[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SEQUESTRATION: EXAMINING EMPLOYERS'
WARN ACT RESPONSIBILITIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. House of Representatives
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, FEBRUARY 14, 2013
__________
Serial No. 113-3
__________
Printed for the use of the Committee on Education and the Workforce
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN KLINE, Minnesota, Chairman
Thomas E. Petri, Wisconsin George Miller, California,
Howard P. ``Buck'' McKeon, Senior Democratic Member
California Robert E. Andrews, New Jersey
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Tom Price, Georgia Ruben Hinojosa, Texas
Kenny Marchant, Texas Carolyn McCarthy, New York
Duncan Hunter, California John F. Tierney, Massachusetts
David P. Roe, Tennessee Rush Holt, New Jersey
Glenn Thompson, Pennsylvania Susan A. Davis, California
Tim Walberg, Michigan Raul M. Grijalva, Arizona
Matt Salmon, Arizona Timothy H. Bishop, New York
Brett Guthrie, Kentucky David Loebsack, Iowa
Scott DesJarlais, Tennessee Joe Courtney, Connecticut
Todd Rokita, Indiana Marcia L. Fudge, Ohio
Larry Bucshon, Indiana Jared Polis, Colorado
Trey Gowdy, South Carolina Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania Northern Mariana Islands
Martha Roby, Alabama John A. Yarmuth, Kentucky
Joseph J. Heck, Nevada Frederica S. Wilson, Florida
Susan W. Brooks, Indiana Suzanne Bonamici, Oregon
Richard Hudson, North Carolina
Luke Messer, Indiana
Barrett Karr, Staff Director
Jody Calemine, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
TIM WALBERG, Michigan, Chairman
John Kline, Minnesota Joe Courtney, Connecticut,
Tom Price, Georgia Ranking Member
Duncan Hunter, California Robert E. Andrews, New Jersey
Scott DesJarlais, Tennessee Timothy H. Bishop, New York
Todd Rokita, Indiana Marcia L. Fudge, Ohio
Larry Bucshon, Indiana Gregorio Kilili Camacho Sablan,
Richard Hudson, North Carolina Northern Mariana Islands
C O N T E N T S
----------
Page
Hearing held on February 14, 2013................................ 1
Statement of Members:
Courtney, Hon. Joe, ranking member, Subcommittee on Workforce
Protections................................................ 4
Prepared statement of.................................... 6
Walberg, Hon. Tim, Chairman, Subcommittee on Workforce
Protections................................................ 1
Prepared statement of.................................... 3
Statement of Witnesses:
Eisenbrey, Ross, vice president, Economic Policy Institute... 41
Prepared statement of.................................... 43
Furchtgott-Roth, Diana, senior fellow, Manhattan Institute... 48
Prepared statement of.................................... 49
Gies, Thomas, partner, Crowell & Moring, LLP................. 26
Prepared statement of.................................... 28
Notestine, Kerry E, Esq., Littler Mendelson, P.C............. 16
Prepared statement of.................................... 18
Oates, Hon. Jane, Assistant Secretary, Employment and
Training Administration, U.S. Department of Labor.......... 8
Prepared statement of.................................... 11
Additional Submissions:
Chairman Walberg:
Article: ``At White House Request, Lockheed Martin Drops
Plan to Issue Layoff Notices''......................... 68
SEQUESTRATION: EXAMINING EMPLOYERS' WARN ACT RESPONSIBILITIES
----------
Thursday, February 14, 2013
U.S. House of Representatives
Subcommittee on Workforce Protections
Committee on Education and the Workforce
Washington, DC
----------
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2175, Rayburn House Office Building, Hon. Tim Walberg
[chairman of the subcommittee] presiding.
Present: Representatives Walberg, Kline, DesJarlais,
Bucshon, Hudson, Courtney, Andrews, Bishop, Fudge. Also
present: Davis.
Staff present: Owen Caine, Legislative Assistant; Molly
Conway, Professional Staff Member; Ed Gilroy, Director of
Workforce Policy; Benjamin Hoog, Legislative Assistant; Marvin
Kaplan, Workforce Policy Counsel; Nancy Locke, Chief Clerk/
Assistant to the General Counsel; Donald McIntosh, Professional
Staff Member; Brian Newell, Deputy Communications Director;
Molly McLaughlin Salmi, Deputy Director of Workforce Policy;
Alexa Turner, Staff Assistant; Joseph Wheeler, Professional
Staff Member; Mary Alfred, Minority Fellow, Labor; Tylease
Alli, Clerk/Intern and Fellow Coordinator; Jody Calemine,
Minority Staff Director; John D'Elia, Minority Labor Policy
Associate; Daniel Foster, Minority Fellow, Labor; Brian Levin,
Minority Deputy Press Secretary/New Media Coordinator; Celine
McNicholas, Minority Senior Labor Counsel; Richard Miller,
Minority Senior Labor Policy Advisor; Megan O'Reilly, Minority
General Counsel; Michele Varnhagen, Minority Chief Policy
Advisor/Labor Policy Director; and Michael Zola, Minority
Senior Counsel.
Chairman Walberg. A quorum being present the subcommittee
will come to order. Good morning, and welcome to the first
hearing of the Workforce Protection Subcommittee of the 113th
Congress. I would like to welcome our members and thank our
witnesses for being with us today. I would like to extend a
special good morning to Assistant Secretary Oates. Thank you
for participating with us this morning.
Finally, I would like to recognize our colleague from
Connecticut, the man who is willing to make sure history is
accurate. Lincoln is upheld as well as his state of Connecticut
and the efforts they had on emancipation. And thanks for giving
some notoriety to our subcommittee by just being here as well.
Joe Courtney has taken on the role as senior Democratic member
for the 113th Congress. I look forward to working together over
the next 2 years and I will try to make sure my facts are
accurate as well.
As part of the Budget Control Act of 2011 President Obama
insisted on a process known as sequestration, a series of
across-the-board spending cuts that will impact most defense
and domestic programs. Sequestration is not how Washington
should conduct the people's business. It has created even more
uncertainty in an already difficult environment.
Twice House Republicans have taken action to replace
sequestration with common sense cuts and reforms.
Unfortunately, the president has failed to offer his own
proposal that will help control runaway spending and get this
economy moving again. With our nation fast approaching $17
trillion in debt and more than 12 million Americans searching
for work, the time for leadership is now.
As we eagerly await the president's plan, we have a
responsibility to examine the impact of sequestration on
policies within our jurisdiction. The committee's continued
oversight of the Worker Adjustment and Retraining Notification
or WARN Act is part of that effort.
Congress approved the WARN Act to help workers plan for
possible job losses, as well as allow them time to assess
various employment services provided by the states and federal
government. The law requires employers with more than 100
employees to give workers 60 days notice of mass layoffs or
plant closings. A legal notice must include specific details,
including the expected date of the first layoffs and the job
titles that will be affected.
The law also includes provisions for conditional notices,
as well as exceptional circumstances when an employer wouldn't
be required to issue a 60-day notice. Employers who fail to
provide proper notices can be sued in federal court, liable for
back wages and benefits, and be forced to pay monetary
penalties.
Numerous federal contractors have advised Congress that
sequestration may lead to layoffs in their workplaces. As job
losses become more eminent, employers have legal
responsibilities they must follow. While there are longstanding
concerns with the act, it is a law, a law of the land.
Political shenanigans should not interfere with an employer's
obligation to follow the law or the Labor Department's role in
administering the law.
However, last summer the Obama administration managed to
inject even more uncertainty into sequestration. On July 30,
the department released guidance that states the WARN Act does
not apply to sequestration and instructed employers not to
issue notices. The department's guidance raises a number of
concerns.
First, the guidance contradicts current regulations that
encourage employers to provide as much notice as possible, even
when they are uncertain which jobs will be cut and when. And
while the law creates an exemption for unexpected
circumstances, to be legally protected employers must still
issue notices as soon as layoffs are reasonably foreseeable.
Additionally, the department has no enforcement authority
over the WARN Act. Federal judges are responsible for enforcing
the law and they ultimately decide through costly litigation
whether an employer complied with the law.
Finally, the guidance creates the impression that employers
who follow the administration's opinion will be immune from
future litigation. Nothing could be further from the truth. If
a worker feels they have been denied proper notice, they have
every right to take their employer to court.
Perhaps this explains why the Office of Management and
Budget explicitly promised to use taxpayer's dollars to cover
the legal expenses an employer might face for failing to warn
workers of future layoffs. That is right, the Obama
administration is telling employers to ignore the law and
forcing taxpayers to pick up the tab.
Assistant Secretary Oates, these are important concerns,
and I am sure you feel the same way, concerns that require a
serious response. I am disappointed. The administration has
refused to cooperate in good faith with this committee's
oversight investigation into this matter.
Providing over 400 pages of materials that were slipped
under a door in the middle of the night, last night, before a
congressional hearing, when those materials were first
requested 6 months ago is really an insult to this committee.
Congress deserves better. Americans, America's workers,
employers, and taxpayers deserve better. It is time we got
answers to the questions we have been asking, and I hope today
will be that opportunity.
Again, I would like to thank our witnesses for joining us.
And I will now recognize my distinguished colleague Joe
Courtney, the senior Democratic member of the subcommittee, for
his opening remarks.
[The statement of Chairman Walberg follows:]
Prepared Statement of Hon. Tim Walberg, Chairman,
Subcommittee on Workforce Protections
Good morning and welcome to the first hearing of the Workforce
Protections Subcommittee in the 113th Congress. I'd like to welcome our
members and thank our witnesses for being with us today. I'd like to
extend a special good morning to Assistant Secretary Oates. Thank you
for participating in today's hearing.
Finally, I would like to recognize our colleague from Connecticut,
Joe Courtney, who has taken on the role as senior Democratic member for
the 113th Congress. I look forward to working together over the next
two years.
As part of the Budget Control Act of 2011, President Obama insisted
on a process known as sequestration, a series of across the board
spending cuts that will impact most defense and domestic programs.
Sequestration is not how Washington should conduct the people's
business. It has created even more uncertainty in an already difficult
environment.
Twice House Republicans have taken action to replace sequestration
with commonsense cuts and reforms. Unfortunately, the president has
failed to offer his own proposal that will help control runaway
spending and get this economy moving again. With our nation fast
approaching $17 trillion in debt and more than 12 million Americans
searching for work, the time for leadership is now.
As we eagerly await the president's plan, we have a responsibility
to examine the impact of sequestration on policies within our
jurisdiction. The committee's continued oversight of the Worker
Adjustment and Retraining Notification (WARN) Act is part of that
effort.
Congress approved the WARN Act to help workers plan for possible
job losses, as well as allow them time to access various employment
services provided by the states and federal government. The law
requires employers with more than 100 employees to give workers 60
days' notice of mass layoffs or plant closings. A legal notice must
include specific details, including the expected date of the first
layoffs and the job titles that will be affected.
The law also includes provisions for conditional notices, as well
as exceptional circumstances when an employer would not be required to
issue a 60-day notice. Employers who fail to provide proper notices can
be sued in federal court, liable for back wages and benefits, and be
forced to pay monetary penalties.
Numerous federal contractors have advised Congress that
sequestration may lead to layoffs in their workplaces. As job losses
become more eminent, employers have legal responsibilities they must
follow. While there are long-standing concerns with the act, it is the
law of the land. Political shenanigans should not interfere with an
employer's obligation to follow the law or the Labor Department's role
in administering the law.
However, last summer the Obama administration managed to inject
even more uncertainty into sequestration. On July 30, the department
released guidance that states the WARN Act does not apply to
sequestration and instructed employers not to issue notices. The
department's guidance raises a number of concerns.
First, the guidance contradicts current regulations that encourage
employers to provide as much notice as possible, even when they are
uncertain which jobs will be cut and when. And while the law creates an
exemption for unexpected circumstances, to be legally protected
employers must still issue notices as soon as layoffs are reasonably
foreseeable.
Additionally, the department has no enforcement authority over the
WARN Act. Federal judges are responsible for enforcing the law and they
ultimately decide through costly litigation whether an employer
complied with the law.
Finally, the guidance creates the impression that employers who
follow the administration's opinion will be immune from future
litigation. Nothing could be further from the truth. If a worker feels
they've been denied proper notice, they have every right to take their
employer to court.
Perhaps this explains why the Office of Management and Budget
explicitly promised to use taxpayer dollars to cover the legal expenses
an employer might face for failing to warn workers of future layoffs.
