Labor Department Rules WARN Notices Not Needed for Sequester; HASC Chairman Responds Angrily

Companies do not need to send out layoff notices 60 days in advance of the potential sequester in order to comply with the Worker Adjustment and Retraining Notification (WARN) Act according to a ruling from the Labor Department yesterday.  The ruling sparked an angry retort from House Armed Services Committee (HASC) chairman Howard “Buck” McKeon (R-CA).

Representatives of several defense and aerospace companies told HASC at a hearing on July 18 that they were concerned about complying with the WARN Act when it remains decidedly unclear as to whether the sequester will happen or what its impact on specific programs could be.   Robert Stevens, Chairman and CEO of Lockheed Martin, said his company might have to layoff as many as 10,000 employees, but he did not know which ones because he has not been told what programs will be cut or by how much.  Therefore the company might have to notify “a substantially higher number” of workers that they might lose their jobs, he said.

The Labor Department ruled yesterday, however, that such notices should not be sent.  On the question of whether the notices are needed, the ruling states:  “The answer to that question is ‘no.’  In fact, to provide such notice would be inconsistent with the purpose of the WARN Act.”  It said that although sequestration is a possibiity, “it is also known that efforts are being made to avoid” it and “[t]hus, even the occurrence of sequestration is not necessarily foreseeable.”    Other factors also make the potential impacts of sequestration unknowable and therefore potential layoffs are “speculative and unforeseeable,” it added. 

McKeon issued a blistering rebuke.   Calling the Labor Department’s ruling “politically motivated,” he accused President Obama of focusing “on preventing advance notice to American workers that their jobs are at risk” instead of working to get Senate Democrats to the negotiating table to resolve sequestration.

Sequestration will go into effect on January 2, 2013 pursuant to last year’s Budget Control Act (BCA) unless Congress changes that law or finds a way to reduce the deficit by $1.2 trillion by 2021.   Under sequestration, all government agencies categorized as “discretionary” spending, including the Department of Defense, NASA and NOAA, will be subject to immediate across-the-board budget cuts in order to reduce the deficit.  The estimate is that agencies will be cut 8 percent, although that will have to be absorbed in nine months rather than 12 since fiscal year 2013 will already be three months old at that point.  “Across-the-board” means that every activity would be cut by the same amount, rather than allowing agencies to decide which activities have higher priority than others.    Sequestration was included in the BCA as a “poison pill” in the expectation that its effect would be so dire that Congress would find some other solution to deficit reduction, but it has not worked so far.  Republicans and Democrats blame each other for the situation.