Some employment lawyers and analysts are accusing businesses of threatening to issue layoff notices as a way to pressure lawmakers to roll back cuts that could reduce profitability.
“If it’s truly the intent of the defense industry to want to send out the mass notices, I think that is being triggered by their frustration over the uncertainty about the budget,” said Jack Raisner, a specialist in employment law. “They’re manufacturing a hysteria about being forced to do it.”
Others argue that companies will conclude that the law compels them to send out notices.
“Whether it’s bluster or serious, unfortunately the contractors have to take it seriously,” Michael Hordell, a contracting lawyer in Washington, said in an interview before the Labor Department guidance. “What’s sad about this is they’re not sure what programs are going to be cut if there are automatic cuts, so they have to do broad general notification.”
Behind the potential layoff notices is the 1988 Worker Adjustment and Retraining Notification, or WARN, Act.
The law requires companies with more than 100 employees to alert workers that they may be laid off if there is a foreseeable event in the next 60 days that is likely to require the dismissals.
Some states, such as New York and California, require notifications as early as 90 days in advance. Failure to do so can lead to hundreds of dollars in penalties, per employee per day, but there are a number of caveats in the statute. The statute says companies are not to issue “blanket” notices.
Shai Akabas, a senior policy analyst at the Bipartisan Policy Center who has studied the issue, said the Labor Department’s advisory — that there’s no need for dismissal notices — would not be definitive. The WARN Act can be adjudicated in court only.
“Contractors’ legal representatives have stated they need to issue notices to comply with the act,” he said. “They may not feel comfortable failing to issue the notices simply in light of this guidance.”
Akabas and other analysts wrote in a recent research note that millions of employees could receive such notices in the most dramatic case.
“Businesses will want to maintain flexibility by issuing to all their employees who could get laid off, and the precise decisions may depend on which contracts are affected by the spending cuts,” they wrote. “Employers wishing to pressure policymakers to overturn the [cuts] have an incentive to exaggerate the impact by including as many workers as possible.”