Lockheed says it won’t issue sequester-related layoff notices this year

The government’s largest contractor, Lockheed Martin, announced Monday it would not issue official warnings of impending layoffs before a federal budget sequester potentially goes into effect in January.

Lockheed officials have been warning for months that they might issue layoff warnings under the 1988 Worker Adjustment Retraining Notification Act, which requires companies to provide 60-day notice to employees of impending mass layoffs. But the Labor Department has ruled such notices are unnecessary and in fact “inconsistent” with the law, because it’s not clear whether a sequester actually will happen or what impact the across-the-board cuts it triggers would have on individual agency contracts and companies.

On Friday, the Office of Management and Budget issued guidance saying agencies would cover contractors’ “liability and litigation costs” related to WARN Act notices if the companies follow Labor’s guidelines. Separately the Defense Department told contractors that it would take some period of time after a sequester went into effect on Jan. 2, 2013, before funding for individual programs would be cut.

In a memo to Lockheed Martin employees Monday, Bob Stevens, the company’s chairman and chief executive officer, and Chris Kubasik, its vice chairman, president and chief operating officer, said that the two pieces of guidance satisfied them that layoff notices were not required this year.

The two executives, however, did not mince words in criticizing the looming sequester.

“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,” Stevens and Kubasik said in the memo. “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.”

Republican lawmakers criticized the Obama administration's guidance on WARN Act notices. “In 2007, Senator Obama wanted to extend the WARN ACT notices to 90 days, up from 60, to ensure workers were treated fairly," said Sen. Lindsey Graham, R-S.C., ion a statement. "Now, President Obama is trying to suppress the issuance of WARN notices, which will hit mailboxes right before the election. The Obama administration’s legal advice is dubious at best."

“The WARN ACT is crystal clear when it comes to defense contractors having to issue notices of impending layoffs as a result of sequestration," Graham added. "I hope defense contractors will follow the law and warn their employees about the devastating impact of sequestration."

Graham, Sen. John McCain, R-Ariz., and Sen. Kelly Ayotte, R-N.H., said Friday that OMB's guidance could result in the Defense Department paying as much as $4 billion in repayments to contractors to cover the salaries of workers laid off without receiving WARN Act notices -- along with legal damages they called "inestimable." 

Sequestration, which goes into effect automatically in January under the 2011 Budget Control Act unless Congress acts to stop it, would impose cuts of 9.4 percent in nonexempt defense discretionary funding and 8.2 percent in nonexempt, nondefense discretionary funding. A 2 percent cut would hit Medicare providers, 7.6 percent would affect other nonexempt nondefense mandatory programs, and 10 percent would be applied to nonexempt defense mandatory programs, according to an Obama administration report.

The Lockheed officials said they would continue to press the government for more information about agencies’ sequester planning activities.

“While we work to stop sequestration we will also continue to petition the government to outline exactly how sequestration will be implemented so that we can responsibly prepare for the impact to our employees and our business,” they wrote in the memo.