It looks like several defense contractors will side with high-profile Republicans and ignore the Department of Labor guidance, and send out layoff notices to thousands of their employees four days before the election. At least two contractors will press ahead:
Despite administration warnings that notices related to sequestration were unnecessary, Lockheed Martin and Pratt & Whitney are continuing their preparations.
Lockheed Martin and Pratt & Whitney are going forward with plans to issue layoff notices to thousands of employees due to looming defense cuts under sequestration, despite administration claims that such warnings are unnecessary.
The layoff notices are required, say the defense contractors, under the WARN Act, which requests that federal contractors notify employees of potential layoffs within 60 days of action. The automatic sequester, which would cut $600 billion in defense spending over a ten-year period, would trigger on January 2. About $55 billion of that would affect Fiscal Year 2013. Sixty days notice means that the pink slips would go out November 2, four days before the 2012 elections.
The Labor Department put a couple theories in a guidance for the defense industry arguing that the notices were unnecessary. One, that Congress could overturn the sequester, seemed pretty weak to me. If current law means anything, you have to honor it with anything it triggers. But the Labor Department also said that, because of how procurement works, the actual layoffs wouldn’t happen for months after the trigger hits, meaning that the 60-day clock should not begin on the first day of the trigger.
But the defense industry will ignore this. They know that the best way to ensure that they can get those cuts cancelled is to put the fear of God into their employees and build mass opposition from there. The industry has almost never followed the law when it comes to the WARN Act, but all of a sudden now they are sticklers for detail. The fact that this could affect the Presidential election in states like Virginia and Florida, with high concentrations of military contractors, isn’t far from the minds of these CEOs, I’m sure.
Engine maker Pratt and Whitney’s President David Hess left a little wiggle room in his announcement about the layoff notices, saying that “Some of it may depend on what clarity we get in 30 days,” Hess said. The President has 30 days to deliver a report to Congress detailing how the Administration would handle the sequester cuts if they came to pass. This will guide the industry as to where the cuts will land and how hard they would hit contracting. But regardless of that report, expect the more ideological defense contractors to send out the layoff notices, causing mass anxiety at a sensitive time.