Federal contractors grilled on pre-sequester layoff notices

In letters to CEOs of 10 major government contractors, a key Republican lawmaker asked if the companies had consulted their own lawyers about whether layoff notices are required ahead of threatened across-the-board budget cuts slated to begin in January.

The letters from House Oversight Committee Chairman Darrell Issa, R-Calif., also asked the contractors to detail their communication with Obama administration officials about the 1988 Worker Adjustment Retraining Notification Act, which requires companies with more than 100 employees to issue notices to them 60 days before  mass layoffs or plant closures.  

The Labor Department said in July that it would be “inconsistent” with the WARN Act for contractors to send notices informing their employees that mass layoffs could result from the loss of business after across-the-board cuts leave government -- and especially the Defense Department -- unable to continue paying for contracts. The Office of Management and Budget said in September that the government would pay for related legal costs incurred by companies that follow Labor’s advice. And Defense has assured contractors that any devastating cuts to programs and contracts would not occur immediately in early 2013.

That guidance seemed to satisfy heads of many of the largest federal contractors, who have said they will not send WARN Act notices unless they get more details about how sequestration -- the dramatic cuts that will take effect in January if lawmakers don’t agree on an alternative long-term budget plan -- would affect them.

House Republicans were still skeptical. “The guidance seems intended to invite federal contractors to flout the law, and in doing so places a large contingent financial liability on the shoulders of American taxpayers in order to indemnify those contractors who follow the administration’s direction,” Issa told the companies.

The letter was addressed to the CEOs of Boeing Co., Lockheed Martin Corp., Northrop Grumman Corp., Science Applications International Corp., Raytheon, General Dynamics, Hewlett-Packard, Booz Allen Hamilton, Computer Sciences Corp. and DynCorp International.

In a separate letter to Obama administration officials, Issa sought more details on the legal reasoning behind the guidance from Labor and OMB. Ali Ahmad, a spokesman for the House Oversight and Government Reform Committee, said the commitment to pay legal costs related to sequestration may have changed the business decisions of some companies.

“Despite the Obama administration’s failure to be transparent about sequestration-related cuts and the Department of Labor’s instruction that contractors ignore their obligations under the WARN Act, many firms publicly indicated they thought it would be necessary to issue notifications to employees in early November,” Ahmad said. Early November is 60 days before the cuts are scheduled to take effect on Jan. 2.

“The White House’s commitment to foot the bill for WARN Act violation claims with taxpayer money evidently affected the decision-making of at least some of these firms, and the committee is seeking information about the White House’s motivations,” Ahmad said.

Spokeswoman Jennifer Allen said Lockheed Martin’s decision to delay sequestration-related layoff notices was based on the Obama administration’s clarification of the timetable for the budget cuts.

“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,” Allen said.