That's right: the Obama administration is telling employers to ignore
the law and forcing taxpayers to pick up the tab.
Assistant Secretary Oates, these are important concerns that
require a serious response. I am disappointed the administration has
refused to cooperate in good faith with this committee's oversight
investigation into this matter. Providing over 400 pages of materials
that were slipped under a door in the middle of the night before a
congressional hearing--when those materials were first requested six
months ago--is an insult to this committee. Congress deserves better.
America's workers, employers, and taxpayers deserve better. It is time
we got answers to the questions we've been asking.
Again, I'd like to thank our witnesses for joining us, and I will
now recognize my distinguished colleague Joe Courtney, the senior
Democratic member of the subcommittee, for his opening remarks.
______
Mr. Courtney. Well, first of all, thank you, Chairman
Walberg, for convening this hearing. Thank you for your kind
words this morning.
The two of us entered Congress together in 2006, and who
knew that a short time later we would again be able to help
lead one of, in my opinion, the most important subcommittees in
Congress, which is about making sure that people who get up to
work every day come home safe and sound and are able to
actually support their families. And again, I look forward to
working with you.
We had a good meeting this morning to talk about our mutual
end goal here, our mutual mission, which is to actually make
this subcommittee produce real results and hopefully not just
degenerate into a debate club. So again, thank you again, for
your nice words. And I look forward to working with you.
And I want to thank the panel for coming here this morning
as well; again, just a stellar background and credentials to
have this important discussion here. And again, I think this
topic of sequestration is probably the most critical facing our
country in the near term.
Yesterday my other committee, the House Armed Services
Committee, held a hearing with the Joint Chiefs, the general
who is in charge of the National Guard. There were 27 stars on
the witnesses that were there. So, you know that is tough to
match.
However, I am sure you are going to be just as informative
today as they--as these amazing individuals who serve our
country. And frankly the message they conveyed in terms of
sequestration is impact, aside from the issue that we are
talking about today. I mean we are talking about an immediate
damage to the military readiness of this country.
The Navy cancelled an aircraft carrier mission to the
Middle East, which is going to provide critical support for our
troops in terms of air cover. Making sure that the Strait of
Hormuz is kept clear for, again, 20 percent of the world's oil
supply.
This is an issue which we must deal with immediately. And
frankly, I am quite disappointed that we are not in session
next week. Our work schedule, frankly, does not match the
gravity of the challenge that our country faces right now. And
again, hopefully maybe this hearing will help the cause in
terms of trying to get really what I think is the real solution
to this problem, which is to make sure that we come up with a
deficit reduction plan that hits the target of the Budget
Control Act.
I would like to point out that when the Budget Control Act
was passed in August of 2011 it was negotiated between the
White House and the Republican House leadership and the Senate
Democratic leadership. Speaker Boehner, after the vote, said
that he got 98 percent of what he was looking for; not 50
percent, not just the part beside sequestration, but 98 percent
of what his caucus and what his party was looking for.
So, the fact of the matter is sequestration is something
that both sides have their skin in the game, and frankly both
sides need to solve. And I think if you look at the true
legislative history, as long as we are talking about history
this morning, of sequestration, what we actually did in August
of 2011 was incorporate the 1985 sequestration statute, Gramm-
Rudman, and just basically update the measure to this era that
we are living in right now.
The structure of sequestration is identical to the one that
was passed in 1985 by--led by Gramm and Rudman. And I think if
you go back and read Senator Gramm's comments about what the
legislative intent of sequestration was when they passed it, he
says it is very clear. It was never the objective of Gramm-
Rudman to trigger sequester. The objective of Gramm-Rudman was
to have the threat of sequester force compromise and action.
So, again, the--and if you look at what happened in the
wake of 1985, again very difficult moments occurred in terms of
coming up right to the edge of having that chainsaw go through
the government. But cooler heads prevailed. People did their
job. They sat down and negotiated and compromised, and they
came up with a result.
And if you look at, again, at the fiscal cliff bill that
passed on January 1st, just a few days ago, we delayed
sequester by 2 months. And how did we do it? We paid for it
with a mixture of revenue that was 50 percent of the pay for
and 50 percent were cuts. And that in fact is precisely the
same Da Vinci Code, the same formula that was used by the
Congress, by our predecessors to avoid having, again, a
devastating impact on our national security and on domestic
priorities that are so critical to our country.
Sequestration would be a disaster for this country in terms
of having, again, an indiscriminate mechanism go through the
domestic budgets and national security budgets of this country.
And again, that should be our priority here today.
Lastly, I would just say coming from a district where the
largest manufacturer is Electric Boat, 9,000 employees. They
have one customer, the U.S. Navy. And sitting on the Seapower
Subcommittee we were following this WARN notice issue like a
box score because it affected, again, thousands of people who
live in southeastern Connecticut.
And I would just say this. I think the undersecretary got
it right. The fact of the matter is, is that procurement for
programs like submarines, which take 5 years to build, or
aircraft carriers, which from start to finish are 10 to 15
years. The fact of the matter is the funding supply is procured
over a period of years.
So, even if sequestration did go into effect on January
1st, but it did not thank God, the fact of the matter is, is
that the obligation of funds, procurement of funds for programs
like the Virginia-class submarine program or the Ohio
replacement program or the carrier program that is being built
in Virginia. Those funds are already well into the system so
that the contracting officers who have to deal with these
defense venders--I mean they are not going to turn the switch
off on day one. It does not happen all on one day all at once.
Again, I don't want to minimize the damage it would do in
terms of having a real horizon down the road. But the idea that
it would trigger something as immediate as a WARN Act notice,
frankly is a notion completely divorced from the reality of how
contracting actually takes place with defense contractors.
And this is right in my wheelhouse. My nickname in Congress
is ``Two-Subs Joe'' because we got the shipbuilding program
enlarged over the last 2 years to get to two subs a year.
So, I mean we follow this thing not just like a box score,
but really microscopically. And the notion that that employer
was obligated to have a mass blanket WARN notice, frankly, is
just completely disconnected from the reality of how they hire
and how they build programs that take years to complete from
start to finish.
So, again, I am looking forward to having this hearing
today flush out some of these issues in terms of the real
mechanics of what triggers a human resource officer to comply
with the WARN notice. And again I look forward to your
testimony and your answers to our questions.
Thank you, Mr. Chairman. I yield back.
[The statement of Mr. Courtney follows:]
Prepared Statement of Hon. Joe Courtney, Ranking Member, Subcommittee
on Workforce Protections
I want to thank all of our witnesses for coming to share their
experience and expertise on the Worker Adjustment Retraining
Notification Act (WARN) and, in particular, the responsibilities of our
nation's employers under this law in the context of sequestration.
Since 1988, the WARN Act has ensured the protection of our workers
by requiring covered employers to provide affected workers with notices
of impending plant closings and mass layoffs 60 days before they occur.
The law ensures that employees are given a sufficient amount of time to
seek and obtain alternative employment. Issuing a WARN notice also
triggers rapid response from state departments of labor and unlocks
worker retraining funds and other resources.
Last summer, the applicability of WARN Act requirements relative to
the impacts of sequestration become a hot topic ahead of the then-
looming trigger date of January 2, 2013. To clarify the WARN
obligations of employers in anticipation of sequestration, the
Department of Labor issued guidance indicating that such notifications
were not required under the law and, in many ways, contrary to the
law's intent to provide specific, detailed and accurate information to
affected employees. The Department's guidance--issued under their
longstanding practice to provide information guidance on laws and
regulations under the department's purview--concluded that the law's
unforeseeable business circumstance exemption applied in the case of
sequestration.
Much has been said about this guidance, and no doubt we will hear
from some of our witnesses today why they believe the Department's
guidance on this matter was not in line with their interpretation of
the law. However, with the new sequester deadline of March 1, 2013
rapidly approaching just fourteen days from today, the truth is that
little has changed since the Department issued their July guidance.
While sequestration appears more likely to be triggered today than
it did last summer, I believe there remains bipartisan interest in both
chambers of Congress to avoid these broad and indiscriminate cuts to
our federal budget. And, in reality, the specific impacts of
sequestration on particular programs, projects and contracts still
remains to be seen--in the case of defense contracts, for example, it
may take several months or even years before the actual impact of
budget cuts from sequestration will be felt. Many other factors, such
as the calculation of unobligated balances, adjustments to contract
terms and timing and potential flexibility in a company to readjust
their workforce between government and private work, could potentially
be at play here.
As such, broad notices are inappropriate until such time that more
detailed information is known about specific impacts to contracts and
projects--and their resulting impact on a company's workforce--should
this process be triggered. Until then, the uninformed uncertainty and
consternation--as well as the use of limited retraining dollars and
resources by already cash-strained states--that is triggered by WARN
notices would be premature and counterproductive.
The reality is that the uncertainty surrounding sequestration is
being felt now. On January 30, the U.S. Department of Commerce reported
that gross domestic product fell at a 0.1-percent annual rate in the
fourth quarter of 2012, down from three-percent growth in the quarter
before. The sudden dip is due to uncertainty caused by the threat of
sequestration. This uncertainty caused a drop in the defense sector,
which fell at an alarming 22.2-percent annual rate in the quarter.
Although personal consumption expenditures rose at a 2.2-percent rate,
business spending on equipment and software rose at a 12.4-percent
rate, and housing investment rose at a 15.4 percent clip, strong
performances in those sectors were not enough to offset a severe
slowdown in defense spending as the Pentagon and defense firms gird for
sequestration.
As we are all too well aware, the impact of sequestration goes well
beyond the defense sector. For instance, more than 2,700 would see
their Title I education funds cut at a time when local school systems
are strained more than ever to provide our schools with the resources
they need. Cuts to IDEA and special education programs would eliminate
federal support for more than 7,200 teachers and staff who work each
and every day to support children with disabilities. And, more than
70,000 Head Start and Early Start students would have their early
education reduced or eliminated. From food safety to economic
development, law enforcement to supporting those struggling to make
ends meet, sequestration's impacts will be felt far and wide in nearly
every aspect of our economy.
Let us remember that sequester was not a new concept that was
thought up in the summer of 2011; this mechanism was first authorized
27 years ago by the bipartisan Balanced Budget and Emergency Deficit
Control Act of 1985 (commonly known as the Gramm-Rudman-Hollings Act).
Notably, Senator Phil Gramm, one of the authors of the 1985 sequester
law, told the Senate Finance Committee in 2011 that ``It was never the
objective of Gramm-Rudman to trigger the sequester; the objective of
Gramm-Rudman was to have the threat of the sequester force compromise
and action.''
The single more important thing that this Congress can do right now
to provide employers and employees with the certainty they need is to
come together to pass a balanced and bipartisan agreement to ward off
the looming trigger of sequestration. It is my sincere hope that this
Congress can once again make the compromises and take the action
necessary to provide our employers with the certainty they need and
avoid the self-inflicted damage to our economy that we have within our
power to prevent.
______
Chairman Walberg. I thank the gentleman.
Pursuant to committee Rule 7(c), all members will be
permitted to submit written statements to be included in the
permanent hearing record. And without objection the hearing
record will remain open for 14 days to allow statements,
questions for the record and other extraneous material
referenced during the hearing to be submitted into the official
record.
It is now my pleasure to introduce formally our
distinguished panel of witnesses.
First, the Honorable Jane Oates is the Assistant Secretary
for the Employment and Training Administration at the U.S.
Department of Labor.
Our second is Mr. Kerry Notestine--I hope I got that right,
who is a shareholder and co-chair of the Business Restructuring
Practice Group at Littler Mendelson law firm in Houston Texas.
Welcome.
Mr. Thomas Gies is a partner and founding member of the
Labor and Employment Law Group at Crowell & Moring law firm in
Washington, D.C. Welcome.
Mr. Ross Eisenbrey is the vice president at the Economic
Policy Institute in Washington, D.C. And I would say Go Blue to
you as well.
Ms. Diana Furchtgott-Roth is senior fellow at the Manhattan
Institute for Policy Research in Washington, D.C.
Thank you all for being here. None of you are novices at
that table. You know the lighting system, the 5-minute process,
the warning yellow light that comes on, and then our
appreciation when you keep as close to that 5-minute time
period as possible. And we will attempt to keep ourselves to
the 5-minute time period as closely as possible as members
also.
So, having said all of that, Undersecretary Oates, thank
you again for being here, and we would appreciate your comments
now.
