Two top Republicans said this week that the Obama administration may not have had the legal authority to tell defense companies that taxpayers will pick up their legal bills if the companies are sued because of layoffs resulting from pending defense cuts.
Sens. Chuck Grassley of Iowa and Kelly Ayotte of New Hampshire said the government could be on the hook for billions of dollars.
"We are concerned about the authority of the executive branch to instruct private employers not to comply with federal law and to promise to pay the monetary judgments and litigation costs that arise out of the lawsuits that may follow," the senators wrote in a letter late Monday demanding answers.
It's the latest twist in the fight over the automatic spending cuts, known in budget speak as "sequesters," that are due to take effect Jan. 2 under the terms of last year's debt deal.
With the Pentagon slated to take a hit of more than $55 billion, defense companies had said they were required under federal law to warn their employees of possible layoffs — and the notices would have gone out just before the November election.
Seeking to prevent that, the Pentagon and White House budget office said late last week that the cuts are speculative and said they won't immediately cancel any contracts Jan. 2. They also said the federal government would pick up any costs or liability the companies faced by issuing pink slips without the required warning.
With that new guidance in hand, Lockheed Martin Corp. and BAE Systems PLC on Monday said they will no longer be issuing the layoff notices, which the companies earlier had said would be needed under the Worker Adjustment and Retraining Notification Act, or Warn Act.
The White House on Tuesday denied it had pressured the companies.
"Absolutely not," press secretary Jay Carney said. "Individual companies like Lockheed make the decisions according to their own interests."
Mr. Graham and Ms. Ayotte, though, said the administration needs to explain why taxpayers should have to pay for the companies' decisions.
"The administration's new guidance tells employers to willfully ignore the law and stay silent about looming layoffs until after the election — and promises them a taxpayer-funded bailout for their legal expenses if they do so," Ms. Ayotte said. "The administration must explain its legal basis for this interpretation of the Warn Act that leaves taxpayers on the hook, American workers in the dark, and our national security in jeopardy."
Mr. Grassley is the ranking Republican on the Senate Judiciary Committee, and Ms. Ayotte is a member of the Senate Armed Services Committee.
An administration official told The Washington Times that the federal government paying for companies' layoff costs and liability is legal under "long-standing cost principles" in federal acquisition regulations, but there is no reason for taxpayers to bear the costs because Congress has time to avoid the defense cuts and "we are confident they will."
Sending out the notices just before the election could have angered thousands of voters in Virginia, a hotbed of defense contracting and a heavily contested swing state crucial to President Obama's re-election bid.
Republicans such as Sen. Lindsey Graham, South Carolina Republican and also a member of the Senate Armed Services Committee, as well as House Armed Services Committee Chairman Howard P. "Buck" McKeon, California Republican, expressed outrage Monday, accusing the White House of caring more about its re-election efforts than workers' job security.
The Labor Department has said sending out warnings would be inappropriate because Congress and Mr. Obama are trying to work out a deal to end the automatic sequesters.
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