I am reasonably sure most people haven’t heard of the WARN Act. I am also pretty sure people would be surprised to hear that President Obama’s administration is actually providing financial incentives in an attempt to encourage businesses to violate Federal law.
The issue revolves around the WARN Act of 1988. For those who do not know the Worker Adjustment and Retraining Notification Act requires employers with more than 100 employees to notify workers 60 days in advance of certain plant closings and mass layoffs.
Notices must be provided to the workers or their union representatives and representatives of State and local government. The Wikipedia page on the WARN Act states: The WARN Act was passed by a veto-proof Democratic majority in Congress and became law without President Reagan's signature. The WARN Act became law in August 1988 and took effect in 1989.
Due to the budget cuts arising President Obama’s deal with Congress to raise the Debt Ceiling, many businesses will be forced to layoff large numbers of employees in January, 2013. Reports are that many companies that rely on Federal contracts will see those contracts eliminated or drastically reduced unless Congress acts before deadline in December.
In July of 2012, the Department on Labor issued a guidance letter informing employers who are contemplating layoffs resulting from the “Sequestration” that no notice was necessary. The letter states: As long as the likelihood and timing of contract cancellations remains speculative, an employer is not obligated to provide WARN notifications.
The business journal Forbes ran an article on September 30, 2012 that had this to say:
While the Department of Labor guidance was consistent with existing precedent, it seems to be inconsistent with The WARN Act Guide for Employers, issued by the Department of Labor. That guidance provides only three exceptions to a WARN Act notification. The exceptions are: 1) a faltering company that is actively seeking capital or business and believes notification would prevent it from obtaining such capital, 2) a natural disaster and 3) unforeseeable business circumstances.
On October 1, 2012 the DEFCON HILL blog ran an articles discussing the most recent guidance provided by the Obama administration regarding the WARN Act. The article states:
The Obama administration issued guidance Friday that said defense firms’ costs would be covered if they have to lay off workers due to canceled contracts under the across-the-board cuts set to take effect Jan. 2.
The issue has become very politically charged because of the upcoming Presidential election. If companies are planning layoffs for January 2, 2013, they will be required to issue WARN Act notices in early November. This means the notices will be given to employees prior to the Presidential election.
Republicans are alleging the White House is telling companies not to notify the employees in order to increase the President’s chance of winning re-election. On the surface, it appears the Republicans are making a valid point. However, the possibility that Congress will act and prevent “Sequestration” weakens their argument.
The democrats also have a valid point regarding the issue. Because the budget cuts are not set in stone and because of the uncertainties regarding which businesses will be affected any layoffs are speculative at best it is hard for companies to know if they will be affected. Therefore, the democrats make a good point that layoff notices may be premature.
Regardless of the validity of each position, employers are bound to follow the law and issue notices if layoffs or plant closings are planned. It is reprehensible for President Obama or any President to encourage employers to violate Federal law.