Is the microphone on there?
STATEMENT OF HON. JANE OATES, ASSISTANT SECRETARY, EMPLOYMENT
AND TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR
Ms. Oates. Oh. There it is. I am sorry. As a former ninth
grade teacher I did not want to bellow at you. I am sorry.
Good morning. I appreciate the opportunity to discuss the
Department of Labor's June 30th guidance to the State
Dislocated Worker Units on whether as of that date the
possibility of a January 2, 2013 sequestration would trigger
the advance notice requirements of the Worker Adjustment and
Retraining Notification Act, the WARN Act.
The WARN Act was enacted in 1988, and many of you know the
history better than I, with wide bipartisan support. The law
provides protection to workers, their families and their
communities by requiring employers subject to certain
exceptions to give workers or their representatives 60 days
advanced notice of plant closings and mass layoffs. Employers
are also required to give notice to local government and State
Dislocated Worker Units so that workers can promptly receive
the appropriate assistance that they may need.
The Department of Labor does not enforce the WARN Act, as
you said, Mr. Chairman. That is left up to private parties and
the courts. We do, however, have statutory authority to issue
regulations, which we did soon after the law took effect in
1988.
Our objective in issuing those rules was to articulate
clear principles and guidelines that could be applied in
specific circumstances. These regulations require WARN Act
notices to contain specific information. These requirements are
consistent with the WARN Act's primary purpose, which is to
give specific workers who are likely to lose their jobs a
period of time in which they can find new work or make other
arrangements, and can obtain assistance from the state and
local workforce programs.
These requirements are also consistent with the notion that
advanced notice should not be provided to workers who are not
likely to be affected. As the regulation's preamble explains,
it is not appropriate for an employer to provide a blanket
notice to workers.
At the time we issued the regulations, the department
recognized that the rules could not address every advance
notice issue that might arise under the WARN Act. We have
supplemented over time those regulations with less formal
guidance to help State Dislocated Worker Units and employers
carryout the law is important purpose.
For example, we have a special Web site for the WARN Act
that has compliance assistance materials containing, among
other things, a worker's guide, an employer's guide and a fact
sheet. Another type of informal guidance we frequently provide
the states across our issues in ETA is our training and
employment guidance letter known as TEGLs. Everything has an
acronym.
These advisories provide direction and information on
procedural, administrative, management and program issues. One
such issue arose last spring when Congress, state workforce
agencies and others began asking whether the possibility of the
sequestration was a sufficient predicate to require federal
contractors to issue WARN notices.
To provide clarity to state workforce agencies and others,
the department issued a TEGL. The TEGL summarized the relevant
WARN framework and reiterated a straightforward principle that
a blanket notice is neither appropriate nor legally sufficient
under the WARN Act.
It also explained that because the law requires notice only
for the specific employees who may reasonably be expected to
experience an unemployment situation as a result of a plant
closing or mass layoff, employers have no WARN Act notice
obligation when particular employment losses are speculative.
The TEGL then applied the WARN Act framework to the
potential sequester on January 2, 2013. At the time the TEGL
was issued, members of Congress and the administration had both
indicated that their goal was to avoid sequestration. So the
TEGL explained that the occurrence of sequestration was not
necessarily foreseeable.
In addition, the OMB had not directed federal agencies to
begin planning for how they would operate in the event of
sequestration. Agencies had not announced which contracts would
be affected by sequestration should it occur. The TEGL stated
that in the absence of additional information any potential
plant closing or layoff that might come about through a
sequestration-related contract termination or cutbacks were
speculative and unforeseeable.
WARN Act notices, the TEGL concluded, were not required 60
days in advance of January 2, 2013. The TEGL also makes clear
that the prospect of sequestration was part of a dynamic
process, and that additional information would make the
possibility of plant closings or layoffs less speculative and
more foreseeable.
It is important to keep in mind that a TEGL is an
interpretative aid for state workforce agencies and their
administrators and liaisons who on a daily basis field
questions from federal contractors and help workers who are
dislocated by plant closings and mass layoffs. The TEGL does
not suggest that federal contractors don't need to take the
WARN Act into account when considering the consequences of a
possible sequestration.
The department is committed to help ensure that WARN Act
notices are provided in appropriate circumstances. However,
providing WARN notices to workers who are not likely to lose
their job can unnecessarily disrupt their lives, be disruptive
for the employers because very important employees could choose
to leave their job. And it also wastes government resources by
forcing the state workforce agencies to kick in with rapid
response efforts. These are serious situations that should be
avoided.
Let me close by saying that our analysis and guidance
regarding the WARN Act's application to sequestration was and
is correct. And workers and the state workforce system have all
been well served as a result of the TEGL. Funds were not
sequestered on January 2, 2013, nor were contracts terminated,
plants shuttered, or to our knowledge unnecessary advanced
notices sent. Just as important, lives and businesses were not
disrupted unnecessarily, and resources were not wasted.
Thank you for inviting me, and I look forward to your
questions.
[The statement of Ms. Oates follows:]
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Chairman Walberg. Mr. Notestine.
STATEMENT OF KERRY NOTESTINE, SHAREHOLDER,
LITTLER MENDELSON
Mr. Notestine. Thank you, Chairman Walberg, Ranking Member
Courtney, members of the subcommittee.
My name is Kerry Notestine. I am a shareholder in the
Houston office of Littler Mendelson, the nation's largest law
firm exclusively devoted to representing management in
employment matters. I want to focus my time with you today on
the uncertainty regarding employers' obligations to comply with
the Worker Adjustment and Retraining Notification Act, or WARN,
in response to the potential upcoming sequestration.
As you may know, the WARN Act requires certain employers to
provide their employees and government entities with 60-days
advanced notice of mass layoff or plant closings, and subjects
those who fail to provide notice with harsh penalties,
including 60 days back pay plus benefits to affected employees,
$500-a-day penalties to local government where the event
occurred, and attorney's fees and litigation.
WARN was enacted with workers in mind. The express purpose
of the act is to provide workers and their families advance
notice of potential job losses in order to give them time to
adjust to the prospective loss of employment, seek and obtain
alternative jobs, and, if necessary, enter skills training or
retraining that will allow them to successfully compete in the
job market. For this reason in the past the Department of Labor
consistently has advocated employers should provide as much
notice as possible for WARN events.
Even President Obama while in the Senate advocated
broadening the requirements of WARN to prevent employers from
using what he called loopholes in the act to withhold notice.
Specifically, in May 2008 at a hearing of a Senate Committee on
Health, Education, Labor and Pensions, then-Senator Obama gave
a prepared statement urging employers to provide as much notice
as possible, even in ambiguous situations, stating that workers
in their communities have the right to know when they are
facing a serious risk of plant closing.
The upcoming sequestration arguably imposes just such a
risk on thousands of federal contractors, subcontractors and
their employees. Nevertheless, the Department of Labor in its
July 30, 2012 guidance addressing federal contractor obligation
under WARN, is taking a very different position than years'
past. Advocating that contractors should provide no notice in
advance of sequestration due to the uncertainty regarding
whether those automatic cuts will take place at all, and if
they do, when and where those spending cuts will occur.
According to the Department of Labor, such uncertainty
provides contractors with a statutory exception from complying
with WARN, that is the unforeseen business circumstances
exception. The OMB subsequently released its own guidance
indicating that federal contractors who heed the Department of
Labor's advice will be permitted to recover their liability and
litigation costs from the contracting agencies.
While the Department of Labor and OMB guidance appear to
benefit employers by potentially relieving them of obligations
under WARN, I would note that they appear to do so at the
expense of thousands of employees who, as President Obama put
it, deserve to know when their jobs are in jeopardy.
Additionally, circumstances have changed since the DOL
issued its opinion 6 months ago. Sequestration appears more
likely to occur this time around. And new information is coming
out every day regarding where the government will be
implementing these cuts. The chances of employers successfully
claiming that layoffs and plant closings are unforeseeable are
diminishing every day.
Finally, DOL and OMB guidance failed to disclose three key
points that employers need to know when considering their
obligations under WARN.
First, they fail to disclose that the DOL's guidance is not
binding on federal courts, those entities that are responsible
for enforcing the act. We cannot say what about of deference,
if any, a court will give the DOL's opinion in this matter, and
it is therefore entirely possible that a contractor will heed
the DOL's opinion only to find that a federal court disagrees
and subjects it to significant liability.
Second, they failed to mention that employers must give as
much notice as possible once the layoff or closure becomes
reasonably foreseeable. And along with that notice they must
provide a brief statement explaining the reason for reducing
the notification period. Importantly, without this additional
statement, the statutory exception relied upon by the DOL
becomes unavailable.
Third, they failed to mention that notwithstanding federal
WARN there are numerous other potential areas of liability that
a contractor may be subjecting itself to by failing to provide
notice. For instance, many states have their own mini-WARN
statutes that contain different eligibility requirements and
notice periods. Some states, like California and New Jersey for
example, don't include in their statute an exception for
unforeseen business circumstances.
Additionally, employers may have contractual notice
obligations under collective bargaining agreements or
individual employment agreements. DOL and OMB fail to mention
any of these potential liability areas, leaving employers
uncertain about their responsibilities.
More importantly, these three critical omissions may have
some--leave some contractors with the mistaken belief that by
following DOL's guidance they are free from potential
liability; a fact, which I have described is not the case.
Chairman Walberg, Ranking Member Courtney, I thank you
again for inviting me. I am happy to answer any questions that
you have.
[The statement of Mr. Notestine follows:]
Prepared Statement of Kerry E Notestine, Esq.,
Littler Mendelson, P.C.
Good morning Chairman Walberg, Ranking Member Courtney and
distinguished members of the subcommittee. Thank you for the invitation
to be here before you. My name is Kerry Notestine, and I am pleased to
provide this testimony to address the issues surrounding the effects of
sequestration on American workers and employers. Specifically, I will
address issues related to the WARN Act and other legal obligations
associated with reducing a company's workforce because of contract
cancellation. I am a Shareholder/Partner with Littler Mendelson, P.C.,
the world's largest labor and employment law firm representing
management. With over 950 attorneys and 56 offices nation and world-
wide, Littler attorneys provide advice, counsel and litigation defense
representation in connection with a wide variety of issues affecting
the employee-employer relationship. Additionally, through its Workplace
Policy Institute, Littler attorneys remain on the forefront of
political and legislative developments affecting labor, employment and
benefits policy and participate in hearings such as this in order to
give a voice to employer concerns regarding critical workplace issues.
Nevertheless, the comments I provide today are my own, and I am not
speaking for the firm or the firm's clients.\1\
I. Executive Summary
With the January 1, 2013 passage of the American Taxpayer Relief
Act of 2012, Congress addressed the expiration of the Bush-era tax
cuts, but delayed resolution of the automatic spending cuts known as
``sequestration.'' Defense and other federal contractors stand to be
significantly impacted by massive budget cuts that, by virtue of the
new law, are now scheduled to begin on March 1, 2013, unless Congress
acts before then. If the sequestration of federal funds occurs,
affected employers face potentially dramatic cuts in federal contracts
and, as a possible result, may need to implement significant furloughs
or layoffs, or even close some facilities. The prospect of sudden and
dramatic downsizing raises important employment law concerns, including
the requirement under the Worker Adjustment and Retraining Notification
(WARN) Act that employers provide employees 60 days' advance notice of
certain mass layoffs and plant closings, or face significant penalties.
On July 30, 2012, the U.S. Department of Labor (DOL) issued
Training and Employment Guidance Letter No. 3-12, which offered
guidance on the applicability of WARN to potential layoffs by federal
contractors in the wake of sequestration. The DOL guidance letter
concluded that, given the federal WARN unforeseeable business
circumstances exception, employers would not be required to provide the
Act's full 60-day notice period and the obligation to provide notice
would not be triggered until specific layoffs or facility closures
became reasonably foreseeable. In addition to the DOL's guidance
letter, the President's Office of Management and Budget (OMB) issued a
memo on September 28, 2012, stating that compensation, litigation and
other costs resulting from federal WARN Act liability for those
employers who followed the DOL guidance letter would qualify as
allowable costs and be covered by the contracting agency.
While these statements would appear to benefit employers by
potentially relieving them of obligations under WARN, lawmakers and
commentators have rightfully expressed concern and skepticism about the
DOL's legal conclusions (as it is not clear what degree of deference
courts will give the DOL's guidance letter) and about the authority of
the OMB to cover resulting litigation costs. In addition, these
statements undermine retraining and advance notice benefits that
workers would receive if employers provided 60-day WARN notice. My
testimony addresses those concerns in additional detail.
