Time Running Out on Sequestration, Yet Admin Stands by WARN Act Defiance

Less than two weeks before devastating defense cuts are set to go into effect without a congressional rescue, the administration is standing behind its pre-election guidance to defense contractors to not issue WARN Act notices of potential layoffs.

“[Department of Labor] concluded that it is neither necessary nor appropriate for Federal contractors to provide WARN Act notice to employees 60 days in advance of the potential sequestration because of uncertainty about whether sequestration will occur and, if it did, what effect it would have on particular contracts, among other factors,” said the memo from the Office of Management and Budget last year.

Lockheed Martin Corp., the world’s largest defense contractor, rescinded plans to issue layoff notices after “careful review” of the guidance and other contractors were similarly cautious.

If notices under the law had been issued for the Jan. 2 sequestration, they would have been required to go out just before Election Day. The can was kicked on sequestration to March 1 in the New Year's Eve fiscal cliff deal, but no solution is near to avert the $1.2 trillion in cuts.

The OMB also made clear in that memo that those companies who decide not to issue WARN Act notices, yet get hit with legal recourse under the law if sequestration layoffs occur, could send the “reasonable and allocable” bill to the contracting agency — thus sticking taxpayers with the tab.

"Our analysis and guidance regarding the WARN Act's application to sequestration was and is correct," Jane Oates, assistant secretary of Labor for Employment and Training Administration, said late last week at a hearing of a subcommittee of the House Committee on Education and the Workforce.

"Funds were not sequestered on January 2, 2013, nor were contracts terminated, plants shut, or to our knowledge, unnecessary advanced notices sent. Just as important, lives and businesses were not disrupted unnecessarily, and resources were not wasted," Oates continued.

Subcommittee on Workforce Protections Chairman Tim Walberg (R-Mich.) noted that for half a year the committee was requesting documentation and communication related to that guidance -- and finally received a response slipped under the committee's door, more than 400 pages on CD, at 9 p.m. the night before the hearing.

"Do you know if it does contain that information that we requested?" Walberg asked Oates.

"The direct answer would be no, sir," she replied. "But I need to tell you that the department takes seriously all of the questions that Congress puts up there."

"We will undertake looking at these 400 pages. And on the basis of what we find out, I guess, we'll decide where we go from here," Walberg said. "But I'm disappointed that it took a committee hearing to be called for us to get that."

Kerry Notestine, a shareholder in Littler Mendelson, which represents management in employment matters, reminded the committee that as a senator President Obama wanted to broaden WARN to prevent employers from using what he called "loopholes" in the act to withhold notice.

"While the Department of Labor and OMB guidance appear to benefit employers by potentially relieving them of obligations under WARN, I would note that they appear to do so at the expense of thousands of employees who, as President Obama put it, deserve to know when their jobs are in jeopardy," Notestine said.

"Additionally, circumstances have changed since the DOL issued its opinion six months ago. Sequestration appears more likely to occur this time around. And new information's coming out every day regarding where the government will be implementing these cuts. The chances of employers successfully claiming that layoffs and plant closings are unforeseeable are diminishing every day."

He also clarified that, while the administration's guidance seemed to assure contractors that they would be shielded from liability, "three critical omissions" in the guidance show that's not even the case.

"They fail to disclose that the DOL's guidance is not binding on federal courts, those entities that are responsible for enforcing the act," Notestine said. "They failed to mention that employers must give as much notice as possible once the layoff or closure becomes reasonably foreseeable…without this additional statement, the statutory exception relied upon by the DOL becomes unavailable."

"They failed to mention that, notwithstanding federal WARN, there are numerous other potential areas of liability that a contractor may be subjecting itself to by failing to provide notice," such as state laws, he added.

Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, pulled no punches in her written testimony to the committee. "I am not privy to internal White House discussions, but it is likely that the White House asked contractors to break the law in the interest of the reelection of President Obama," Furchtgott-Roth wrote.

"I think it's likely that your statement is motivated by political malice against the administration -- not being a fact, I didn't say certainly, I said likely as well," shot back Rep. Robert Andrews (D-N.J.).