The Sequester Shuffle

Faulty Department of Labor guidance to defense contractors may be issue in House Armed Services Committee hearing

Department of Labor / Wikimedia Commons

The Obama administration may have provided defense contractors with faulty legal advice this week that could expose them to a flurry of expensive labor lawsuits. The issue is likely to be raised today during a House Armed Services Committee hearing meant to address wide-ranging cuts to the U.S. Defense budget.

A Labor Department memo on Monday instructed government contractors to delay issuing more than 10,000 pink slips to employees.

However, heeding the administration’s call could leave contractors vulnerable to litigation: The Worker Adjustment and Retraining Notification (WARN) Act requires companies to notify their employees at least 60 days in advance (or 90 days in some states) that their jobs may be cut during periods of mass layoffs.

Labor’s memo argued that the nearly $500 billion in mandatory defense cuts known as sequestration are not a certainty. Because it remains unclear how the cuts would be made, or if they will be made at all, DOL recommended that contractors avoid issuing any notices.

But defense industry insiders are concerned that the administration is trying to avoid a political dilemma until after Election Day.

"This is not a well designed thing, and it’s designed for political gain," one longtime defense contractor told the Free Beacon.

"The administration is asking me to break the law or take a hit and I don’t have a leg to stand on," the source said. "They’re exposing contractors to lawsuits, which is a double whammy given the defense cuts."

The administration’s memo also drew a sharp rebuke from congressional Republicans, who argue that the administration’s decree is a partisan ploy designed to prevent an election year headache.

Other critics of the administration’s recommendation said that defense contractors cannot disregard the law simply because team Obama instructed them to.

"This conveniently-timed guidance by Labor issued just before OMB officials testify before Congress on Wednesday is just that: election year politicking," Mackenzie Eaglen, a former Pentagon official who specializes in defense issues, wrote recently for the American Enterprise Institute. "The WARN Act and Budget Control Act are the laws of the land that legally cannot be ignored simply because it might hurt a pol’s reelection chances. The law states that sequestration will take effect in January. Only another law will change that."

Hoping to allay the defense industry’s concerns, the House Armed Services Committee (HASC) has summoned Jeffrey Zients, director of the Office of Management and Budget, to explain how the administration plans to implement the sequester.

Congress, in its August 2011 debt limit deal, agreed on $487 billion in defense cuts over the next decade. Failure to agree on further cuts by December will lead to another round of cuts, the effect of which would be catastrophic if the White House fails to provide guidance, the sources said.

"We think the administration and White House is taking a situation riddled with uncertainty and has to clarify it," said one senior committee source. "They seem to be taking a pass."

Lawmakers plan to ask Zients to clarify the administration’s stance on the WARN Act, and to explain exactly how the Defense Department will cut its budget, according to HASC officials.

HASC officials charged that the administration is fostering uncertainty by instructing its agencies to avoid preparing for future defense cuts.

"The Office of Management and Budget has not directed Federal agencies to begin planning for the specific manner in which they will operate were sequestration to occur," the DOL’s Monday memo stated.

This lack of preparedness could leave the Defense Department and other agencies scrambling to deal with sequestration, or with any other agreed-upon defense cuts, a Congressional source explained.

"I don’t know how DOD could plan without guidance from the OMB," said one HASC source. "They’re just saying find [cuts] and find [them] fast."

Today’s hearing, however, could provide some much needed clarity on the issue.

Rep. Howard "Buck" McKeon (R., Calif.) has provided OMB Director Zients with a four-page list of questions to answer.

McKeon, among other things, wants to know "what steps the administration [will] take to ameliorate Warn Act requirements," as well as who in the administration is responsible for advising agencies on how to implement the cuts.