The Obama administration is coming under fire for encouraging companies affected by the looming sequestration cuts to hold off issuing layoff notices as required by law, saying the WARN Act doesn't apply in this situation.
Sequestration was developed as part of the Budget Control Act of 2011, which raised the federal debt ceiling and promised to cut budget deficits by at least $2.1 trillion from 2012 to 2021. If the cuts weren't enacted, sequestration would automatically kick in, resulting in $1.2 trillion in mandatory cuts. Of that $1.2 trillion, $500 billion in cuts would apply to the military.
Under the requirements of the WARN Act, private-sector employers with 100 or more full-time employees are expected to give workers at last 60 days notice of plant closings and layoffs. Without warnings, employees can sue. That 60-day limit would hit many companies right before the November election.
A recent report warned that the sequestration cuts could push unemployment back above 9 percent and reduce projected growth in 2013 by two-thirds as millions of workers lose their jobs. Estimates for job loss include 48,059 health care jobs 98,953 construction jobs, 473,250 manufacturing jobs and 617,449 federal jobs.
In July, the White House released a memo stating it was "neither necessary nor appropriate" for federal contractors to provide WARN Act notices due to uncertainty about whether or not sequestration will occur.
On Friday, the Office of Management and Budget told contractors that if they do not issue mass layoff warnings, consistent with DOL guidance, then contractors will be compensated for legal costs if layoffs occur due to sequestration. The legal fees will be covered regardless of the outcome of the litigation, the White House memo said.
Sens. Chuck Grassley, R-Iowa, and Kelly Ayotte, R-NH, sent a letter requesting more information from the White House about the new guidance, saying it could cost taxpayers billions.
"What the administration has done raises serious questions," Grassley said. "In our letter of inquiry, we're asking what authority the administration is using to say it is okay to disregard the law and commit to pay for monetary judgments and other expenses resulting from lawsuits. If workers aren't given the notice they're due, the cost could amount to billions of dollars for taxpayers. The public deserves answers and accountability without delay."
"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," Ayotte said.
Sen. Lindsey Graham, R-S.C., also criticized the move, knocking Obama for what he perceives as a change in politics.
"In 2007, Sen. Obama wanted to extend the WARN Act notices to 90 days, up from 60, to ensure workers were treated fairly," Graham said. "Now, President Obama is trying to suppress the issuance of WARN notices, which will hit mailboxes right before the election. The Obama administration's legal advice is dubious at best."
Rick McHugh, an attorney with the National Employment Law Project, told Kathleen Pedner of the San Francisco Chronicle that the possibility of sequestration layoffs do not fall under the WARN Act requirements.
"The obligation to give notice arises once the employer believes or should have known that a mass layoff or plant closing is going to happen at a particular worksite," McHugh said. "At this point, no one knows with any certainty that layoffs will be taking place or not at a particular worksite."
As of September 20, top defense leaders said they were still acting as though sequestration would be averted. Top defense companies have warned about the cuts, saying they would be a "blunt-force trauma to industry and to America."
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