II. Introduction
I am a member of the Texas state bar and board certified by the
Texas Board of Legal Specialization in labor and employment law. In my
practice, which is based in Houston, Texas, I have represented
employers across the country in all aspects of employment matters,
including litigation under federal, state, and local statutes and
common law; administrative proceedings before various federal and state
government agencies; and counseling employers regarding employment
issues, particularly issues related to business restructuring and
reductions-in-force (RIF). I am the Co-Chair of Littler's national
practice group on business restructuring, and have advised clients on
hundreds of RIF's including assisting employers with compliance issues
under WARN, the Older Worker Benefit Protection Act, and the many
federal, state, and local anti-discrimination laws. I also have
represented clients in litigation resulting from RIF's, including
acting as lead defense counsel in a class action alleging WARN Act
violations as a result of a client's 1,800-person mass layoff. Together
with other attorneys from Littler, I have drafted a 50-state survey of
release requirements by which employers must abide when conducting
layoffs. My experience in advising clients with respect to RIF's and
alternative cost-cutting measures gives me considerable insight into
the legal challenges defense and other government contractors face
because of the looming sequestration.
III. Sequestration
The Balanced Budget and Emergency Deficit Control Act of 1985
(BBEDCA), as amended by the Budget Control Act of 2011 (BCA), 2 U.S.C.
901a(7)(A) and (8), required that, in the event the Joint Select
Committee on Deficit Reduction (i.e., Super Committee) failed to
produce deficit reduction legislation with at least $1.2 trillion in
cuts, then Congress could grant a $1.2 trillion increase in the debt
ceiling, but this would trigger across-the-board cuts in both mandatory
and discretionary spending by reducing both non-exempt defense accounts
and non-exempt non-defense accounts by a uniform percentage. Following
the Super Committee's announcement on November 21, 2011 that it had
failed to reach bipartisan agreement on deficit reduction legislation,
sequestration became an apparent inevitability--set to automatically
occur on January 2, 2013, unless Congress took action to avoid its
effects. This deadline and the negotiations leading up to it became
commonly referred to as the ``fiscal cliff.'' However, with only one
day remaining before reaching the fiscal cliff, Congress passed the
American Taxpayer Relief Act of 2012. Seen as a temporary resolution to
the fiscal cliff, the act delayed the effects of sequestration until
March 1, 2013.
IV. The WARN Act
Leading up to the January 2013 fiscal cliff deadline, several U.S.
employers with large federal contracts began publically questioning
whether and to what extent they would be required to comply with the
Worker Adjustment and Retraining Act (WARN), 29 U.S.C. Sec. Sec. 2101-
2109, a federal law requiring employers to provide employees with
advance notice of mass layoffs and plant closings. In a nutshell, WARN
requires employers with 100 or more employees to give at least 60 days'
advance notice of either a plant closing or mass layoff (i.e., a ``WARN
Event''). The Act defines a plant closing as the termination of 50 or
more employees at a single site, and defines a mass layoff as a layoff
involving either 500 employment terminations at a single site of
employment, or, if fewer, 50 or more employment terminations that
constitute 33% of those working at a single site of employment.
The purpose of WARN is to provide advance notice of potential job
losses to workers and their families, in order to allow them some
transition time to adjust to the prospective loss of employment, to
seek and obtain alternative jobs and, if necessary, to enter skill
training or retraining that will allow these workers to successfully
compete in the job market. WARN also provides for notice to State
dislocated worker units so that dislocated worker assistance can be
promptly provided.
Where there will be a WARN Event, there are very technical
requirements for both the notice which must be given, how it is
delivered, and to whom it is given. The Act requires an employer to
notify several different entities or individuals. See 20 CFR Sec.
639.7. If the facility is unionized, the employer must give written
notice to the chief elected officer of the exclusive representative or
bargaining agent of the affected employees.\2\ Notice for unionized
employees must include: (a) the name and address of the affected
employment site and the name and telephone number of a company official
to contact for further information; (b) a statement indicating whether
the shutdown or layoff is expected to be permanent or temporary and, if
the entire plant is to be closed, a statement to that effect; (c) the
expected date of the first separation and schedule of anticipated
separations; and (d) the job titles of positions to be affected and the
names of workers currently in those positions. 20 CFR Sec. 639.7(c).
In non-union facilities or departments, and with respect to
employees not represented by a union, an employer must provide written
notice individually to each employee who reasonably may be expected to
lose employment.\3\ Written notice to each affected, non-unionized
employee must include: (a) a statement indicating whether the shutdown
or layoff is expected to be permanent or temporary and, if the entire
plant is to be closed, a statement to that effect; (b) the expected
dates when the individual employee will be terminated or laid off and
when mass layoffs or the plant closing will commence; (c) an indication
of whether bumping rights exist; and (d) the name and telephone number
of a company official to contact for further information. 20 CFR Sec.
639.7(d).
An employer must also notify the state dislocated worker unit and
the chief elected official of the local government where the closing or
layoff will occur. 29 U.S.C. Sec. 2102(a)(2). This written notice to
the government must contain: (a) the name and address of the affected
employment site and the name and telephone number of a company official
to contact for further information; (b) a statement indicating whether
the shutdown or layoff is expected to be temporary or permanent and, if
the entire plant is to be closed, a statement to that effect; (c) a
schedule of layoffs or terminations; (d) the job classifications of
affected positions and the number of employees in each such position;
(e) an indication of whether bumping rights exist; and (f) the name and
address of each union and chief elected officer representing affected
employees. 20 CFR Sec. 639.7(e).\4\
WARN subjects employers who fail to abide by the Act's requirements
to significant penalties, including 60-days' back pay plus benefits for
all affected employees, $500 a day to the local government where the
reduction in force occurred, and attorneys' fees in litigation.
Accordingly, in the summer of 2012, defense industry and other
government contractors and subcontractors began considering their
obligations under WARN when anticipating the effects the automatic
sequestration cuts would have on their government contracts and, by
extension, their workforces.
V. DOL Guidance and the Unforeseeable Business Circumstances Exception
In response to these concerns, on July 30, 2012, the Department of
Labor (DOL) issued its Training and Employment Guidance Letter No. 3-
12, addressing the WARN Act's requirements in the event of
sequestration.\5\ The DOL concluded that federal contractors were not
required to provide WARN Act notices to potentially thousands of
employees 60 days in advance of sequestration (which would have been on
or about November 2, 2012) because of uncertainty about whether
Congress would act to avoid sequestration and if they did not act, what
effect the sequestration would have on particular governmental
contacts.
A. Unforeseeable Business Circumstances
In advising employers not to provide advance notice of potential
layoffs, the DOL relied on the ``unforeseeable business circumstances''
exception to the WARN Act. This exception allows an employer to provide
fewer than 60 days' notice if a plant closing or mass layoff was caused
by business circumstances not reasonably foreseeable at the time that a
60-day notice would have been required. 29 U.S.C. Sec. 2102(b)(2)(A).
The Code of Federal Regulations provides that an important indicator of
a business circumstance that is not reasonably foreseeable is that the
circumstance is caused by ``some sudden, dramatic, and unexpected
action or condition outside the employer's control.'' 20 CFR Sec.
639.9(b)(1). Examples of such circumstances include a client's sudden
and unexpected termination of a contract, a strike at a major supplier,
unanticipated and dramatic economic downturn, or a government-ordered
closing of an employment site that occurs without prior notice. Id.
It is an employer's reasonable business judgment, rather than
hindsight, which dictates the scope of the unforeseeable business
circumstances exception. Loehrer v. McDonnell Douglas Corp., 98 F.3d
1056, 1061 (8th Cir. 1996). As such, courts evaluate whether a
``similarly situated employer in the exercise of commercially
reasonable business judgment would have foreseen the closing'' when
determining whether a closing was caused by unforeseeable business
circumstances. Hotel Employees Int'l Union Local 54 v. Elsinore Shore
Assocs., 173 F.3d 175, 186 (3d Cir. 1999). Thus, the WARN Act provides
flexibility for predictions about ultimate consequences that, though
objectively reasonable, may prove to be wrong. See Halkias v. General
Dynamics Corp., 137 F.3d 333, 336 (5th Cir. 1998), cert. denied, 525
U.S. 872 (1998) (observing that the ``reasonable foreseeability''
standard envisions the probability, not the mere possibility, of an
unforeseen business circumstance).
In the context of defense contracts, several courts have found that
the unforeseeable business circumstances exception exempted an employer
from providing notice. International Ass'n of Machinists & Aerospace
Workers v. General Dynamics Corp., 821 F. Supp. 1306 (E.D. Mo. 1993)
(Within the unique context of defense contracting it is rare for the
government to cancel contracts despite delays and cost overruns.
Therefore, it was a commercially reasonable business judgment to
conclude that the contract would not be canceled, and the subsequent
cancellation qualified as an unforeseeable business circumstance.).
Nevertheless, even under this exception, notification is required as
soon as practicable along with a brief statement of the basis for
reducing the notification period. 29 U.S.C. Sec. 2102(b)(3).
VI. What the DOL Guidance Doesn't Tell Employers
A. Additional Notice Requirements under the Unforeseeable
Business Circumstances Exception
The statutory section of WARN that makes the unforeseeable business
circumstances exception available to employers has an additional notice
requirement when the exception is to be invoked: An employer relying on
this subsection shall give as much notice as is practicable and at that
time shall give a brief statement of the basis for reducing the
notification period. 29 U.S.C. Sec. 2102(b)(3). The DOL Guidance fails
to mention that employers are still required to provide some advance
notice upon the employer's realization of a WARN Event (even if the
exception allows for less than 60 days' notice) and that the notice
must specify why the employer reduced the notification period.
Importantly, failure to give this required brief statement in the
written notice has very severe consequences: The statutory exception
becomes unavailable. Childress v. Darby Lumber Co., 126 F. Supp. 2d
1310, 1318 (D. Mont. 2001), aff'd, 357 F.3d 1000 (9th Cir. 2004);
Grimmer v. Lord Day & Lord, 937 F. Supp. 255, 257-58 (S.D.N.Y. 1996);
see also, Alarcon v. Keller Industs., Inc., 27 F.3d 386, 389-90 (9th
Cir. 1994). Thus, employers relying solely on the DOL's Guidance may
not provide written notice at all, or may provide notice lacking the
brief statement, in which case the exception is no longer available.
B. Authority of DOL to Issue Its Guidance
It is highly questionable whether the DOL even has authority to
issue its Guidance in this instance. Indeed, the WARN regulations
specifically provide that ``[t]he Department of Labor has no legal
standing in any enforcement action and, therefore, will not be in a
position to issue advisory opinions of specific cases.'' 20 CFR Sec.
639.1(d) (emphasis added). On the contrary, the regulations provide
that the federal courts are the sole arbiters of WARN compliance and
thus, the DOL's opinion is not binding on these courts. As a result, it
is unclear what amount of deference, if any, a court would apply to
such an opinion.
Indeed, in the past when the DOL has tried to issue specific
guidance with respect to WARN requirements, the Department has made it
clear in the guidance that its answers were not binding on courts. For
example, in a Fact Sheet issued by the DOL following Hurricane Katrina,
the Department specifically warned that its Fact Sheet responses
``represent the U.S. Department of Labor's best reading of the WARN Act
and regulations,'' and ``employers should be aware that the U.S.
Federal Court solely enforces the Act and these answers are not binding
on the courts.'' Notably, the DOL provided no such disclaimer in the
guidance regarding sequestration.
VII. Why Courts May Independently Determine that the Unforeseeable
Business Circumstances Exception Does Not Apply to
Sequestration.
While the Department of Labor has no enforcement responsibility,
the agency did promulgate regulations regarding WARN. See 20 CFR Sec.
639. These regulations indicate that employers are encouraged, even
when not required, to provide advance notice to employees about
proposals to close a plant or significantly reduce a workforce. 20 CFR
Sec. 639.1. Furthermore, in its regulations, the Department of Labor
concedes that the statute can be very vague when an attempt is made to
apply WARN to a specific situation. The regulations read in part:
In practical terms, there are some questions and ambiguities of
interpretation inherent in the application of WARN to business
practices in the market economy that cannot be addressed in these
regulations. It is therefore prudent for employers to weigh the
desirability of advance notice against the possibility of expensive and
time-consuming litigation to resolve disputes where notice has not been
given. The Department encourages employers to give notice in all
circumstances.
