Some of the nation’s largest military contractors told lawmakers they are struggling to determine if they should issue layoff warnings to employees in advance of potential across-the-board Pentagon budget cuts that may or may not start next year. A handful of the firms, though, appear poised to send out the notices this fall.
Senate Armed Services Committee (SASC) members, including ranking Republican John McCain (R-Ariz.), had asked major defense firms about how so-called sequestration budget cuts would impact them and if they plan to issue so-called WARN notices. The Worker Adjustment and Retraining Notification (WARN) Act requires a 60-day notice to employees of pending layoffs, and states including New York law require 90-day notification.
One of the more definitive answers on the likelihood WARN notices, from the 13 executives who responded to the SASC members’ questions about sequestration, came from Lockheed Martin. Its Chairman and Chief Executive Officer (CEO) Robert Stevens, like many of his colleagues, vented that President Barack Obama’s administration has not issued specific guidance on the sequestration cuts that would allow his company to precisely forecast the impact on various aspects of its business, its locations, and its contracts.
Still, Stevens said “our best judgment at this point” is that beginning in late September for New York employees and late October for those elsewhere in the country, “we may have to conditionally notify a substantially higher number of our employees than would actually be laid off that they may not have a job if sequestration takes place as planned.” He adds: “The notice to employees will be based on the best information available at that time. I do not look forward to sending these notifications, but in the absence of more clarity and certainty in how sequestration will be implemented, we have an obligation to tell them that their jobs are potentially at risk.”
Other companies that appear to be leaning toward issuing WARN Act notices, in their carefully worded letters, include EADS North America, General Dynamics [GD], and BAE Systems.
Sean O’Keefe, EADS Chairman and CEO, said: “In the absence of definitive guidance from (the Department of Defense) DoD, (the Office of Management and Budget) OMB and the Defense Contract Management Agency, we feel compelled to act in the spirit of this (WARN Act) law and in all likelihood will issue WARN notices to those employees engaged in ongoing federal contract activities.”
Jay Johnson, Chairman and CEO of General Dynamics, said without any “clarification” in the coming months, his company’s management “may conclude that considerations would warrant issuing a ‘conditional’ WARN Act notice in late October at defense business units likely to be most impacted by a sequestration.”
BAE Systems is “reluctant to issue conditional WARN notices to a broad range of potentially affected employees,” President and CEO Linda Hudson said. “However, due to the complexity of the situation, the act itself, and legal precedent, we believe that unless something changes, we may have no choice but to eventually do so.”
Many Democrats and Republicans in Congress oppose the sequestration cuts, as do Obama and Republican presidential nominee Mitt Romney. Lawmakers, though, have not been able to agree on an alternate plan to prevent them. Brought about by the Budget Control Act of 2011, the sequestration cuts would trim $500 billion from planned defense spending over the next decade.
Some Republicans have encouraged defense contractors to issue the WARN notices, to force lawmakers to grapple with the potential job losses and agree on an alternate budget-cutting plan to replace sequestration, which is slated to begin next January. However, to the GOP’s chagrin, Obama’s Labor Department said in July that contractors are not required under the WARN Act to issue the notices.
McCain’s office released letters yesterday that he and the other SASC Republicans received from 13 military contractors in response to their queries sent to 15 firms on June 29. All of the responses express some level of frustration, or at least inability to accurately respond to the lawmakers’ questions, because of the uncertainty surrounding sequestration.
The White House plans to send a report to Congress this week required by the Sequestration Transparency Act of 2012 and is supposed to explain how specific spending accounts would be slashed if the sequestration cuts are not stopped. While the cuts are designed to be across-the-board–and trim same percentage from every defense program, project, and activity–some aspects of the Pentagon budget are exempt.
Companies including Boeing [BA] told the SASC members they couldn’t give direct answers on whether they would issue WARN notices.
For example, Boeing Chairman, President, and CEO Jim McNerney said “while sequestration would undoubtedly prompt the issuance of WARN Act notices across the industry, we are not yet in a position to accurately predict whether and when we would issue such notices absent specific guidance as to how sequestration would impact Boeing programs.”
“Upon the receipt of such guidance from the U.S. government,” he said, “we would make plans to issue any necessary WARN Act notices.”
Sequestration continues to be a major issue in political circles this week, when Congress is back in Washington after its August recess. The GOP-led House plans to vote later this week on The National Security and Job Protection Act, a Republican bill intended to help stop the sequestration cuts in 2013. It also would require Obama to submit an anti-sequestration plan to Congress by Oct. 15.
The Romney and Obama campaigns have been trading barbs over their plans for the military and defense budget. Romney is slated to address the National Guard Association Convention in Reno today.