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Despite growing warnings from GOP Senators, government contractors appear unconvinced that they must issue sequester-related layoff notices before the elections next month to comply with federal law.
Though a trio of Senators has traveled the country warning of impending job losses caused by automatic budget cuts that take effect Jan. 2, industry insiders and budget experts say defense contractors are unlikely to need to lay off workers on the day the cuts are scheduled to begin.
Assurances from the White House helped, including word from the Office of Management and Budget last week that the federal government would help cover litigation costs associated with compliance with the Worker Adjustment and Retraining Notification Act, which requires employers with at least 100 employees to provide written notice to affected employees 60 days before ordering certain plant closings or mass layoffs if they are reasonably foreseeable. If layoffs were expected Jan. 2, notices would need to go out in the first few days of November — a scenario Republicans believe could create a problem for President Barack Obama just days before the election.
Instead, the guidance “takes away from the companies the requirement to [issue notices] in order to meet that fiduciary responsibility,” said Cord Sterling, the top lobbyist with the Aerospace Industries Association.
But the White House doesn’t expect taxpayer funds will have to be spent because the automatic cuts — also known as sequestration — might never happen.
“There is no reason taxpayers should incur costs. Congress still has time to avoid the joint committee sequestration, and we are confident they will do so,” an administration official said.
Indeed, part of the Obama administration’s argument against issuing layoff notices has been that Congress is looking to avert the sequester in the coming lame-duck session.
Even if Congress doesn’t, said Todd Harrison, senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments, no government funds will need to be spent to cover WARN Act liability largely because federal spending will continue to flow after Jan. 2. Even if the sequester takes effect, contractors are unlikely to see an immediate drop-off in funding because those funds were obligated in previous fiscal years.
“All those people working on the factory floor [come Jan. 2] will continue to work,” Harrison said, adding that any program reductions and resulting layoffs would come later in plenty of time for contractors to comply with the WARN Act.
“You’ll start to see a slowdown in parts of the defense industry at different times,” Harrison said. “It will be in the months and years that follow.”