US defense firms could push forward with sending layoff notices

by  Carlo Muņoz

08/09/12 04:16 PM ET

Despite administration warnings that notices related to sequestration were unnecessary, Lockheed Martin and Pratt & Whitney are continuing their preparations.

Lockheed Martin and Pratt & Whitney are going forward with plans to issue layoff notices to thousands of employees due to looming defense cuts under sequestration, despite administration claims that such warnings are unnecessary.

U.S. defense companies planned to start handing out pink slips in November under federal mandates outlined in the Worker Adjustment and Retraining Notification (WARN) Act, due to the anticipated $500 billion automatic cut to defense coffers are set to go in place in January.

But administration officials from the Department of Labor have argued that such notices did not fall under the act's mandates, noting the law only required notices to be sent out if layoffs are caused by a foreseeable event. 

Since Congress has the power to come up with an alternative sequester plan, the White House argues, those automatic defense cuts don't qualify as a foreseeable event.

But lawmakers remain deadlocked on a viable alternative, increasing the likelihood of those cuts going in effect early next year.

That gridlock on Capitol Hill has prompted some American defense firms to begin preparing to send out pink slips to their employees.

"Right now the WARN Act is the law, and we always comply with the law, so we're not quite sure we understand the direction from the Department of Labor," Hess told Reuters during an anti-sequestration rally in Florida on Wednesday. 

"We'll make a decision in the future as to whether or not we'll issue WARN notices. Some of it may depend on what clarity we get in 30 days," Hess said.

If the firms decide to issue layoff notifications, defense industry employees would begin receiving those notices days before the presidential elections. 

Top industry officials have said publicly that automatic cut under sequestration could lead to the loss of 1 million defense-related jobs.

Industry leaders and their supporters in Congress say those job losses would hit battleground states such as Ohio, Pennsylvania, Virginia and Florida particularly hard. 

"Generally speaking, if we know there's a potential to have a major reduction in the future, we have to take appropriate action," Lockheed Martin chief Bob Stevens said at the same rally on Wednesday. "All we are trying to do is be transparent with our employees so that nobody is caught by surprise."

Stevens told Congress in July that his firm alone stands to lose 10,000 employees if the cuts go into effect as planned. 

In August, Senate Republicans attempted to force legislation that would require U.S. defense firms to begin sending out layoff notices to their employees. 

The legislation, introduced by Sen. Lindsey Graham (R-S.C.), would have been folded into the Senate Appropriations Committee's version of the Pentagon's fiscal 2013 spending bill.

Graham argued that allowing individual defense firms to decide whether to issue layoff notices would only add to the growing fiscal uncertainty within the defense industry over sequestration. 

Committee member Sen. Tom Harkin (D-Iowa) slammed the Graham amendment as a blatant political ploy, designed to use the threat of job losses as a "political football" in the runup to the November election.  

Committee Chairman Daniel Inouye (D-Hawaii) called the measure an "unnecessary modification" to the WARN Act for political purposes. 

In the end, the amendment was defeated 17-13 by the committee in a party-line vote.