The Trump administration has agreed to withdraw a policy that gave federal agencies open-ended authority to conduct mass layoffs during government shutdowns, settling a lawsuit brought by public-sector unions.
The agreement made public on Friday requires the administration to abandon guidance that directed agencies to initiate reductions in force during a lapse in funding. Agencies must also remove blanket layoff authorisations from their shutdown plans and provide 30 days’ notice before making changes that would restore them.
The unions sued at the beginning of the 2025 shutdown, arguing that the Office of Management and Budget was using the funding lapse to dismantle parts of the civil service beyond what appropriations law allowed. A federal judge in San Francisco temporarily blocked more than 4,000 planned dismissals while the litigation proceeded.
The settlement resolves that challenge without a final judicial ruling on the broader limits of presidential authority during a shutdown. It replaces the disputed policy with notice obligations that should give employees and unions time to seek review if agencies attempt similar action in the future.
The case is American Federation of Government Employees v. Office of Management and Budget in the US District Court for the Northern District of California. Court approval and implementation of the filed agreement remain the final procedural steps.
