Issa investigates Obama administration guidance on defense industry layoffs

Rep. Darrell Issa (R-Calif.) is launching an investigation into the Obama administration’s guidance that helped persuade defense contractors not to issue layoff notices this year due to across-the-board defense cuts.

Issa, chairman of the House Oversight and Government Reform Committee, asked senior Obama administration officials and 10 defense firms Thursday to provide documents and correspondence detailing any communication as the guidance was drafted.

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Republicans have accused the Obama administration of playing politics by telling contractors to ignore a law that requires 60-day notice for potential mass layoffs. 

Lawmakers have taken particular issue with the federal government saying it will cover severance costs of contractors if they do in fact have to lay off workers in less than 60 days — but only if the defense firms don’t send notices now.

The issue has sparked a political backlash because contractors were threatening to send the notices just four days before the election, tied to the Jan. 2 date that $55 billion in defense cuts through sequestration would take effect.

In response to the guidance, Lockheed Martin and others said they would not send any layoff notices this year. 

Some Republicans have vowed to block payments the government might make to contractors, saying the administration was “bribing” the defense firms.

In a letter to acting Office of Management and Budget (OMB) Director Jeffrey Zients, Issa accused the administration of inviting contractors to “flout” the law.

“The administration is urging federal contractors to risk violating federal law, and offering to cover any resulting repercussions using taxpayer funds,” Issa wrote.

The Obama administration defends its guidance to defense firms, pointing to a Pentagon letter that said no contracts would be canceled on Jan. 2, the day sequestration takes effect. 

Because contracts would not be canceled immediately under sequestration, officials say, defense industry firms wouldn’t feel the effects right away. 

Administration officials also argue that sequestration is exempt under the Worker Retraining and Notification (WARN) Act, which requires the 60-day notice, because the law requires specific losses for notices and sequestration remains an uncertain event.

Issa asked Zients to explain what legal authority OMB has to reimburse the costs for contractors that don’t comply with the WARN Act. He also asked the administration for an estimate of the cost to taxpayers.

Issa sent a letter to the Defense Contract Audit Agency as well, asking the agency to determine whether the costs of the payouts would be considered “allowable costs.”

In his letters to the 10 defense firms, Issa requested documents of all communication company officials had with the Obama administration over the guidance and WARN Act.

The WARN Act notices have snowballed into a political issue after Lockheed Martin CEO Bob Stevens threatened to send them to all his 123,000 employees because of sequestration’s uncertainty. 

The Labor Department issued guidance in July saying it was “inappropriate” to issue the notices due to the threat of sequestration, but Lockheed and several other defense firms indicated they still planned to do so.

In response to the new administration guidance, Lockheed said it would have time to issue layoff notices if sequestration occurs, suggesting that the administration’s promise of payments would not need to occur.

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