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To WARN or Not to WARN

By

Director, KippsDeSanto & Co.

Posted on October 31st, 2012

Posted under: Government Services

With the election nearing and sequestration potentially imminent, many government contractors have been left stranded trying to negotiate the political onslaught of potential Worker Adjustment and Retraining Notification (“WARN”) Act requirements. The WARN Act (29 U.S.C. §§ 2101-2109) generally requires employers with at least 100 employees to provide written notice to affected employees 60 days before ordering certain plant closings or mass layoffs if they are reasonably foreseeable.

If Congress fails to act, the across the board cuts, put in place by sequestration, are currently scheduled to occur on January 2nd. Thereby, under a very strict interpretation of the WARN act’s 60 day requirement, employers would need to issue layoff notifications by November 2nd, just four days before the presidential election.

On one side, the Department of Labor (“DOL”) issued guidance on September 28th, stating it has concluded “that it is neither necessary nor appropriate for Federal contractors to provide WARN Act notice…because of uncertainty about whether sequestration will occur and, if it did, what effect it would have on particular contracts, among other factors.”  The DOL’s main rationale behind this guidance rests on its argument that providing notice under the current circumstances “would waste State’s resources in undertaking employment assistance where none are needed and create unnecessary anxiety and uncertainty for workers.”

Additionally, in order to curb issuance of layoff notices, the DOL has stated that as long as a contractor has acted in accordance with the DOL’s guidance, and sequestration occurs, thereby requiring termination of employees, then any resulting employee compensation costs for WARN Act liability, as determined by court (including attorney’s fees and other litigation costs), would qualify as allowable costs and be covered by the contracting agency.

On the other side, House Republicans, led by House Oversight Committee Chairman, Darrell Issa (R-CA), are still skeptical.  In a letter issued to 10 major government contractors, Issa told companies that, “the guidance [of the DOL] seems intended to invite Federal contractors to flout the law, and in doing so places a large contingent financial liability on the shoulder of American taxpayers, in order to indemnify those contractors who follow the administration’s direction.” Issa has additionally asked if the companies had consulted their own lawyers on whether or not layoff notices should be issued.

Many companies remain split on their interpretation of the Act, however despite Issa’s letter most have opted to follow the DOL’s guidance and withhold from issuing pre-emptive sequestration-related notices at this time.

With the election approaching however, only time will tell whether new information will surface and alter contractors’ views ahead of politicians’ big day.

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