20 CFR Sec. 639.1(e) (emphasis added). Moreover, in the Fact Sheet
the DOL issued following Hurricane Katrina, the Department advised
employers to provide ``as much notice as possible,'' even in situations
where the hurricane had destroyed the employer's plant and all
employment records were gone. According to the DOL, providing some form
of notice (even by posting in a public place, publishing in a
newspaper, or mailing to the employees' last known addresses) showed
the employer's good faith compliance with WARN.\6\
Thus the recent DOL Guidance on sequestration strangely contravenes
the Department's own past advice, as well as the express purposes of
the WARN Act. Again, according to the Department's own regulations:
Advance notice provides workers and their families some transition
time to adjust to the prospective loss of employment, to seek and
obtain alternative jobs and, if necessary, to enter skill training or
retraining that will allow these workers to successfully compete in the
job market. WARN also provides for notice to State dislocated worker
units so that dislocated worker assistance can be promptly provided.
29 CFR Sec. 639.1(a). The current DOL Guidance, meanwhile,
advocates providing no notice, stating that providing notice to workers
who may not ultimately suffer an employment loss, ``both wastes the
state's resources in providing rapid response activities where none are
needed and creates unnecessary uncertainty and anxiety in workers,''
both of which the DOL now claims ``are inconsistent with the WARN Act's
intent and purpose.''
Indeed, the DOL Guidance appears to even contravene President
Obama's assessment of what protections WARN should provide. On May 20,
2008, the Senate Committee on Health, Education, Labor and Pensions
held a hearing examining plant closings and focusing on workers' rights
and the WARN Act's 20th anniversary. During the hearing, a then-Senator
Obama remarked on his days as a community organizer working on the
south side of Chicago helping people in communities affected by steel
plant closings get back on their feet. According to Senator Obama, one
of the things he learned early on, and saw over and over again, was
that ``American workers who have committed themselves to their
employers expect in return to be treated with a modicum of respect and
fairness.'' He therefore reasoned that ``failing to give workers fair
warning of an upcoming plant closing ignores their need to prepare for
the transition and deprives their community of the opportunity to help
prevent the closing.'' \7\ Furthermore, in his closing remarks, Senator
Obama reasoned:
Workers and their communities have a right to know when they are
facing a serious risk of a plant closing. Making that information
available before the plant closes can, in the best case scenario, help
communities come together to prevent the loss and, in the worst case
scenario, help workers and communities prepare for the difficult
transition to come.
Clearly, President Obama felt that workers facing potential
separation from employment deserved advance notice, regardless of
whether the WARN Act required such notice. The DOL now appears to take
an about-face to this position, encouraging employers to withhold
advance notice, even where the notice may be able to assist the workers
(and their communities) to prepare for the potential transition to
come. While the DOL is understandably concerned that some employees may
suffer unnecessary anxiety by receiving a notice and then not suffering
an employment loss, such concern fails to protect those employees who
actually do suffer an employment loss.
Furthermore, the DOL's new position seems to conflict with its own
past advice that providing some notice, even conditional notice, is
better than providing no notice at all. Indeed, the DOL's regulations
specifically allow employers to issue conditional notice:
Notice may be conditioned on the occurrence or non-occurrence of an
event, such as the renewal of a major contract, only when the event is
definite and the consequences of its occurrence or nonoccurrence will
necessarily, in the normal course of business, lead to a covered plant
closing or mass layoff less than 60 days after the event. For example,
if the non-renewal of a major contract will lead to the closing of the
plant that produces the articles supplied under the contract 30 days
after the contract expires, the employer may give notice at least 60
days in advance of the projected closing date which states that if the
contract is not renewed, the plant closing will occur on the projected
date.
20 CFR Sec. 639.7(a)(3). Similarly, courts reviewing this issue
may ultimately determine that employers should have provided 60 days'
conditional notice to employees in advance of the sequestration,
stating that, in the event sequestration occurs and funding to a
particular project is cut, the plant closing or mass layoff will occur
on a projected date. Although the regulations state that the notice
must be specific, they also provide that the notices must be based on
the best information available at the time notice is given. 20 CFR
Sec. 639.7(a)(4). Thus, a court will look to the individual
circumstances and what information the employer had available at the
time to determine whether a ``similarly situated employer in the
exercise of commercially reasonable business judgment would have
foreseen the closing.'' See Hotel Employees Int'l Union Local 54, 173
F.3d at 186 (3d Cir. 1999).
Finally, courts may find it hard to agree with the DOL's six-month-
old advice that sequestration is an unforeseeable business
circumstance. Specifically, the Guidance states that ``even the
occurrence of sequestration is not necessarily foreseeable'' and
``Federal agencies, including DOD, have not announced which contracts
will be affected by sequestration were it to occur.'' While that may
have been true with respect to the January 2 deadline, as the new March
1 deadline looms closer, it appears far more likely that the cuts will
actually go into effect this time around. Indeed, even House Budget
Committee Chairman Paul Ryan has publically stated his belief that
``the sequester is going to happen.'' \8\ Likewise, additional
information is being released every day with respect to where the cuts
will likely take place. For example, just last week, our nation's
military branches released documents outlining their proposals for
complying with the sequestration. As more information becomes
available, courts are more and more likely to find that employers who
fail to provide advance notice of resulting plant closures and layoffs
are in violation of WARN and less likely to apply the unforeseeable
business circumstances exception.
VIII. The OMB Guidance Only Raises Additional Questions
Further confusing the issue for employers, on September 28, 2012,
the President's Office of Management and Budget (OMB) issued its
``Guidance on Allowable Contracting Costs Associated with the Worker
Adjustment and Retraining Notification (WARN) Act'' to address whether
federal contracting agencies would cover WARN Act-related liability and
litigation costs. The OMB stated in its Guidance that:
If (1) sequestration occurs and an agency terminates or modifies a
contract that necessitates that the contractor order a plant closing or
mass layoff of a type subject to WARN Act requirements, and (2) that
contractor has followed a course of action consistent with DOL
guidance, then any resulting employee compensation costs for WARN Act
liability as determined by a court, as well as attorneys' fees and
other litigation costs (irrespective of litigation outcome) would
qualify as allowable costs and be covered by the contracting agency, if
otherwise reasonable and allocable.
While the OMB Guidance appears to be aimed at reassuring employers
by promising them indemnification against potential WARN-related
liability, attorneys' fees and litigation costs in the event they
follow the DOL Guidance by failing to issue WARN notices, the OMB
Guidance may unintentionally be providing employers false assurances
that all liability and litigation costs will be covered. Specifically,
Federal WARN is only one avenue amongst several that employees may take
to challenge the results of a reduction-in-force and seek damages for
failure to provide advance notice. Other areas of potential liability
include state Mini-WARN laws and laws requiring advance notice of
changes to employee pay and/or hours worked, as well as contractual
obligations found in collective bargaining agreements and individual
employment agreements. It is not clear whether and to what extent the
OMB Guidance provides for indemnification of these potential liability
areas.
A. State Mini-WARN Acts and Other State Law
Approximately twelve states have ``mini-WARN'' acts that provide
additional requirements beyond what Federal WARN requires. California,
for example, applies different threshold requirements under its state
law--requiring notice from facilities employing 75 or more individuals
within the preceding 12 months (rather than 100 individuals under
Federal WARN). CAL. LAB. CODE Sec. Sec. 1400--1408. Additionally under
California law, a layoff of 50 or more employees within any 30 day
period (regardless of percentage at the facility) is a mass layoff, and
any shutdown of a covered facility is a plant closing, regardless of
the number of employment losses. Id. As a result, employees whose jobs
are eliminated in California may qualify for protection under the
state's mini-WARN act but not qualify for protection under Federal
WARN. Other states such as Illinois, Iowa, New Hampshire, and Wisconsin
require 60 days' advance notice for layoffs involving as few as 25
employees. 820 Ill. Comp. Stat. 65/1-99 (2008); Ill. Admin. Code tit.
56, Sec. 230 (2008); Iowa Code Sec. Sec. 84C.1-84C.5 (2011); N.H.
Rev. Stat. Ann., Chapter 275-F; Wis. Stat. Sec. 109.07(1)(b). Other
states require more notice than the Federal WARN's 60-days. New York,
for example, requires 90 days advance notice of WARN Events and applies
to companies with as few as 50 employees. NY LAB. LAW Sec. 860 McKinney
(2008). New Jersey WARN, meanwhile, provides an additional penalty for
noncompliance in addition to the 60 days' back pay--employers are
required to provide one week's pay for each full year of an employee's
service. This is significantly greater than the federal WARN Act's
remedy of paying lost wages (back pay) for a maximum of 60 days.
In addition to Mini-WARN laws, many states impose additional
severance obligations on employers undertaking layoffs, outside the
context of WARN. Connecticut, for example, has an statute requiring
that for certain closings, the employer must pay for 100% of health
care coverage for employees and dependents, to the extent that they are
covered, for up to 120 days. CONN. GEN. STAT. Sec. Sec. 31-51(n), 31-
51(o), 31-51(s) (2008). Maine employers, meanwhile, must provide
employees 60 days' notice in advance of a cessation of operations and
severance pay computed at one week per year of service, payable to
employees who have been employed at least three years. ME. REV. STAT.
ANN. tit. 26, Sec. 625-B.
Finally, where sequestration results in employee furloughs or
reductions in employee hours and/or pay, there are other legal issues
that an employer must consider. In furlough cases, it is advisable to
provide advance notice to employees and have employees sign an
agreement regarding the terms of the furlough. If the employer wishes
the time to be unpaid, it should expressly inform employees, preferably
in writing, not to do work while on the furlough.\9\ Some state laws
require advance notice of changes in pay (the longest being a 30-day
advance notice obligation in Missouri), and it is unresolved whether
placing employees on an unpaid furlough may trigger those notice
obligations. Employers arguably may have an excuse for failing to
provide required notice for reasons similar to those addressed above
related to WARN obligations, but employers are advised to provide as
much notice as possible to maintain defenses to these notice
obligations.
The DOL does not purport to address such state laws in its Guidance
(and, indeed, the DOL Guidance would do very little to protect
employers in states like California or New Jersey where there is no
comparable state-based exception for unforeseeable business
circumstances). However, it is disconcerting that the DOL fails to even
mention in its Guidance that failing to comply with the notice
requirements under Federal WARN may subject employers to additional
liability under state law. Such omission may leave some employers with
the mistaken belief that, by following the DOL's Guidance, they are
absolved of any potential liability--a belief which those same
employers may believe is supported by the OMB Guidance.
In fact, it is entirely unclear from the language of the OMB
Guidance whether contracting agencies would indemnify employers of this
additional state-based liability. Specifically, the OMB states that its
guidance ``does not alter existing rights, responsibilities,
obligations, or limitations under individual contract provisions or the
governing cost principles set forth in the Federal Acquisition
Regulation (FAR) and other applicable law.
B. Collective Bargaining and Contractual Agreements
In addition to state requirements, the National Labor Relations Act
and collective bargaining agreements may require advance notification
to unions representing employees and bargaining about the effects of a
layoff due to sequestration. Additionally, employers may have entered
employment agreements with certain employees, providing advance notice
of separation. In both cases, compliance with the DOL Guidance would
not necessarily address these additional contractual obligations. In
the case of furloughed employees, employers may have obligations to
bargain with unions representing furloughed employees or may have
obligations under existing individual employment agreements that should
be considered. In the event a grievance is filed by a union
representative receiving only 5 days' notice of a plant closing, will
contracting agencies indemnify employers for that? Will they indemnify
for any breach of contract issues arising from an individual's
employment agreement? Although the answer is likely no, often such
claims are brought in conjunction with claims under the WARN Act. If an
employee brings a lawsuit to assert both a contractual claim and a WARN
Act claim, how will the contracting agency go about indemnifying the
employer for litigation costs surrounding one cause of action and not
the other?
C. How Will the Litigation Costs be Covered?
Other than stating that employee compensation costs, attorneys'
fees and other litigation costs ``would be covered by the contracting
agency,'' the OMB Guidance provides very little actual guidance to
employers regarding how the indemnification process will actually work.
