After new White House guidance prompted defense contractors to back off from their threats of issuing layoff notices in the face of possible mandatory budget cuts, Republican lawmakers last week accused the Obama administration of politicking and vowed not to support its promises to contractors.
Bethesda-based Lockheed Martin, the Arlington-based U.S. business of BAE Systems and Herndon-based EADS North America had all warned that they might be required to issue layoff notices under the Worker Adjustment and Retraining Notification Act, or WARN Act, given the prospects that the sequestration process would begin in January.
But they moved away from those plans last week, citing a new White House memo. In the memo, the administration said 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.
Lockheed, the Pentagon’s biggest contractor, and BAE and EADS, which are discussing a possible merger that would require U.S. clearance, all said they now plan to take a wait-and-see approach in deciding if layoff notices are necessary.
Brian Roehrkasse, a spokesman for BAE Systems’ U.S. business, said that “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.”
Guy Hicks, a spokesman for EADS North America, said that EADS does not “feel compelled to automatically issue WARN notices [in] November,” but would do so if and when sequestration, as the mandatory budget cuts are known, affected the company’s operations.
Republican politicians reacted angrily to the new guidance from the Obama administration. Sen. John McCain (R-Ariz.) said in an Oct. 3 letter to Defense Secretary Leon Panetta that the Pentagon could face paying up to $4 billion to cover contractors’ liabilities.
“I intend to deny any transfers of defense dollars to reimburse contractors for costs that could have been avoided simply by complying with the law,” he wrote.
Rep. Howard P. “Buck” McKeon (R-Calif.) said in a statement that companies are “bow[ing] to the the threat implicit” in the Obama administration’s guidance.
“Instead of engaging with Congress months ago to chart a resolution to this crisis, President Obama decided to issue politically motivated memos with dubious grounding in the law,” he said. “In so doing, the president eliminated the very reason for having the WARN Act in the first place. Notifications will not be sent to those at risk, even though we have heard directly from CEOs in hearings this summer that layoffs will occur.”
Sen. Lindsey O. Graham (R-S.C.) accused the president of trying to suppress layoff notices before the election.
“This is the most outcome-based White House in memory,” he said in a statement.