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Letter to Fifteen Major Contractors

Letter

By:
Date:
Location: Washington, DC

U.S. Senators Lindsey Graham (R-South Carolina) and John McCain (R-Arizona) sent a letter today to defense contractors urging them to follow the WARN Act despite the Obama Administration's guidance encouraging employers not to issue notices before the election. The Administration has also offered to reimburse employers for any legal action taken by employees should sequestration occur.

"We plan to block any effort by the Administration to reimburse contractors who fail to provide the required WARN Act notifications," said Senators Graham and McCain. "We will oppose any requested funding increase in the budget process, any reprogramming action, including transfers that fall below the level requiring Congressional notification, or the use of any program funds to reimburse contractors for any expenses resulting from failure to comply with the law."

"Despite the Administration's guidance not to issue WARN notices now, it is our fear that, should you rely on that guidance and fail to comply with the WARN Act requirements, you will be setting your company up for serious legal and financial repercussions. The Congress should not put the taxpayers on the hook if a private company fails to follow the law."

The letter was sent to fifteen major contractors: Lockheed Martin Corporation, Raytheon Company, L-3 Communications Holdings Inc., Northrup Grumman Corporation, Huntington Ingalls Industries, the Boeing Company, General Dynamics Corporation, Honeywell International Inc., CSC, SAIC, BAE Systems Inc., ATK, ITT Exelis, EADS North America Inc. and United Technologies Corporation.

Full text of the letter is below:

October 5, 2012

Dear Sir:

Earlier this year, we and several colleagues sent you a letter requesting information regarding the effect of sequestration, required by the 2011 Budget Control Act (BCA), will have on your company and your workforce. In light of the lack of progress in avoiding sequestration and the recent guidance from the Administration on the allowability of certain Worker Adjustment and Retraining Notification (WARN) compliance costs, we feel it is important to advise that we do not believe compliance with the WARN Act is optional. The law clearly states that workers must be notified at least 60 days in advance of a potential mass layoff or plant closure, and it is unclear to us, in light of the Administration's refusal to plan for sequestration, how the Administration can guarantee that no sequester-related budget cuts or contract actions will occur on January 2 or shortly thereafter that would have that result. If such notices are withheld until entirely foreseeable contract terminations or job losses are identified after sequestration is implemented, the cost to the taxpayer could potentially increase to billions of dollars. Even more disturbing, contractors may decide not to issue such notices at all, since the threat of financial liability for failing to do so would fall on the government, not the contractor.

We plan to block any effort by the Administration to reimburse contractors who fail to provide the required WARN Act notifications. We will oppose any requested funding increase in the budget process, any reprogramming action, including transfers that fall below the level requiring Congressional notification, or use of any program funds to reimburse contractors for any expenses resulting from failure to comply with the law. As the Secretary of Defense and Chairman of the Joint Chief of Staff have repeatedly said, the potential impact of sequestration on our national security and defense programs will be devastating, and compounding that impact by draining additional resources from programs to pay wholly avoidable costs due to failure to issue WARN notices is unconscionable.

Make no mistake about it. The looming sequester is very real and the impacts will be felt in every corner of our economy. According to a study produced by Stephen Fuller, director of George Mason University's Center for Regional Analysis, the sequester could reduce employment across the economy by 2.1 million jobs in FY2013. Further, a study produced for the National Association of Manufactures by the University of Maryland found that defense-dependent employment will be reduced by 907,000 jobs in calendar year 2013.

We wholeheartedly believe that it is in no one's best interest to create unnecessary anxiety in your workforce, and it is our hope that Congress and the Administration act as soon as possible to avoid the severe consequences of the sequester. However, we are three months from the date sequestration is scheduled to take effect, and neither the Senate nor the Administration have put forward a plan to address the issue. Further, the Congress is not even scheduled to come back into session until the week of November 13. This leaves precious little time for a plan to come together. Despite efforts by the Administration to ignore the facts, sequestration and the WARN Act are the law of the land.

Despite the Administration's guidance not to issue WARN notices now, it is our fear that, should you rely on that guidance and fail to comply with the WARN Act requirements, you will be setting your company up for serious legal and financial repercussions. The Congress should not put the taxpayers on the hook if a private company fails to follow the law.

Sincerely,

Lindsey O. Graham
John McCain


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