The law the White House wants companies to ignore

Article Highlights

  • Within the past 2 weeks, 2 major defense contractors let go over 500 workers as a result of defense cuts from this year.

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  • The admin is desperate to stop defense companies from sending out WARN notices on the eve of the presidential election.

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Liberals like to complain about the “imperial presidency” when individuals of a different political stripe occupy the Oval Office.  However, they have little to say when one of their own becomes president and ignores a law. The most recent case of this phenomenon occurred this past Friday when the Office of Management and Budget (OMB) told defense contractors that they could disregard a statute requiring them to notify employees that might lose their jobs.

The law OMB wants companies to ignore is the WARN (“Worker Adjustment and Retraining Notification”) Act.  Central among its provisions is the requirement that employers provide written notice to their employees of “plant closings” and “mass layoffs” affecting them at least 60 days in advance.  With the prospect of a $500 billion dollar cut in defense spending automatically going into effect on January 2 if sequestration is not avoided, the administration is desperate to stop defense companies from sending out WARN notices on what would be the eve of the presidential election. 

At least when Abraham Lincoln appeared to ignore existing laws at the start of the Civil War he had the excuse that he was trying to save the Union.  All President Obama seems to be doing is trying to save his job.

Really, there are only two questions to be addressed to when considering whether the WARN act applies in this instance.  The first is: what is a “mass layoff” and does it apply in this instance?  According to the law, a “mass layoff” amounts to the loss of employment at the single site during a 30-day period for at least 50-499 employees (if they represent at least 33% of the total workforce at a site) or, simply, the loss of employment for 500 or more employees (again at a site).

Now, there is little question that sequester would lead to layoffs of this scale and, accordingly, apply in this instance.

"Given that the size of the defense cuts mandated by sequestration are of the same magnitude as this past year, there seems to be little question that similar size layoffs can be expected come January." -Gary J. SchmittIn fact, just within the past two weeks, two major defense contractors (Northup Grumman and Sikorsky) let go well over 500 workers as a result of defense cuts from this year.  Given that the size of the defense cuts mandated by sequestration are of the same magnitude as this past year, there seems to be little question that similar size layoffs can be expected come January.

The administration counters by saying sequestration can be avoided, and hence the need for WARN notices, if Congress and the president reach an agreement on an alternative path to make $1.2 trillion in federal budget reductions as required by the Budget Control Act. That’s true.  But saying sequestration need not happen is a far cry from saying it won’t happen or even that it is unlikely to happen.

As the act’s acronym suggests, the purpose of the law is for the employer to give an employee fair warning that he or she may well lose their job. Indeed, according to the Labor Department, one of the few exceptions for the 60-day notice requirement is “unforeseen business circumstances,” a situation that hardly applies in this instance.  To the contrary, given how little effort the White House has made so far to avoid sequestration, any reasonable assessment of the likelihood of avoiding a new round of defense cuts would have to be low.

In a backhanded way, the administration admits as much.  In Friday’s announcement, OMB stated that, if a company follows the administration’s advice but the federal courts—whose job it is under the act’s terms to enforce the law—nevertheless find the company as having violated the act, the company’s liability, civil penalties and even lawyer’s fees can all be passed on to the contracting agency—in this case the Pentagon, one of its agencies, or the military services—as “allowable” program costs.  In short, OMB is saying that money appropriated by Congress for, say, for developing a particular weapon system can now be used to cover the costs of ignoring a law.

Nor is Friday’s announcement by OMB the first to attempt to ignore a law when it comes to the consequences of sequestration.  Just two weeks ago, OMB refused to abide by the terms of the Sequestration Transparency Act which required the administration to spell out the impact sequestration would have on specific programs.  In doing so, the White House made it even more likely that defense companies would feel obligated to send out wide-spread WARN notices since they lacked any information on how exactly January’s cuts would be implemented.  Indeed, it may be that the refusal to follow the law in this first instance forced the White House to double down this past week by offering in effect “liability insurance” for companies to disregard the WARN Act altogether.

One is tempted of course to say, “this is just politics.”  But, in fact, it’s far more than that.  It’s a case of the president abusing his “executive power” to turn duly enacted laws on their heads.

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