http://www.heritage.org/research/reports/2012/10/urging-federal-contractors-to-violate-the-warn-act
On September 28, the Office of Management and Budget issued a “guidance” letter that assures defense contractors that the federal government will pay for any legal damages incurred for failing to issue layoff notices related to sequester-induced job losses as required by the Worker Adjustment and Retraining Notification (WARN) Act.[1] Specifically, the guidance states that “any resulting employee compensation costs for WARN Act liability as determined by a court, as well as attorneys’ fees and other litigation costs (irrespective of litigation outcome),” will “qualify as allowable costs and be covered by the contracting agency.”
In other words, the White House is telling defense contractors that the American taxpayer will compensate them for any liability incurred for violating federal law.
This guidance is the second notice issued by the government after defense contractors such as Lockheed Martin and EADS warned of impending layoffs because of automatic spending cuts in the defense budget.[2] However, the guidance is completely silent as to what legal authority enables the Administration to make such a guarantee—and for a good reason: There is none.
An Expensive Proposition
Sending employees layoff notices 60 days before a plant closing or mass layoff is required under the WARN Act,[3] a law that President Barack Obama previously supported. In 2007, when he wanted to amend the WARN Act to force employers to give 90 days’ notice, then-Senator Obama said:
American workers who have committed themselves to their employers expect in return to be treated with a modicum of respect and fairness. Failing to give workers fair warning…ignores their need to prepare for the transition.… Many of these workers support families that are living from pay check to pay check, squeezed by the demands of rising health care costs, the declining value of their homes, and wages that have been stagnant for decades. It adds insult to injury to close a plant without warning employees.[4]
Being shielded from this notice requirement no doubt provides comfort to defense contractors who, according to the law, would otherwise have to issue the notice letters by November 2 (four days before the election) in order to meet the January 2 start date for the spending cuts. Many of the defense contractor employees who would receive WARN notices are located in Virginia, a key battleground state.
Lawsuits related to a failure to meet the 60-day deadline can be very expensive, especially when multiplied by tens of thousands of affected employees, such as the 123,000 employees whom Lockheed CEO Bob Stevens said would receive such notices. Employers who violate the WARN Act are liable to their former employees for “back pay for each day of a violation” and “benefits under an employee benefit plan,” as well as a penalty of $500 for each day that notice has not been sent to the local government where the layoffs will occur.[5]