If you’re like me you may have missed a story a couple weeks ago that has broader ramifications than you may have originally thought.
You may recall that “sequestration” is the collection of automatic budget cuts proposed by the White House and agreed to under duress by Congress as part of the debt ceiling negotiations. The cuts go into effect on January 2 unless Congress and the President act. Kind of like a spending cut time bomb: the White House extracted this concession in exchange for its agreement to increase the debt ceiling, with the hope it could get Congress to accept other less terrible cuts and tax increases later. That plan has backfired, however, and we’re left with the real possibility of the president’s sequestration time bomb going off. Defense Secretary Leon Panetta has said these cuts would have a “catastrophic” effect on national security, “like shooting ourselves in the head.”
As a result, businesses, especially defense contractors, are now preparing to lay off up to one million workers. A friend I spoke with yesterday told me at his company no one knows if they’ll have a job come January 2. Usually these workers would not have to wait until the day the layoffs occur to know their fate. Under a Federal law called the “WARN Act,” companies with 100 or more employees must give workers 60 days notice before a layoff of the lesser of 1/3 or 500 people. Failure to provide the notice can result in significant exposure to employee lawsuits. To avoid these costs, companies would need to notify workers of a pending layoff by November 2, 2012.
Well, that’s terribly inconvenient timing for the president. Friday November 2 is the Friday before the election. It’d be a real bummer for a million voters to get pink slips four days before voting. Not wanting to let a good law get in the way of re-election, the Obama administration on July 30, through Jane Oates, assistant secretary in the Labor Department, issued “guidance” advising companies they need not comply with the WARN Act if they’re contemplating sequestration layoffs. Effectively the administration advised defense contractors to not tell employees they’re about to get fired. Never mind the reason behind the Act that employees should be given a fair heads’ up. According to Obama, that law “shouldn’t” apply if the Department of Labor says it doesn’t.
But it gets worse. Many companies saw the advice from the Department of Labor and said they were going to provide the notices anyway, since ultimately whether they violated the law, and had to pay related penalties, would be determined not by the Department of Labor, but the courts. These companies’ exposure was estimated to be as much as $4 billion, plus inestimable other expenses (see below). So, having not been convincing enough, on September 28, on the letterhead of the “Executive Office of the President, Office of Management and Budget” the Obama administration went even further and agreed to pick up the tab for these companies’ failing to comply with the law. In other words, if these companies rely on the DOL’s advice, fail to timely provide WARN Act notices, and lay off employees with no warning whatsoever on January 2, Obama has volunteered to pay, at taxpayer expense, all resulting costs, including penalties, judgements and legal fees. Did I say this was at taxpayer expense? (more…)