Vermont labor commissioner warns federal layoffs, potential shutdown could slow unemployment claims

The Vermael House Committee on Commerce & Economic Development heard Jan. 21 that recent federal workforce reductions and the possibility of a federal shutdown could slow processing of unemployment claims in Vermont and increase adjudications, state labor officials said.

Commissioner (Vermont Department of Labor) told the committee the department is treating two separate buckets of cases: employees who are terminated and employees who are furloughed when a federal shutdown occurs. "We take that claim at the Department of Labor. We will also send a form to the federal government," the commissioner said, adding that wage records from the federal government often arrive slowly and the department therefore sometimes accepts claimant affidavits of wages.

The distinction matters for eligibility and timing. If the employer asserts a termination "for cause" — typically a performance-based separation in the current letters — the department must adjudicate the claim, and benefits are placed on hold while additional fact-finding occurs. If furloughed, nonessential employees who are unpaid while the government is closed generally are eligible for benefits but must repay any benefits later if they receive retroactive back pay when the government reopens. Essential federal workers required to work without pay are not eligible for unemployment benefits under federal rules, the commissioner said.

The department also described operational limits that could slow processing if many federal workers file claims at once. About 6,800 people work for the federal government in Vermont, a figure the labor department’s labor market information official provided to the committee. The commissioner estimated that roughly 25%–30% of claims statewide currently require additional fact-finding. "In most cases, just stating it's for performance, without any documentation would probably not rise to the level of a winning strategy," the commissioner said. "But at the same time, they would be placed on hold and not receive any benefits until that was adjudicated."

Committee members pressed for timing details. Emily (committee member) asked what a reasonable time standard is for an employer to respond; the commissioner said the department typically allows fewer than 10 days, and that a five-day response window had been mentioned in the meeting.

Officials said the department’s adjudication backlog has improved since the pandemic but remains a constraint: the commissioner reported an average adjudication time of "less than 60 days," with a stated goal of returning to a 21-day federal target as modernization and staffing allow. "Any disruption or influx into the system just further pushes us away from trying to obtain those federal time lapse numbers," the commissioner said.

Committee members raised concerns about nonprofit and reimbursable employers who lose federal funding and then lay off staff, noting those layoffs during COVID created pressure on the state trust fund. The commissioner said the department is monitoring daily data and will share regular reports if it detects an upward trend. "If we start to see the snowball rolling down the hill, if you will, we'll start sharing that on a regular basis," the commissioner said.

The commissioner offered to return with additional staff, including the interim UI director and general counsel, to answer more detailed questions if the committee wants further briefings.

The committee did not take any formal action on the issue during the Jan. 21 meeting.