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Feds: Taxpayers could cover layoff costs under sequester

A Lockheed Martin facility is shown. | AP Photo

Defense giant Lockheed Martin said it welcomed a notice from the OMB. | AP Photo

Taxpayers would be on the hook for the costs of laying off defense industry workers if automatic, across-the-board budget cuts were to take effect Jan. 2.

Defense giant Lockheed Martin, which backed off Monday from an earlier threat to issue thousands of layoff warnings later this month just as voters were preparing to go to the polls, said it welcomed a notice from the Office of Management and Budget that affirmed vendors could bill Uncle Sam if “contract actions” next year meant they were forced to close plants and lay off employees.

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The notice also made clear that layoff notices under a labor law called the “WARN Act” would be in order in the run-up to potential cancellations, although those cancellations would likely take place months after the Jan. 2 budget restrictions, rather than on the same day.

“The additional guidance … ensures that, if contract actions due to sequestration were to occur, our employees would be provided the protection of the WARN Act and that the costs of this protection would be allowable and recoverable,” said company spokeswoman Jennifer Allen.

Lockheed CEO Robert Stevens warned earlier this year that he might issue layoff warnings in late October because the Jan. 2 onset of $55 billion in automatic cuts for fiscal 2013 — called sequestration — might mean cancellations, plant closures and lost jobs, and as such he owed his employees a warning under the law. But OMB guidance issued Friday said that although the Defense Department would probably have to abrogate or renegotiate contracts under sequestration, that wouldn’t happen all at once.

“The additional guidance offered important new information about the potential timing of DoD actions under sequestration, indicating that DoD anticipates no contract actions on or about Jan. 2, 2013, and that any action to adjust funding levels on contracts as a result of sequestration would likely not occur for several months after Jan. 2,” Allen said.

Another major defense vendor, BAE Systems, also said Monday that OMB’s notice obviated the need for layoff advisories around the end of this month.

“As it remains less than clear how and when sequestration might be implemented for individual programs, BAE Systems has determined it will not issue conditional WARN notifications to all of its employees following the guidance issued by OMB and DoD last week,” said the company’s top spokesman, Brian Roehrkasse. Still, like Lockheed, he made clear BAE still believes that option remains open.

“If specific information becomes available that certain company facilities may suffer mass layoffs due to sequestration, we will issue WARN notices at that time as required by law,” Roehrkasse told POLITICO. “Unless sequestration is avoided, we eventually may have no choice but to issue WARN notices to potentially impacted employees.  When that might happen will depend on the circumstances as they develop.”

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