For instance, will the contracting agency be covering the costs of
litigation from its inception? Or will it wait until the case is
resolved and reimburse costs at that time? The former option raises
questions regarding what level of input or oversight the contracting
agency will have over the selection of legal counsel. For instance,
will government attorneys be required, or will the employers be allowed
to select their own outside counsel? Will the contracting agency pay
whatever hourly rates legal counsel is charging or will the employer/
attorneys be provided guidelines regarding what is ``otherwise
reasonable and allocable?'' Additional questions are also raised
regarding the level of input and oversight into the overall litigation
strategy. For instance, will the contracting agency have any input into
whether the employer seeks an early settlement or sees the litigation
through to trial?
On the other hand, the latter option (waiting until resolution of
the action to indemnify the employer), creates its own issues. For
instance, waiting until the end of the case to cover costs makes the
promise of indemnification illusory for smaller employers who likely
will be unable to afford paying the up-front costs of hiring a law firm
and covering litigation expenses and attorneys' fees through the
resolution of the case. Indeed, for those contractors or subcontractors
whose entire business relies on federal contracts, their inability to
pay such extraneous expenses up front is likely increased due to
reduced revenue from cancelled or modified government contracts.
IX. Conclusion
The guidances issued to employers by the DOL and OMB regarding WARN
compliance have done little to reassure this employment lawyer. Indeed,
I cannot understand why the DOL would issue a guidance advising
employers to provide less notice rather than more when sequestration is
the current law of the land. The OMB Guidance further complicates
matters by suggesting that employers will have blanket immunity from
liability in the event they follow the DOL Guidance--a proposition that
may not ultimately be the case.
Chairman Walberg, Ranking Member Courtney, I thank you again for
inviting me to testify.
endnotes
\1\ I thank Sarah Morton of Littler Mendelson, PC for her
preparation of this statement, and to Michael Lotito and Ilyse Schuman
of Littler Mendelson for their comments on prior drafts of this
statement.
\2\ This notice should be provided to all entities identified in
the collective bargaining agreement as representatives of the
bargaining unit employees. Many labor agreements are signed by a union
local and the international union; notice should be provided to both.
Failure to send notice to the international union could result in a
ruling that notice was ineffective and the employer is liable for full
penalties for non-compliance with the Act.
\3\ This includes managerial and non-managerial employees alike. It
also includes part-time employees who may be affected, even though such
employees are not considered in determining whether the plant closing
or mass layoff thresholds are reached.
\4\ A shortened version of this notice can be given, and if the
shortened notice includes the first day of layoff and the total number
of employees to be laid off, the detailed schedule of layoffs and the
details of the job classifications and number of occupants of each can
be maintained at the site for governmental inspection. 20 CFR Sec.
639.7(f).
\5\ Although the Guidance addresses the effects of sequestration as
it was originally set to occur on January 2, 2013, Congress voted on
January 1, 2013 to extend sequestration until March 1, 2013.
\6\ The good faith defense referred to there by the DOL is found in
29 U.S.C. Sec. 2104(a)(4). Specifically, it provides that if an
employer ``proves to the satisfaction of the court'' that the act or
omission which violated WARN was done in good faith and with reasonable
grounds for believing that its act or omission was not a violation,
``the court may, in its discretion, reduce the amount of the liability
or penalty.'' However, this defense is far from absolute and may only
reduce the amount of liability--not eliminate it entirely.
\7\ Senator Obama used the hearing to promote the FOREWARN Act,
legislation he co-sponsored with Senator Sherrod Brown and then-Senator
Hillary Clinton. The purpose of the FOREWARN Act he stated was to
enhance WARN protections to ensure that ``workers are not chewed up and
spit out without a job or a paycheck'' and to close loopholes in the
act allowing ``employers to disregard the WARN Act without penalty.''
Notably, the proposed FOREWARN legislation aimed to provide the
Department of Labor with enforcement authority over WARN violations,
thus recognizing that the current state of the law does not provide the
DOL with such authority.
\8\ Interview with Paul Ryan, Meet the Press (January 27, 2013).
\9\ Making or answering calls or email, checking voicemail,
drafting documents, and similar tasks typically are considered work and
non-exempt and exempt employees must be compensated for the time spent
in such activities. Non-exempt employees may be compensated in hourly
or less increments depending on the employer's policy, while exempt
employees generally must be paid their full salary for the entire
workweek if they perform work at any time during the workweek.
______
Chairman Walberg. Thank you.
Mr. Gies.
STATEMENT OF THOMAS GIES, PARTNER,
CROWELL & MORING, LLP
Mr. Gies. Good morning, Chairman Walberg, Ranking Member
Courtney and other distinguished members of the subcommittee.
My name is Tom Gies. I am a partner with the Crowell & Moring
law firm based here in Washington. And I thank you for the
invitation to provide testimony this morning.
Many federal contractors are increasingly apprehensive as
we get closer to March 1. This anxiety stems in part from
ambiguities regarding their obligations under the WARN Act in
light of the lack of clarity about the specific impacts of the
looming sequester. The reality facing contractors today,
particularly in the defense sector, is that the sequester calls
into doubt both the availability of funding for future contract
awards and the contracting agency's ability to continue funding
under many existing contracts.
The Navy's cancellation of the A-12 fighter bomber program
back in 1991 is a cautionary tale. Both McDonnell Douglas and
General Dynamics had numerous discussions with the Navy over a
several-month period. This led to several exchanges of
proposals and communications, including employee communications
issued by both contractors, prepared with an eye towards WARN
compliance.
The upshot was that the Navy terminated the contracts with
only a few days' notice. Both companies got sued for WARN
violations. And neither was vindicated until they went all the
way through costly trials and federal court.
Fast forward to March 1. Contractors will soon begin to get
more specific information about the plans of contracting
agencies regarding sequestration. We are aware that the
military departments within DOD, for example, are currently
preparing specific plans. But these plans are unlikely to
identify particular contracts, options, task orders or other
contract vehicles that the military departments may terminate
or elect not to proceed upon if sequestration were to occur.
Without more detail it is doubtful that any contractor can
accurately predict today the specific impacts of sequestration
on its business. But, as information becomes more--becomes
available, contractors will have to begin making tougher
decisions. Mindful of legal risks, many companies are likely to
conclude they should begin providing some sort of notice within
the next 2 weeks, or as soon as they learn of anything more
specific.
Depending on specific government procurements, one can
envision a subsequent wave of conditional notices as more
information becomes available. These communications will cause
significant disruption and confusion, both for employers and
employees. Productivity will suffer as employees become
increasingly anxious about job security.
There is the very real worry of a major league brain drain
at some companies. Notwithstanding weaknesses in the overall
labor market, in the technology sector competition remains
fierce for highly talented and skilled employees like software
design engineers.
The complexities of WARN compliance itself will add to the
challenge facing many companies. Two examples should illustrate
that problem. Counting the right number of employees who will
be affected is often difficult. WARN has arcane aggregation
rules requiring a company to consider, in some circumstances,
other workforce reductions that took place before and after the
particular planned event in order to determine whether the WARN
targets have been met.
WARN likewise makes it difficult to determine, in some
cases, whether a particular job loss impacts a single site of
employment. The regulations and case law make razor fine
distinctions in situations involving, for example, groups of
structures that form a campus or an industrial park, or
separate facilities across the street from each other. Because
each company's situation is likely to be unique we can expect
numerous lawsuits filed around the country against contractors
accused of guessing wrong on a variety of WARN issues.
For many companies their decision about how to manage
upcoming layoffs will be driven in part by the government's
position on whether the costs associated with workforce
reductions will be viewed as allowable costs, and thus
reimbursed by the government. There is no definitive one-size-
fits-all answer to the question of whether, in the event of
sequestration, a contractor's costs of complying with the WARN
Act or of defending against alleged violations of the statute
would be deemed allowable by the contracting agency.
That said, a contractor's costs of complying with the WARN
Act or of successfully defending its compliance with the
statute would generally be deemed an allowable cost. The
central question and the inevitable litigation will be the
latest version of the old question of what did they know and
when did they know it?
You have heard testimony about the guidance issued last
year by the Department of Labor. By its terms that does not of
course address the question of what a contractor should do
after March 1. And as we sit here today, many of even the most
sophisticated federal contractors aren't sure about what to do.
Chairman Walberg, Ranking Member Courtney, I thank you
again for inviting me to testify. I would be happy to answer
any questions.
[The statement of Mr. Gies follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Thank you.
Mr. Eisenbrey, welcome.
STATEMENT OF ROSS EISENBREY, VICE PRESIDENT, ECONOMIC POLICY
INSTITUTE
Mr. Eisenbrey. Mr. Chairman--thank you Mr. Chairman. It is
a pleasure to be here. As you know, I was the staffer to
Congressman Bill Ford, who was the principle House author of
the bill. I worked on the legislation for 9 years and helped
negotiate the conference report with the Senate, and helped
draft a couple of rounds of comments that are in one of your
committee prints, which I helpfully brought for you. And so I
have a long history with this act.
I have three main points today. One is that what the
department did was completely appropriate. Giving guidance to
employers is part of their responsibility. They have been doing
it ever since the law passed, and that is totally appropriate.
Number two, if federal contractors--you have heard there is
really no doubt about this now. If contractors had given 60
days' notice back in November because of the proposed
sequester, it would have been counterproductive and needlessly
disruptive. It would have done a lot of damage in fact to the
contractors themselves and their communities.
The issues--finally, the issues of the WARN Act and its
potential for mass layoffs is only here before us because
Congress hasn't dealt with sequestration. And as Mr. Courtney
said, that is the real problem. That is what has to be
addressed. And we should be looking forward, I think it would
be more helpful than looking back to what the department did or
didn't do.
But, in any event, what the department did was appropriate.
You know that on the department's Web site is, as Ms. Oates
said, is guidance that they have given in Katrina without any
objection from anybody, guidance that they gave in 2003 when
they put together the employer handbook for the WARN Act.
It--on the one hand you can't say that those, as my
colleagues, my fellow panelists have said, that those things
were appropriate and somehow this wasn't. The department should
give guidance. And they have been proven right.
I mean, that is the other thing. They said this was
speculative. It might not happen. In fact, it is less likely to
happen than to happen on January 2nd. So, giving notice, even
conditional notice would be inappropriate. The department was
right.
The law in this area has been dealt with in the
submissions, but you know I think it is important to just read
one thing from the A-12 cases that Mr. Gies mentioned. And that
is that the court said this isn't a case of a single contract
cancellation. They said the question of reasonable
foreseeability begs another question.
By adopting the standard, does the WARN Act envision the
probability of an unforeseen business circumstance, i.e. a
contract cancellation, or instead the mere possibility of such
a circumstance? We can only conclude that it is the probability
of occurrence that makes a business circumstance reasonably
foreseeable.
That is in the case of a single cancellation. Here we are
talking about sequestration that will lead to who knows how
many cancellations. The Department of Defense in its letter on
the subject says for contracts in place that are incrementally
funded, any action to adjust funding levels would likely occur,
if it occurred at all, several months after sequestration.
This is a point that Mr. Courtney said. It is way too early
for employers to be giving these notices. And I am very
confident that courts would agree with my interpretation of the
law.
Finally, let us talk about sequestration. This is a
disaster. The CBO, I think, has said that there would be three
quarters of a million jobs lost if it went forward. At my
institute the economists at the Economic Policy Institute have
estimated that 660,000 jobs will be lost just in 2013 if the
sequestration were to take place on March 1st.
That is the problem that Congress needs to be dealing with.
It needs to be stopped. And I really encourage this committee
and every committee to put their energy there. Thank you.
[The statement of Mr. Eisenbrey follows:]
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------
Chairman Walberg. Thank you, Mr. Eisenbrey. And I certainly
concur with you as I said in my opening statement that
sequestration is a terrible thing to happen. And its time
appears to have come, sadly, after this House on two occasions
offered an alternative to that. Nonetheless, we are here today.
So, thank you.
Ms. Furchtgott-Roth, thank you for being with us. It is
your time.
STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN
INSTITUTE FOR POLICY RESEARCH
Ms. Furchtgott-Roth. Thank you very much for inviting me to
testify today. Two days ago the Labor Department brought out
its job openings and labor turnover data for December. That
showed that the rate of job openings declined from 2.8 percent
to 2.6 percent. The rate of hires declined from 3.3 percent to
3.1 percent.
