Defense contractor Lockheed Martin heeded a request from the White House today - one with political overtones - and announced it will not issue layoff notices to thousands of employees just days before the November presidential election.
Lockheed, one of the biggest employers in the key battleground state of Virginia, previously warned it would have to issue notices to employees, required by law, due to looming defense cuts set to begin to take effect after Jan. 2 because of the failure of the Joint Select Committee on Deficit Reduction - the so-called Super-committee, which was created to find a way to cut $1.5 trillion from the federal deficit over the next decade.
Such massive layoffs could have threatened Obama's standing in the state he won in 2008 and is hoping to carry again this November.
On Friday, the Obama administration reiterated that federal contractors should not issue notices to workers based on "uncertainty" over the pending $500 billion reduction in Pentagon spending that will occur unless lawmakers can agree on a solution to the budget impasse, negotiations over which will almost definitely not begin until after the election.
Contractors had been planning to send out notices because of the WARN Act - Worker Adjustment and Retraining Notification Act - which according to the Department of Labor requires "most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs."
In a statement Friday, GOP Senators John McCain, Lindsey Graham and Kelly Ayotte accused Obama of putting "his own reelection ahead of the interests of working Americans and our national security by promising government contractors that their salary and liability costs will be covered at taxpayer expense if they do not follow the law that requires advance warning to employees of jobs that may be lost due to sequestration. … Apparently, President Obama puts politics ahead of American workers by denying them adequate time to plan their finances and take care of their families. The people who work in the defense industry and other government contracting companies deserve as much notice as possible that they are on track to lose their jobs."
In July the Labor Department issued legal guidance making clear that federal contractors are not required to provide layoff notices 60 days in advance of the potential Jan. 2 sequestration order, and that doing so would be inconsistent with the purpose of the WARN Act.
In Friday's memo, the Office of Management and Budget reiterated that notice, urging agencies' contracting officials and CFOs to "minimize the potential for waste and disruption associated with the issuance of unwarranted layoff notices."
The guidance issued Friday told contractors that if the automatic cuts happen and contractors lay off employees the government will cover certain liability and litigation costs in the event the contractor is later sued because it hadn't provided adequate legal warning to its employees, but only if the contractor abides by the administration's notice and refrains from warning employees now.
After "careful review" Lockheed announced today that it will abide by the administration's guidance.
"We will not issue sequestration-related WARN notices this year," Lockheed announced in a written statement. "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. The additional guidance further ensures that, if contract actions due to sequestration were to occur, our employees would be provided the protection of the WARN Act and that the costs of this protection would be allowable and recoverable.
"We remain firm in our conviction that the automatic and across-the-board budget reductions under sequestration are ineffective and inefficient public policy that will weaken our civil government operations, damage our national security, and adversely impact our industry. We will continue to work with leaders in our government to stop sequestration and find more thoughtful, balanced, and effective solutions to our nation's challenges," Lockheed said.
- Jake Tapper and Mary Bruce