SequestrationGOP lawmakers advise defense contractors to issue sequestration-related layoff notices

Senators Lindsey Graham (R-South Carolina) and John McCain (R-Arizona) last week sent letters to fifteen defense firms advising them that they (the senators) would block any payments from the federal government to the business to cover the costs associated with not complying with the Worker Adjustment and Retraining Notification Act.

The act requires that an employer who employs more than 100 employees must provide a 60-day advanced notice to employees of mass layoffs or the closing of a plant. If the act is not followed, employees can sue for back pay and benefits for up to sixty days.

The Hill reports that with the government required to cut $500 million from the defense budget on 2 January 2013 unless the White House and Congress agree to a budget deal before that date, many defense firms are in limbo, as decision on the budget is not likely to be made before the presidential election next month.

Last week the Office of Management and Budget (OMB) informed defense contractors that they should not send notices of layoffs related to the threat of sequestrations, and that the federal government would cover any legal costs if contracts were cancelled and layoffs occurred.

McCain and Graham warned contractors they might be on the hook if they do not comply with the WARN Act.

“The law clearly states that workers must be notified at least 60 days in advance of a potential mass layoff or plant closure, and it is unclear to us, in light of the Administration’s refusal to plan for sequestration, how the Administration can guarantee that no sequester-related budget cuts or contract actions will occur on January 2 or shortly thereafter,” the senators wrote.

“Despite the Administration’s guidance not to issue WARN notices now, it is our fear that, should you rely on that guidance and fail to comply with the WARN Act requirements, you will be setting your company up for serious legal and financial repercussions,” they said. “The Congress should not put the taxpayers on the hook if a private company fails to follow the law.”

The two senators continued: “We will oppose any requested funding increase in the budget process, any programming action…or the use of any program funds to reimburse contractors for any expenses resulting from failure to comply with the law.”

The companies receiving the senators’ letter include Lockheed Martin, Raytheon, L-3 Communications, Northrop Gurumman, Hunting Ingalls, Boeing, General Dynamics, Honeywell International, CSC, SAIC, BAE Systems, ATK, ITT Excelis, EADS North America, and United Technologies.

It is not whether the senators’ letter has changed the decision of any of the defense contractors with regard to the 60-day required notification.

Many Republicans have accused the Obama administration of making the promise to cover the firms’ expenses as a way to gain votes just before the election.

White House press secretary Jay Carney told the media last week that the administration was “absolutely” not putting pressure on contractors to hold off on issuing the layoff notices. 

A spokeswoman for Lockheed Martin said the company’s decision not to send out the layoff notices before the election was based on assurances from the Pentagon late last week that there are no plans to start canceling contracts immediately.

“Our decision to delay sending [layoff] notices to our employees was based on new information that clarified the timeline for implementing sequestration budget cuts,” Lockheed said in a statement. “If sequestration occurs, we will adhere to the law and provide affected employees the full notice period required by the WARN Act at the appropriate time.”