As the federal government shutdown stretches into its second week, contractors operating under U.S. government contracts abroad, particularly those in conflict zones, are facing a complex and evolving landscape. The shutdown has introduced significant administrative and financial challenges, especially in the handling of Defense Base Act (DBA) and War Hazards Compensation Act (WHCA) claims. While employee benefits remain protected, the mechanisms for processing and reimbursing claims are under strain.
DBA continues to impose legal obligations on employers and insurance carriers, despite the furlough of Department of Labor (DOL) staff. Employers are still required to file Form LS-202, the Employer’s First Report of Injury, within 10 days of becoming aware of an injury. These filings must be submitted electronically via the SEAPortal, which remains operational during the shutdown.
Importantly, DBA benefits are paid by private insurance carriers rather than the federal government, ensuring that injured employees continue to receive medical and wage replacement benefits without interruption. However, the absence of DOL personnel means that formal responses, adjudications and correspondence may be delayed, creating uncertainty and potential compliance risks for employers who fail to maintain timely documentation.
In contrast, WHCA is directly affected by the shutdown due to its reliance on congressional appropriations. WHCA reimbursements, which are processed and paid by the federal government, are suspended during the lapse in funding. Insurance carriers are still obligated to pay DBA benefits for war-related injuries, but they must do so without the assurance of immediate reimbursement. This creates a temporary financial burden and may impact liquidity planning.
Historical precedents suggest that WHCA claims will accumulate during the shutdown, leading to significant processing delays and administrative bottlenecks once appropriations resume. To safeguard reimbursement integrity, carriers must maintain detailed and timely documentation of war-related claims, including incident reports, medical records and eligibility assessments.
Government contracting organizations must remain vigilant and proactive. Claims discipline is essential, and all DBA filings and documentation should continue without delay. Organizations should prepare for WHCA reimbursement delays and communicate with carriers about expected timelines and financial impacts. Internal coordination among HR, legal and risk management teams is critical to ensure that claims handling protocols are followed consistently. Monitoring DOL communications for updates on the resumption of WHCA processing and any procedural changes is also advised. Above all, organizations must reassure overseas staff that their benefits remain intact and that claims will be handled with diligence and care.
In conclusion, while DBA benefits continue uninterrupted and compliance remains critical, WHCA reimbursements are paused, creating financial strain and the potential for future backlogs. Electronic claims systems remain active, but the absence of DOL staff underscores the importance of thorough documentation and proactive planning. By maintaining operational discipline and preparing for post-shutdown challenges, government contracting organizations can mitigate risks and ensure continuity of care for their employees abroad.
For further details, consult the DOL Contingency Plan.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
