.

With the shutdown now over, the clock has resumed on pending reviews, but CFIUS will likely need to deal with a backlog, which means that companies facing deal deadlines for transactions in front of CFIUS will need to be prepared to deal with potential delays. Other regulatory processes related to international security and international trade will also likely be subject to some degree of backlog, which means that especially for processes that do not involve mandatory deadlines for government action, the after-effects of the government shutdown may continue to be felt for some time.

TRADE-RELATED UPDATES

During the government shutdown, the US Department of Commerce’s Bureau of Industry and Security (BIS) suspended processing of most export license applications, other than emergency license applications involving US and allied military activity and the protection of US property and human life. However, BIS continued its export enforcement operations during the shutdown, including criminal investigations and prosecutions for export violations.

The US Department of State’s Directorate of Defense Trade Controls (DDTC) similarly suspended processing of export licenses as well as other services offered by the Defense Export Control and Compliance System (DECCS), such as advisory opinions and commodity jurisdiction determinations, unless such requests fell under excepted functions (again, related to emergencies and activities essential to national security).

The Department of Treasury’s Office of Foreign Assets Control (OFAC) also ceased accepting and processing sanctions-related licenses during the government funding lapse.

These suspensions across BIS, DDTC, and OFAC over the last month and a half will further increase processing times for new and pending export and sanctions-related license applications, so companies should anticipate or build additional time into their schedules or make the agencies aware of specific timing considerations.

On the import side, US Customs and Border Protection (CBP) suspended the processing of refunds and non-essential functions during the shutdown, but otherwise continued operations (including tariff collection) with the majority of CBP staff active and reporting to work.

Additionally, the US Trade Representative continued to perform functions related to the tariff program under the International Emergency Economic Powers Act (IEEPA), including negotiating with trading partners to address the asserted unequal trading relationships underlying the imposition of the IEEPA reciprocal tariffs. This resulted in recent modifications to the tariff rates for Chinese-origin goods as well as newly announced framework trade deals with a number of US trading partners.

TREASURY AND THE INTERNAL REVENUE SERVICE

While the Internal Revenue Service (IRS) managed to maintain normal operations for the first five business days of the shutdown using multi-year funding from the Inflation Reduction Act, the agency was eventually forced to trigger its lapse in appropriations contingency plan on October 8, 2025. This resulted in a dramatic reduction in workforce and services, with the IRS furloughing about half of its workforce.

The IRS exempted 39,982 of its 74,299 employees for certain essential activities—such as processing payments, protecting statutes of limitations, and drafting time-sensitive guidance to implement the One Big Beautiful Bill Act (OBBBA).

Non-essential functions, including taxpayer services and enforcement operations were substantially halted during the shutdown. Additionally, the Tax Court canceled multiple rounds of trial sessions.

Following the government reopening on November 12, 2025 and the resumption of normal operations, the Department of the Treasury and the IRS have shifted to a recovery footing. The shutdown interrupted the agency’s usual fall schedule for updating forms and publications and testing systems and, as a result, the IRS now faces face a compressed schedule to address this backlog and handle significant regulatory work and administrative preparation before the 2026 filing season.

This comes as the IRS is emerging from the shutdown with a workforce that is 25% smaller than it was in January 2025, with headcounts decreasing from about 102,000 employees to less than 76,000. This reduction in staffing has extended the time not only for processing returns and receiving associated refunds, but also for responding to taxpayer requests for assistance, assisting with processing challenges, and the issuance of all but the most essential guidance.

The IRS is focused on processing an accumulated backlog of paper returns and taxpayer correspondence and resuming audits. The Department of the Treasury and the IRS will also continue implementing the OBBBA, with guidance on bonus depreciation, tax-exempt status, green energy credits, and international topics expected in coming months.

LOOKING AHEAD

We anticipate that there will be over 1,000 pieces of proposed state laws, rules, and guidance proposed or issued by the start of legislative sessions in January 2026. These will require careful review, because states are not preempted in that space and one cannot predict which, if any, are or will be consequential. Some affected clients are already establishing internal teams or engaging legislative tracking services to monitor such updates.

STAY INFORMED

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For assistance with navigating the ever-changing tariff and trade landscape, Morgan Lewis has developed a Tariff Tracker tool.

Associate Connor Haffey is an author on this LawFlash