After 43 long days, the federal government’s longest-ever shutdown has mercifully come to an end; with little to no movement on the unrelated policy issues that served as the primary obstacles to an agreement. The political gamesmanship that we were forced to watch play out as workers were furloughed or unpaid, and benefits and services were suspended, has significant effects on the economy. The impacts of this shutdown extend beyond just the economy into legal implications for businesses, large and small. Some of the more significant issues retailers have or may experience include delayed regulatory approvals, insufficient compliance clarifications, labor dispute delays resulting in administrative backlogs, and supply chain disruptions.

How Government Shutdowns Disrupt Retail Operations

The federal government’s inability to keep its doors open does not mean that the wheels of commerce grind to a halt. Unfortunately, commerce and the federal government are inextricably intertwined. Think of a labor or wage dispute that needs to be resolved through an administrative hearing or a regulatory clearance that needs to be acquired to ship or receive materials or goods internationally. Both of those processes have a reputation for being backlogged in normal times, and the shutdown only exacerbates the problem.

Legal Risks and Contract Challenges for Retailers

Beyond regulatory and administrative legal landmines are contract disputes and the cost of pursuing them.

Consider a situation where a supplier is to provide goods to a merchant, the contract has a “time is of the essence” clause, and the shutdown makes delivery difficult or impossible. Certainly, the supplier may avail itself of an impossibility defense or rely on a well-written force majeure, “Act of God,” clause, but when interpreted narrowly, there is no guarantee of victory, and the cost of defending itself will be significant. At the same time, the merchant may have lost out on the opportunity to sell the goods, and realizing a remedy will likewise be costly.

In the case of a government shutdown of any length, everyone loses. Government closure is not the place to pursue a political “win” for any party or individual. Hopefully, Congress sees this reality now that we have gone through this painful exercise and continue to deal with its after effects.