What happens when you combine the Budget Control Act of 2011 with huge mandatory cuts in the defense budget? Lots of layoffs and unemployment, that's what. And what happens - or is supposed to happen - when mass layoffs occur? According to the Worker Adjustment and Retraining Notification (WARN) Act, there is supposed to be a 60-day notice of the impending layoffs. And herein lies the problem...for Barack Obama
According to the Budget Control Act, if Congress cannot come to agreement on budget cuts of $1.2T over 10 years, automatic cuts are triggered in a process called "sequestration". These are "across the board" cuts, but some programs are exempt. One thing that is NOT exempt is the defense budget. As Heritage illustrates, the DoD would see a far greater impact from cuts than any other government program. A recent study from George Mason University points out the following:
This author released a report entitled “The U.S. Economic Impact of Approved and Projected DOD Spending Reductions on Equipment in 2013” on October 24, 2011 in which the economic effects of reduced spending for military equipment were calculated. This analysis determined that a combined $45.1 billion reduction in the purchase of military equipment and in Research and Development funding (BCA I and II) by the Department of Defense would reduce GDP by $86.5 billion and result in the loss of 1,006,320 direct, indirect and induced jobs across all sectors of the U.S. economy impacting every state and representing a decline of personal income (salaries and wages) totaling $59.4 billion. This analysis was restricted to the procurement of military equipment and R&D spending and excluded reductions in DOD civilian payroll and DOD outlays for operations and maintenance. It also excluded the projected spending reductions in the BCA of 2011 impacting non-DOD agencies and therefore only provided a partial assessment.
Why is this a problem for Obama? Corporations who are impacted by this sequestration process will be forced to lay off tens of thousands of employees. The WARN act dictates a 60-day notice for layoffs. Sequestration would kick in on January 2, 2013. 60 days prior to January 2 is - November 2... just a few days before the election. Barack Obama does NOT want to have tens of thousands of pink slips to go out days before the election.
Department of Labor to the rescue!
This week the DOL issued guidance that companies need not comply with the WARN Act if sequestration occurs. How convenient! Now the companies don't have to notify their employees that they'll lose their jobs in January and Obama is saved the grief of facing a mass of angry voters. But several Senators have called the DOL out on their shenanigans. From Sen. James Inhofe (R-OK):
"You can't not comply with the law," Inhofe said on Tuesday. "Put yourself on the board of directors of Lockheed Martin. If they came out with a class-action suit of a thousand dollars per employee, that would be $120 million. You bet they're going to send out pink slips. And by the way, they don't have to wait until Nov. 2. They can send them out today if they want," Inhofe added.
A report from The Hill quotes a former NLRB counsel who backs up Inhofe's point:
But John Irving, a former NLRB general counsel appointed by former President Ford who worked on negotiating the WARN Act, said that the guidance was incorrect. He said that the Labor Department does not enforce the act and employers could still face lawsuits from employees despite the guidance.
“The Labor Department doesn’t determine whether a company has failed to give the warn notices,” said Irving, now a counsel at Kirkland and Ellis. “Even the Labor Department has said, in advisory interpretations of the WARN Act, that when in doubt you are supposed to give notice.”
It appears that some contractors are already prepping for the WARN notices:
Some companies told Secrets that they are already laying off workers while others are drafting layoff notices. Ayotte said Lockheed Martin has a list of 100,000. The National Association of Manufacturers estimates that over 1 million jobs will be cut in 2014 if the budget sequester goes into effect.
But why on earth could the DOL be trying to discourage WARN Act compliance? Senators John McCain and Kelly Ayotte appear to be asking the same question:
“At a time when our economy continues to suffer from staggeringly high unemployment, the Obama Administration today took away an important planning tool for Americans who may lose their jobs as a result of the failure of Congress and the White House to address the looming and entirely predictable threat of budget sequestration. Sequestration is currently the law of the land, and our nation's workers have a right to know how these sequestration cuts which begin in January may impact them," the senators said in a news release.
“This decision is especially disturbing in light of the fact that the Department of Labor previously stated in a Fact Sheet that ‘since it has no administrative or enforcement responsibility under’ the WARN Act, it ‘cannot provide specific advice or guidance with respect to individual situations.’ Today the Department did just that, issuing guidance to government contractors not to provide their employees advance notification of potential layoffs as a result of sequestration. This is a troubling turnaround that lays bare the obvious political aim of today’s announcement – avoiding mass layoff notices just days before the November 6th election.
Note what McCain/Ayotte point out - the DOL had previously stated that they "cannot provide specific advise with respect to individual situations". So why start now?
My guess would be: to save Obama's bacon.
Jennifer Rubin summarizes it accurately:
With any other administration, liberals would be hollering about an imperial executive and/or demanding the administration follow labor laws. But not this one. Civil libertarians and Big Labor long ago tossed aside principle; their sole mission is to reelect President Obama. Actually the same could be said of the entire administration.
Yeah. And the DOL is working overtime on that mission.