I see that my old company, Lockheed Martin, is in the news again. This time it is not an announcement of a successful test of their missile defense system or the announcement of a new program. This time, they were fighting with the administration over sequestration rules.

Congress passed a law some 20 years ago called the WARN Act, that requires employers to provide notification 60 calendar days in advance of plant closings and mass layoffs.  Lockheed Martin announced that the lack of guidance from the Obama administration on defense cuts could compel the company to issue layoff notices to all 123,000 employees because it was unknown where the cuts would fall.

The Obama administration, realizing how disastrous it would be if hundreds of thousands of layoff warnings were issued on November 2 just before the elections, had the Department of Labor issue guidance stating that sending notices would be “inconsistent with the purpose of the WARN Act.”

The CEO of Lockheed Martin responded, “Philosophically, we follow the law. My understanding is that sequestration is the law. Until the law is changed I think it would be irresponsible for us to do anything other than comply with it. And that’s what we’re doing (issue 123,000 layoff notices).”

So who blinked first? The Obama Administration did. The White House issued new guidance this week that said that if sequestration occurs and an agency terminates or changes a contract that results in a plant closing or mass layoff that the contractors’ liability and litigation costs under the WARN Act would be “allowable costs” covered by the contracting agency.
Since the contracting agency is the federal government, what Obama just did was put taxpayers on the hook to pay Lockheed Martin’s (and all other defense contractors) costs of closing plants and terminating workers. All of this to prevent layoff notices going out just before the November election.

Can the White House legally put taxpayers on the hook without going through Congress? Surely you jest; this is simply situation normal (how does the rest of that term go?)

Printed in the October 4, 2012 edition.