Workers in America are hurting. That is why it is so
important that if there is a chance that they are being laid
off they need to be given their WARN notices. We are now at
February 14. The sequester is due March 1st. Even though you
passed two bills to avoid the sequestration, it doesn't look
like Senate and President Obama are following suit.
The biggest problem, I would say, in the economy is not
sequestration. It is lack of economic growth. It is the growing
government deficit. Government outlays have grown from about 20
percent of GDP in 2007 to about 24 percent of GDP. The deficit
has ballooned. The public debt has ballooned. We are talking
about cutting 2 percent--about 2 percent of federal spending.
Surely as you have shown with your alternative bills, we should
be able to do that.
In terms of these WARN notices we are not talking about
blanket WARN notices. Large defense firms are undoubtedly
planning for the sequester. It would be irresponsible of them
not to do this. And the purpose of the WARN notices was just to
allow them to share these plans with their employees so that
their employees are not left surprised.
Just as the CEOs are looking at plans for the companies and
are looking at what their shareholders expect them to do, they
should be sharing this information with the workers who also
have the right to plan. And employees are not stupid. They know
that the January 1 sequester was put off. Here it is February
14. They might be thinking the March 1st one would be put off
too. But it is up to them to have that knowledge.
There are probably other cuts that could be made in DOD. I
would just like to suggest one. Stop buying green fuels. The
military has made a push towards green fuels. This is costing
about $27 a gallon. Regular fuel is about $3.50 per gallon. I
would suggest instead of eliminating the submarines or cutting
back on submarines, instead of stopping to refuel the Lincoln
they should be thinking about how to make the military more
efficient rather than less efficient by going green.
I calculate that if 10 percent of workers were laid off in
the seven major defense firms penalties would be about $412
million in back pay, plus about $100 million in benefits. And
it is not up to the Office of Management and Budget to say well
the Defense Department is just going to be paying those
penalties and costs.
Twenty percent, I calculate, it would be about $825 million
in back pay, $200 million in benefits for about a billion
dollars. And these amounts need to be appropriated and
authorized by Congress, not just told by OMB that it would pay
the penalties.
It is unconscionable for the Office of Management and
Budget, for our government to be telling companies that they
should break the law and that they will pick up the penalties
for doing this. This is the kind of thing we read about
happening in countries such as Russia and Venezuela. We should
be very shocked that it is happening here.
And defense companies are being put in a very awkward
position since the federal government is their major employer.
And if someone comes to them and asks them to do this they are
caught between a rock and a hard place.
So, with that I would just like to summarize that I think
economic growth is the most important thing to do. We need to
be cutting spending. We should not be considering raising
taxes, which we have just done on January 1st, because that
slows economic growth.
The American worker deserves a growing economy. A growing
economy means an efficient economy, low taxes, low burden of
regulation and clear, predictable rules for how to operate.
Thanks very much for allowing me to testify today. I would
be glad to answer any questions.
[The statement of Ms. Furchtgott-Roth follows:]
Prepared Statement of Diana Furchtgott-Roth, Senior Fellow,
Manhattan Institute
Chairman Walberg, Ranking Member Courtney, members of the
Committee, I am honored to be invited to testify before you today on
the subject of employers' WARN Act responsibilities. I am a senior
fellow at the Manhattan Institute. From 2003 until April 2005 I was
chief economist at the U.S. Department of Labor. From 2001 until 2002 I
served at the Council of Economic Advisers as chief of staff. I have
also been a senior fellow at the Hudson Institute and a resident fellow
at the American Enterprise Institute. I have served as Deputy Executive
Secretary of the Domestic Policy Council under President George H.W.
Bush and as an economist on the staff of President Reagan's Council of
Economic Advisers.
The Budget Control Act of 2011, signed into law by President Obama
on August 2, 2011, put in place a sequester of $1.2 trillion over the
next ten years if Congress did not cut spending.\i\ Though the original
sequester was scheduled for January 2, 2013, the American Taxpayer
Relief Act of 2012 moved the date to March 1, 2013.\ii\ Under current
law, according to a September 14, 2012 White House report on details of
the sequester, the Pentagon's spending will decline by over $500
billion over ten years.\iii\
This means that defense contractors will in all likelihood have to
lay off workers, because of cuts to spending used to fund contractors'
work. House Budget Committee Chairman Paul Ryan predicted recently that
sequestration will occur in March. Like Congressman Ryan, businesses
can foresee the layoffs that will be necessary--and this predictability
triggers a legal requirement that they send out notices to their
employees 60 days in advance. Currently, they are not doing so.
The requirement that firms expecting mass layoffs, plant closings,
or certain other employment losses inform their employees 60 days in
advance comes from the Worker Adjustment and Retraining Notification
Act of August 1988, passed by a Democratic Congress over President
Ronald Reagan's veto.\iv\ The WARN Act is meant to allow workers to
prepare themselves for the risk of layoff, temporary or permanent.\v\
Congress was so adamant on the necessity of the WARN Act that it
did not permit employer waivers. No government agency can exempt firms
from issuing the notice of potential job loss.
Sending out WARN notices is routine. Firms that sent out recent
WARN notices include American Airlines, Pfizer, and Sodexo. In 2011
Qimonda AG, an electronic memory products manufacturer, reached a $35
million settlement for not sending out notices in time.\vi\
Informed workers might look for other jobs, skip a planned
vacation, or delay the purchase of a car or dishwasher. Or, another
member of the family might start looking for a job.
WARN notices serve a purpose, because laid-off workers generally
see a decline in earnings. It is particularly hard to find a job in
today's economy. In January the economy created only 157,000 jobs, and
the unemployment rate rose to 7.9 percent.
The economy has 3.2 million fewer jobs than at the start of the
recession, in December 2007. On Tuesday the Bureau of Labor Statistics
issued its Job Openings and Labor Turnover Survey results for December
2012. It showed that rates of employer hiring, job openings,
separations, and quits have not yet recovered from the recession.
The poor economic climate makes it even more surprising that the
Labor Department and the White House have asked federal contractors to
break the law and not send out required WARN notices. Many contractors
were expecting layoffs on January 2, and are now expecting layoffs on
March 1. Some have already reduced hiring in anticipation of future
spending cuts.
The Labor Department, which supposedly has employees' best
interests at heart, issued a guidance notice on July 30, 2012
discouraging firms from issuing WARN notices.
The guidance notice from Assistant Secretary Jane Oates said:
``WARN Act notice to employees of Federal contractors, including in the
defense industry, is not required 60 days in advance of January 2,
2013, and would be inappropriate, given the lack of certainty about how
the budget cuts will be implemented and the possibility that the
sequester will be avoided before January.'' \vii\
The July guidance letter was followed by a Memorandum for Chief
Financial Officers and Senior Procurement Executives of Executive
Departments and Agencies from the White House Office of Management and
Budget. Dated September 28, 2012, the memo counseled defense employers
not to issue layoff notices on November 1. It is the first time in
history that the White House has asked firms not to file layoff
notices.
The reason for the memo was that ``Despite DOL's guidance, some
contractors have indicated they are still considering issuing WARN Act
notices, and some have inquired about whether Federal contracting
agencies would cover WARN Act-related costs in connection with the
potential sequestration.'' \viii\
Daniel Werfel, Controller of OMB's Office of Federal Financial
Management, and Joseph Jordan, Administrator for Federal Procurement
Policy, assured employers that if they did not send out layoff notices
and layoffs occurred, the ``contracting agency,'' namely the Pentagon,
would absorb the penalties and attorneys' fees the employers would have
to pay, a significant cost to taxpayers.
The White House does not have the authority to offer to pay the
costs, because such funds are authorized and appropriated by Congress,
i.e. Members of this Committee. Some senators, such John McCain and
Lindsay Graham, said in October that they will not allow government
funds to be spent on penalties and costs.\ix\
However, OMB's memo states that if sequestration occurs and the
contractor has followed Labor Department guidelines, ``any resulting
employee compensation costs for WARN Act liability as determined by a
court, as well as attorneys' fees and other litigation costs
(irrespective of litigation outcome), would qualify as allowable costs
and be covered by the contracting agency, if reasonable and
allocable.''
If firms don't file WARN notices and certain levels of plant
closings or layoffs occur, employers are liable for penalties of 60
days back pay and benefits paid to workers.
What could that cost?
Lockheed Martin has stated that it expects to lay off 10,000
employees if a sequester occurs. Given other firms' current payrolls,
if they laid off 10 percent of their workers, I estimate that Boeing
would lose 17,000 employees; General Dynamics, 9,500 employees;
Northrop Grumman, 7,000; and Raytheon, 6,800, and SAIC 4,000. This adds
up to 54,300 employees.
If the firms do not file WARN Act notices, they might be liable for
60 days back pay in penalties. Using BLS's average weekly earnings in
the industry of $951, I calculate that the wage bill would come to
about $76 million for Lockheed Martin for its 10,000 workers. Boeing
would owe around $129 million; General Dynamics, $72 million; Northrop
Grumman, $53 million; Raytheon, $52 million; and SAIC $30 million.
These contractors and the Defense Department would be liable for
$412 million in back pay, plus benefits. If 20 percent of employees
were laid off, the bill would run to $825 million plus benefits.
Benefits liabilities would be significant. A 2012 CBO study noted
that 30 percent of a private-sector employee's total compensation cost
was tied to benefits.\x\ Using even a conservative version of that
ratio, benefits owed could top $100 million in a 10 percent layoff
scenario.
These amounts do not account for court costs and attorney fees,
which might run into additional tens of millions.
Defense contractors are being put in an untenable position. They
can break the law and keep the White House happy, or follow the law and
annoy their major customer.
I am not privy to internal White House discussions, but it is
likely that the White House asked contractors to break the law in the
interests of the re-election of President Obama. The Obama
administration was concerned that layoff notices mailed on November 1,
2012, could cost the Obama-Biden ticket votes, especially in Ohio and
Virginia, swing states with a strong defense presence.
Since firms have stated they will not issue the WARN notices, their
potential liability in penalties should be declared on their next
quarterly SEC filings. Otherwise, they might be liable for additional
millions from shareholder suits.
However, this major campaign donation to President Obama has not
appeared on any campaign disclosure forms.
The Administration has devoted substantial resources to making sure
that companies are run efficiently. The Dodd-Frank labyrinth, with its
armies of regulators, is supposed to make sure that companies do not
make financial mistakes. Yet the penalties for not filing WARN notices
could reach into the millions of dollars. Should not shareholders be
informed?
On January 20 and 21, President Obama was sworn in for his second
term. He took the oath of office, in which he swore to defend the
Constitution. The Constitution's Article II, Section 3 states that the
president ``shall take Care that the Laws be faithfully executed.'' Yet
the White House has told some of the largest corporations in America to
break the law in order to help re-elect a sitting president, and
offered to pick up the penalties and court costs.
If this were Russia, no one would think twice. But in America, if
we're not shocked, something is very wrong.
endnotes
\i\ 112th Congress, 1st Session, Budget Control Act of 2011,
Section 251a, http://www.gpo.gov/fdsys/pkg/BILLS-112s365enr/pdf/BILLS-
112s365enr.pdf.
\ii\ 112th Congress, 2nd session, American Taxpayer Relief Act of
2012, Title IX, Section 901, http://www.gpo.gov/fdsys/pkg/BILLS-
112hr8eas/pdf/BILLS-112hr8eas.pdf.
\iii\ White House Office of Management and Budget, OMB Report
Pursuant to the Sequestration Transparency Act of 2012 (P. L. 112--
155), September 14, 2012, p. 5, http://www.whitehouse.gov/sites/
default/files/omb/assets/legislative--reports/stareport.pdf.
\iv\ 110th Congress, House Report 110-410, http://thomas.loc.gov/
cgi-bin/cpquery/?&dbname=cp110&sid=cp1100AFa6&refer=&r--
n=hr410.110&item=&sel=TOC--18846&.
\v\ U.S. Department of Labor, Employment and Training
Administration, The Worker Adjustment and Retraining Notification Act
Fact Sheet, http://www.doleta.gov/programs/factsht/warn.htm.
\vi\ Klehr Harrison Harvey Branzburg LLP, Qimonda WARN Act Case
Information, May 17, 2011, http://www.klehr.com/C7756B/assets/files/
News/SCN--20110517115438--001.pdf.
\vii\ Oates, Jane, Guidance on the Applicability of the Worker
Adjustment and Retraining Notification (WARN) Act, 29 U.S.C., 2101-
2109, to layoffs that may occur among Federal Contractors, including in
the Defense Industry as a Result of Sequestration, Employment and
Training Administration Advisory System, July 30, 2012.
