McCain promises to block WARN Act payments

OMB guidance sets off battle between Republican legislators and the White House over whether defense companies must issue layoff notices Nov. 2.

The Senate Armed Services Committee’s top Republican has promised to cut off any funding offered to defense companies to pay for layoff related expenses connected to sequestration.

Sen. John McCain, R-Ariz., is the latest Republican legislator to balk at President Obama’s guidance to the defense industry on whether it must issue layoff notices 60 days ahead of the Jan.2 scheduled trigger for sequestration cuts.

The Worker Adjustment and Retraining Notification (WARN) Act mandates that most companies with more than 100 employees must issue layoff notices to their work force 60 days ahead of massive planned layoffs. Defense companies like Lockheed Martin said the resulting $500 billion cut to planned defense spending over the next 10 years will force them to layoff a chunk of their work force.

Defense companies anticipated the Pentagon will be forced to start modifying and canceling contracts starting on Jan. 2. The 60 day marker before that is Nov. 2, four days before the presidential election.

However, the Office of Management and Budget issued a guidance memo instructing companies that the federal government would pay for litigation and employee severance costs should the courts find companies had broken the WARN Act in connection to sequestration. Sen. Jim Inhofe, R-Okla., called it bribery.

McCain says he’ll block the payments the White House has promised defense companies warning companies they have a choice whether to follow OMB’s guidance or follow the law.

“Companies have a choice whether to rely on OMB’s politically-motivated guidance or to comply with the law,” McCain said in an e-mailed statement first reported by Bloomberg’s Tony Capacio. “But I can assure them that I will do everything in my power to ensure that taxpayer dollars are not used to compensate contractors who do not comply with the law.”

Lockheed Martin announced on Sept. 29 that they would not be issued layoff notices Nov. 2 as CEO Bob Stevens had threatened.

To halt funding, McCain will have to gain the support of the Democrats as they still control the Senate pending this November’s election.