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Layoff warnings used as a political football?

October 7, 2012 12:10 am


A-T Solutions is one of the Fredericksburg area defense contractors that could be affected by sequestration.

By Chelyen Davis

Defense contractors have a difficult decision to make in the coming weeks.

Should they go ahead and warn workers they might be laid off if Congress doesn't act by January to avert defense cuts? Or should they hold off on the dire warnings, hoping the defense cuts don't happen?

Last week the White House Office of Management and Budget suggested they do the latter, issuing a memo that said the federal government would cover some employee compensation and litigation costs for contractors that don't issue layoff notices if the cuts actually go into effect.

Republicans, though, say that's a politically-motivated stance and that Congress won't pay those costs.

The issue arises from the "sequestration" cuts. The package of cuts--billions of dollars over ten years, about half of it from defense--was put in place through a bipartisan agreement last summer to avert a debt default. Essentially, lawmakers agreed to put future cuts in place as a threat to encourage the negotiation of a different, less draconian package of spending cuts.

But such negotiations went nowhere, and the sequestration cuts are now due to start on Jan. 2 if Congress doesn't reach an agreement on how to avert them.

Those cuts will have a big impact on government contractors, and studies show that could result in thousands of jobs lost in Virginia, where the Northern Virginia economy especially is heavy on government contracting work.

Under the federal Worker Adjustment and Retraining Notification (WARN) Act, companies with at least 100 employees are required to give written notice to workers that they're going to be laid off at least 60 days before plant closings or mass layoffs, if possible.

For government contractors affected by the potential sequestration cuts, that 60-day window falls right before the presidential election next month.

But sequestration cuts aren't a sure thing-no one in Congress actually wants them to happen. The House of Representatives has passed a couple of bills to avert them, although the Senate has not taken similar action yet.

Given the heightened political atmosphere surrounding the fall elections, some members of Congress have said they doubt Congress will act further on sequestration until after the election, but Congress does have a "lame duck" session after the election in which it could act.

Since sequestration isn't a sure thing, the Department of Labor opined this summer that federal contractors should not give WARN notices to employees "because of uncertainty about whether sequestration will occur and, if it did, what effect it would have on particular contracts," according to the OMB memo.

"In reaching this conclusion, DOL explained that giving notice in these circumstances would waste States' resources in undertaking employment assistance activities where none are needed and create unnecessary anxiety and uncertainty for workers," the memo said.

Apparently, though, some contractors have said they're still considering issuing WARN notices and asked whether federal agencies would cover costs related to sequestration.

The OMB memo is intended to answer that. It says if sequestration cuts happen and contracts are changed so that contractors must lay off workers in such a way that they should have been subject to the WARN act, and if contractors have up until then acted under the DOL's guidance in not issuing WARN notices, then contracting agencies would likely pay employee compensation and attorney fees if the contractor was sued by employees.

Republicans say that's nothing but pure politics, intended to prevent a sea of pink slips from going out right before President Barack Obama hopes to be reelected.

"For an administration that talks a lot about transparency, it is disappointing that they apparently think it is more important to protect their political interests than give hard working families any indication that they might in fact lose their job in 60 to 90 days due to inaction by the President and Senate Democrats," said House Majority Leader Rep. Eric Cantor, R-7th, in a written statement.

South Carolina Republican Senator Lindsey Graham told Politico that the OMB's promise to cover legal costs was purely political and in no way binding on Congress.

"They fail to issue these notices at their own peril. I hope they get sued," Graham told Politico. "There will be absolutely no way Congress will reimburse any contractor one penny if they find themselves in litigation. By not issuing the notices, they're on their own."

Chelyen Davis: 540/368-5028

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