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Consider sending layoff warnings, law firm tells federal contractors

Delayed sequestration renews concerns about WARN Act compliance.

With sequestration delayed until early March, contractors should consider issuing sequestration-related layoff notices despite an absence of guidance from the Obama administration, according to a law firm.

In an analysis by Littler Mendelson, a labor and employment law firm, government contractors could face lawsuits if they do not issue layoff notices to comply with  the 1988 Worker Adjustment and Retraining Notification Act.

The law requires any company with more than 100 employees to issue layoff notices 60 days in advance of any mass layoff or plant closure. With sequestration delayed by the major budget agreement signed by President Obama on Tuesday, the briefing says, companies may need to act fast to avoid falling afoul of federal or state versions of the WARN Act.

“In light of the additional two months of sequestration breathing room provided by the tax bill, employers potentially affected by sequestration who have not previously provided contingent WARN notices may now wish to consider doing so,” the briefing said. “Employers who gave contingent WARN notice in October, effective Jan. 2, will generally wish to issue new contingent notices effective in early March.”

The largest federal contractors did not issue WARN notices last fall and await further information now.

Boeing Co. spokesman Dan Beck told Government Executive his firm would wait until guidance was issued by “defense and government customers” before issuing notices.  Lockheed Martin in a statement on Tuesday said that the specter of sequestration “stifles investment in plant, equipment, people and future research.”

In September, the Office of Management and Budget told contractors to follow guidance issued by the Labor Department and hold off on WARN Act notices. OMB also said that the government would cover the costs of litigation resulting from delayed layoff notices.

But Littler Mendelson said companies may still face costs from legal battles in court. “It is also not clear what degree of deference courts will give to the DOL's guidance letter, and employers may still find themselves subject to a court's individualized assessment of WARN compliance,” the briefing said.

The White House has encouraged agencies to continue normal spending and operations, and an OMB spokesman told Government Executive the agency would provide further guidance and close coordination as time progresses.

Alan Chvotkin, executive vice president and counsel of the Professional Services Council, a contractor trade group, said  many companies will have spent a significant amount of resources understanding the legal obligations if sequestration occurs, but will be biding their time until more details are released.

Companies “will wait until sequestration occurs and the federal agency directs how that sequestration would affect specific contracts that a company has,” Chvotkin said.

(Image via Steve Cukrov/