- The Washington Times - Tuesday, November 13, 2012

Republican lawmakers are pushing back on guidance from the White House saying that the federal government will reimburse defense companies’ liability or litigation costs for not issuing legally mandated layoff warnings to employees this year as deep spending cuts loom, with the companies maintaining postelection they are comfortable with the advice and have no plans to issue the notices this year.

“They’re intimidated by the White House,” Sen. John McCain said Tuesday of the companies. “No more, no less.”

The Arizona Republican and South Carolina Sen. Lindsey Graham recently sent a letter to 15 of the country’s largest defense contractors urging them to follow the federal Worker Adjustment and Retraining Notification (WARN) Act, which says that companies with 100 or more employees must issue layoff notices 60 days in advance if the cuts are “reasonably foreseeable.”

But EADS and Lockheed Martin, two companies that had previously hinted at issuing the notices this year, do not have plans to do so before year’s end — even though a 60-day deadline for sending the notices has come and gone before the official Jan. 2 date.

“Right now, we feel justified in a position that allows us to wait until we see more specifically how sequestration will impact us,” EADS spokesman Guy Hicks said.

Daniel I. Gordon, President Obama’s former administrator for federal procurement policy, says there is no need to rush, as the sequestration process would occur gradually in the event that it does indeed go into effect. Under the terms of last year’s deal to raise the federal government’s debt ceiling, the federal budget faces $109 billion in spending cuts equally divided between defense and domestic spending slated to take effect Jan. 2.

“It’s not until February until the federal government really has to begin acting on the sequestration,” said Mr. Gordon, now Associate Dean for Government Procurement Law Studies at George Washington University Law School, adding that it’s unlikely that the full slated cuts will go into effect anyway. “Nothing will happen on January 2nd. The federal government will be open; contractors will go to work.”

The federal government’s guidance says the companies do not have to issue the notices, and the Office of Management and Budget has said the government will foot associated legal or liability fees for companies who follow their advice. The Pentagon has also assured the companies that changes to contracts will not happen on or around Jan. 2.

Mr. McCain and Mr. Graham have vowed to block any allocation of money to cover companies’ compensatory or legal costs associated with WARN Act violations.

The Obama administration counters that the federal government paying for private companies’ layoff costs is legal under federal acquisition regulation, but there is no reason for taxpayers to incur costs because Congress has time to avoid the defense cuts.

Earlier this year, Lockheed Martin CEO Bob Stevens said that the cuts meant his company would send notices to all 123,000 of his employees.

But Lockheed, the federal government’s largest contractor, was later reassured by the federal guidance, said spokeswoman Jen Allen.

“Our decision to delay sending sequestration-related WARN notices to our employees was based on the new information that clarified the timeline for implementing sequestration budget cuts,” Ms. Allen said. “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.

BAE Systems, which said in a September letter to Mr. McCain the company had considered warning its employees, does not plan on issuing notices, either — for now.

“[I]f specific information becomes available that certain company facilities may suffer mass layoffs due to sequestration, we will issue WARN notices at that time as required by law,” said Brian Roehrkasse, a spokesman for the company.

Over the next eight years, another $1.1 trillion in cuts are slated. They are divided between defense and domestic spending. House Republicans have passed several bills to replace the sequesters with cuts elsewhere, but Senate Democrats have not taken up any of the bills.

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