Tuesday, July 31, 2012

WARN Layoff Notices Could Spur Congressional Budget Deal

Congressional leaders are working feverishly on a six month continuing budget resolution they hope to announce later today or tomorrow, which would avert the threats of huge defense contractors and other businesses trading with the federal government to issue their employees hundreds of thousands of layoff notices required by the WARN Act. That law requires employers of more than 100 workers to give 60 days warning of layoffs planned in response to foreseeable events – events like federal government shutdowns or deep spending cuts at government agencies. Some states have stricter laws requiring 90 days notice.

Employers face fines up to $100/day/employee for failing to give the required layoff warning. August 2 is the 60 day deadline before the October 1 start of the federal fiscal year. So, without Congressional action which can be predicted to keep government agencies spending next fiscal year, notices could go out later this week. If they do, each party will blame the other for the ensuing economic panic. The Obama administration’s Labor Department has already issued guidance to government contractors contending that no WARN Act notices need to be given at this point in time, but that guidance will not be binding on the courts which will apply the act – and the fines – should a shutdown actually happen, and result in contractor layoffs. Defense contracting giant Lockheed Martin says it may issue as many as 100,000 WARN notices if Congress does not pass a deal, or at least announce one. EADS is following suit. Boeing says it is planning for a “worst case scenario.”

Other government contractors have declined to comment, while their employment lawyers try to parse the latest Labor Department guidance.

Economists predict the worst for American businesses if mass notices go out. “If I’m being warned about my job,” Bank of America economist Ethan Harris says, “then I’m going to start acting as though there’s a real chance that I won’t be employed coming forward. It will have a freezing up effect.”

Whether or not a deal can be reached remains to be seen. The only certain thing is that the politicians on both sides of the aisle are more highly motivated by the uncertainty respecting who the voters will blame for the mess than they are about exercising real leadership for their constituents.

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