Election Impacts on Sequestration and the WARN Act
With the threat of sequestration looming, and no seemingly solution on the horizon, I’ve seen a lot on the Worker Adjustment and Retraining Notification (WARN) Act in the news recently. For background reading on sequestration, check out these previous blog entries here and here. The media has focused on how the WARN Act will affect defense contractors, as they will likely have the most layoffs from sequestration, but all GSA contractors should be aware of this law and its impact on your company.
First, you may be wondering what the WARN Act is and if it applies to you. The WARN Act became law in 1989, and it requires many employers to notify employees at least 60 days in advance of mass layoffs or plant closings. So exactly what employers does this apply to? The Department of Labor’s guidance says, “Generally, WARN covers employers with 100 or more employees, not counting those who have worked less than six months in the last twelve months and those who work an average of less than 20 hours a week.” If employers fail to comply, employees can sue for damages under the WARN Act. A mass layoff is defined as affecting at least 33% of full-time employees AND at least 50 full-time employees, OR at least 500 full-time employees.
It’s a noble idea – to provide employees with time to prepare before a potential layoff, try to locate a new job or perhaps enter a training program to make themselves more marketable in the workforce. But between the upcoming election and the sequestration issue, some argue that it’s become politicized. The required 60 day timeline would require contractors facing layoffs due to sequestration to issue notices to employees just days prior to the November 6th election.
The Department of Labor released guidance in July noting that contractors were not required to notify employees regarding the WARN Act because it is speculative whether sequestration will occur, and if it did occur, exactly which contracts it would affect. This memo from the Department of Labor was enough for some large contractors to announce they would not issue WARN notices, but some contractors still planned to notify employees, Lockheed Martin specifically. On September 28th, the Office of Management and Budget issued a memo noting that the Federal government, specifically the contracting/purchasing agency, would cover any legal fees accrued by contractors who did not issue WARN notices and were subsequently sued by employees. After OMB released this guidance, Lockheed Martin announced they would not issue WARN notices in early November.
This isn’t over yet. Senators John McCain and Lindsey Graham have sent letters to defense contractor CEO’s urging them to comply with the WARN Act, noting that compliance is not optional. Many Senate Republicans have also said they will block any taxpayer dollars from funding legal fees for companies who do not comply with the law. Will this make contractors reconsider? Will any WARN notices be issued, and will this impact the election? We’ll have to stay tuned.