Defense contractors back off layoff notice threats ahead of sequestration

October 1, 2012

Several defense contractors on Monday backed off threats to issue layoff notices to employees in coming weeks, a move they had said might be required given the threat of mandatory federal budget cuts in January.

Bethesda-based contracting giant Lockheed Martin and the U.S. arm of Britain’s BAE Systems, which is based in Arlington County, said they would not issue the notices this year. Under the federal Worker Adjustment and Retraining Notification Act, or Warn Act, states require advance notice of mass layoffs or facility closures.

The White House issued a memo late last week that directs contractors to follow the guidance of the Labor Department. In a July letter, the department said the Warn Act does not require contractors facing sequestration to send notices to their workers that they could be let go.

In its new guidance, the White House said that if sequestration occurs and an agency terminates or changes a contract that results in a plant closing or mass layoff, the contractors’ liability and litigation costs under the Warn Act would be “allowable costs” covered by the contracting agency.

“The additional guidance offered important new information about the potential timing of DOD actions under sequestration, indicating that DOD anticipates no contract actions on or about 2 January, 2013, and that any action to adjust funding levels on contracts as a result of sequestration would likely not occur for several months after 2 Jan,” Lockheed said in a statement.

Brian Roehrkasse, a spokesman for BAE Systems’ U.S. business, said BAE also will not issue Warn notifications to its employees.

“However, if 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,” he said in an e-mail. “Unless sequestration is avoided, we eventually may have no choice but to issue Warn notices to potentially impacted employees.”

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