\viii\ Werfel, Daniel I. and Joseph G. Jordan, Memorandum for the
Chief Financial Officers and Senior Procurement Executives of Executive
Departments and Agencies, Executive Office of the President, Office of
Management and Budget, M-12-19, September 28, 2012, http://
www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-19.pdf.
\ix\ Senator Lindsey Graham, Senators Urge Defense Contractors To
Follow The WARN Act, Press Release, October 5, 2012, http://
www.lindseygraham.com/2012/10/release-senators-urge-defense-
contractors-to-follow-the-warn-act/.
\x\ Congressional Budget Office, Comparing the Compensation of
Federal and Private-Sector Employees, January 2012, p. 9, http://
www.cbo.gov/sites/default/files/cbofiles/attachments/01-30-FedPay.pdf.
______
Chairman Walberg. Thank you. We appreciate your comments.
And thank you to all of the witnesses for your insights and
your thoughts on this issue. I now recognize myself for 5
minutes of questioning.
Assistant Secretary Oates, again thank you for being here,
were you aware of the efforts in letters from Chairman Kline,
myself, from our committee, phone calls, meetings that have
been going on for 6 months trying to get answers on this very
issue had been undertaken? Were you aware of those efforts?
Ms. Oates. Mr. Chairman, I was tangentially aware of the
conversations back and forth. But oversight is handled by our
Office of Congressional and Government Relations. It is not
something handled in the Employment and Training
Administration. So, I wouldn't have--I wouldn't be able to
answer any specific questions.
It is a small building. Everybody knows pretty much what
everybody is doing. But I was not involved in any of it.
Chairman Walberg. Well, that is a concern to me as well
because you know last night as I mentioned in my opening
comments, this packet was slipped under a door after 9:00. I
really don't know what is in it other than a disk. Our staff
doesn't know for certain all that is in it other than it is
about 400 pages of information, hopefully containing
information we request in our letters.
Do you know if it does contain that information that we
requested?
Ms. Oates. The direct answer would be no, sir. But I need
to tell you that the department takes seriously all of the
questions that Congress puts up there. So, if you are asking my
opinion, my opinion would be that OCIA answer to the best of
their ability.
Chairman Walberg. So the best ability in 6 months since we
initiated the request on this, as we all would agree, a very,
very critical issue of sequestration and the use of the WARN
Act. Regardless of where we stand on the sequestration itself,
whether we think it is going to result in as many layoffs as it
potentially could.
I would hope it wouldn't take calling a subcommittee
hearing in order to get information like this, 400 pages of it,
the night before the hearing. And I guess I would ask would you
concur with that? That it shouldn't take calling a hearing to
get information; that the oversight responsibility of this
committee and many other committees have to be carried out.
Ms. Oates. Sir, you know that I spent the majority of my
career here in Washington on the other side of this bench
staffing members. So, I understand your frustration.
But I hope you understand that I am saying to you I am on a
team and OCIA is part of that team. And I have to assume that
they are doing everything in their power to answer your
questions as fully as possible. And I will be happy to take
your concerns back to them when I go back to the Department of
Labor.
Chairman Walberg. Well, I would appreciate that. I would
appreciate if you could give me your assurance that in the
future when we request information like this we won't have to
go through this process, but we will have timely response. Even
if it is saying we are still compiling.
But I would hate to think that there is obstruction taking
place of the efforts that we ought to be working together on.
If I could have your assurance on that for the future I would
appreciate that.
Ms. Oates. I can't give you my assurance, sir. If you ask
me that about ETA I would do my best to give you my assurance.
What I can assure you of is that I will take your concerns back
immediately to OCIA and to the departmental leadership.
Chairman Walberg. Well, let's talk about ETA then----
Ms. Oates. Okay.
Chairman Walberg [continuing]. In relationship to this. In
the wake, as was expressed by Mr. Eisenbrey, in the wake of
Hurricane Katrina in 2005 the Employment and Training
Administration issued a fact sheet to aid employers in
understanding their requirements under the WARN Act. That is a
matter of record.
Ms. Oates. Yes, sir.
Chairman Walberg. The fact sheet specifically states, and I
quote--``employers should be aware that the U.S. federal court
solely enforces the WARN Act, and these answers are not binding
on the courts.'' That was what was stated in that advisory.
Ms. Oates. Yes, sir.
Chairman Walberg. You concur. Your most recent guidance in
reference to what we are here about today contained no
statement or qualification equal to this, or more importantly
at all. Could you please explain the Employment and Training
Administration's change in policy regarding binding nature of
guidance issued on the WARN Act in this case?
Ms. Oates. So, as you know, Mr. Chairman, I wasn't in this
position in 2005. But that guidance still remains in place
today and is used for a number of businesses that are incurring
the same----
Chairman Walberg. But was not in your guidance submitted--
--
Ms. Oates. No, no.
Chairman Walberg [continuing]. Or this particular
situation.
Ms. Oates. But it exists on our WARN Web page and is still
used by people. The audience for that guidance in 2005 were
employers, and it was very important to state that. The
audience for my guidance that was issued last summer were the
state workforce agencies and the local workforce agencies.
Answering a question does someone giving a blanket
statement about the possibility of sequestration respond to the
requirements in the WARN Act? So, we were getting those
questions from a number of people.
The reason for the guidance was to make sure that states
knew employers have the right to have good, strong
communications with their employees at all times. But until
they have the specific information required by the WARN Act,
they could not use conversations about pending sequestration to
count as their activities documented under the WARN Act.
So, the importance of that guidance in the summer was to
clarify that at that time we did not have sufficient
information to be able to allow employees to give the
information--I am sorry, employers--the specific information
that they would need to comply with the WARN Act.
Chairman Walberg. The--and I appreciate that explanation.
But still the policy remains that you don't have the authority
to make that statement to employers or state agencies dealing
with what ought to be the part--what ought to be the
requirements of the WARN Act. And that is our concern, that
there seems to be a different means of handling it this time
than others.
My time has expired. But I hope that further questions
bring to light why the change went on at this point. I thank
you.
I now recognize the ranking member, Mr. Courtney, for his
questions.
Mr. Courtney. Thank you, Mr. Chairman.
Again, at the outset I just want to share with the group
here today that when Undersecretary Carter was--for DOD--was at
the hearing yesterday, again he did start to lay out specifics
in terms of you know if the catastrophe occurs. And made it
very clear, unfortunately, the civilian workforce at the
Department of Defense is probably going to be subject to some
pretty heavy layoffs, which is sickening.
I mean 87 percent of those reside outside of D.C. I mean
they provide critical support for military installations, you
know programs of all sorts. O&M, you know Operations &
Maintenance repair work again, would probably again be
something that in this fiscal year would be sort of on the hit
list or targeted, again, but not on March 1st.
You know there is going to be sort of an implementation
rationale even though this is an irrational process that they
would try and lay out. So, again, I just--the granular
presentation that was given to us yesterday, again, is that
again, it is not going to be done by the department all at once
on one single day.
Undersecretary Oates, just to sort of talk TEGL here for a
minute, again, a TEGL is not sort of some once in a lifetime
event. I mean it is something that your department is in the
business of issuing on a pretty frequent basis. Is that
correct?
Ms. Oates. Yes, Congressman.
Mr. Courtney. And so I mean I have some statistics here
that it looks like in 2012 you had a total of 51 TEGLs that
were issued.
Ms. Oates. Yes, sir.
Mr. Courtney. Okay. So I mean this is nothing sort of
extraordinary in terms of what the department was doing in
terms of this normal administrative act.
Ms. Oates. That is correct. We issue them so that there is
consistency. There is over 1,000 employees nationwide in the
Department of Labor under ETA. And anybody could call any of
them. The TEGLs come out so that there is consistency. No
matter who you ask they have the same information so you are
not getting different information from different people.
So, it is a routine thing. We also have other instruments
like UPLs for UI and TENs. We issue, again, an equal number of
those every year.
Mr. Courtney. Okay. And just, again, just to underline the
point, this request for an opinion did not come from the White
House. It did not come from David Axelrod. It came from state
labor departments across the country. Is that correct?
Ms. Oates. And local labor force people too. But yes, sir;
just to clarify, I never had a discussion with the White House
about this guidance.
Mr. Courtney. Thank you. Okay. And so----
Ms. Oates. They don't routinely call me.
Mr. Courtney. Yes. You are not alone.
But in any case, Mr. Eisenbrey, again, when WARN was
designed, I mean again it really was focused on trying to sort
of trigger assistance to workers, right? I mean and that is why
there is a pure--I mean a perfect logic to the fact that that
would be the entity that would be contacting the Department of
Labor looking for some help. Isn't that correct?
Mr. Eisenbrey. That is right. The act was part of a larger
effort to deal with waves of plant closings that were happening
in the 1980s. It set up State Dislocated Worker Units to
respond, that are part of the system that Ms. Oates oversees.
And it required notice to the state so that they could
respond to local governments so that they could begin to
prepare for what could be a disaster in a small community, or
it would always be of a concern anywhere, a mass layoff. And
then for the workers, and they were supposed to get specific
notice, not just we were very concerned and Congressman Ford
and the other authors made sure that the department forbade
blanket notices as a way to comply with the act.
What we wanted was people not just to know that there was a
concern, but that their job was going to be eliminated. They
needed to change their behavior and prepare for what would be--
--
Mr. Courtney. So----
Mr. Eisenbrey [continuing]. Very hard.
Mr. Courtney [continuing]. The opposite happened. You said,
yes, you know WARN Act, all hands on deck. Notices went out.
State labor departments you know kind of activated. I mean the
fact is is that it would have been really obviously a stressful
reaction for people. But at the end of the day it wouldn't have
accomplished----
Mr. Eisenbrey. Right. What would they have done? They
wouldn't have known where to send their resources. A rapid
response unit, where would they go to? I mean Ms. Furchtgott-
Roth talks about thousands and thousands of people who are
going to lose their job.
We don't know that yet, you know where they are going to
be. Would they go to every employer, to every facility? It
would be a real waste of resources to do that.
Mr. Courtney. Thank you. I yield back.
Chairman Walberg. Gentleman's time is expired. I recognize
Dr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman.
Mr. Gies, would you expect litigation to ensue, even with
the DOL and OMB guidance?
Mr. Gies. Yes. Yes, congressman. And the reason I think, to
elaborate briefly on that, is I think we find as lawyers
representing companies any decision you make can be second-
guessed, and this would be like most others.
Mr. DesJarlais. Okay. How long would a typical WARN Act
cause of action take to complete if it were to go to trial?
Mr. Gies. It depends on how busy the federal court is. It
could very easily be 2 years before you get to jury trial if
the case went that far. And I say jury trial; that is another
open legal issue whether or not there is a right to a jury
trial. But irrespective, in many busy federal courts it might
be 2 years.
Mr. DesJarlais. Okay. Can you discuss the cost associated
with WARN Act litigation?
Mr. Gies. Only generally. I mean, you have heard from the
other witness an estimate of what the costs would be. I mean
the statute is pretty clear in terms of what the back pay and
benefits liability would be. Attorney's fees is like any other
form of complex civil litigation how much it might cost.
Mr. DesJarlais. Okay. The OMB guidance purports to
reimburse contractors who are subject to litigation for
following DOL guidance irrespective of litigation outcome. Is
this generally an allowable cost?
Mr. Gies. I think that is a contract-specific question. The
general rule is that costs that are reasonable are reimbursed.
But that is a decision made by the contracting officer on a
contract-specific basis.
Mr. DesJarlais. Okay. What triggers the need to provide a
WARN Act notice?
Mr. Gies. I am sorry, sir?
Mr. DesJarlais. What triggers the need to provide a WARN
Act notice----
Mr. Gies. Oh, the trigger? Well, as you have heard in brief
it is an employment loss of a certain number of employees. If
it is a mass layoff or a plant closing, if it is a complete
closure of a facility, that is a single side of business.
Mr. DesJarlais. Does it have to be public knowledge?
Mr. Gies. No.
Mr. DesJarlais. It does not. Okay.
Do you believe the administration's guidance from DOL and
OMB will indemnity contractors from litigation on the federal
WARN Act? What--do you believe it will indemnify contractors
from litigation?
Mr. Gies. I think it is impossible to know today.
Mr. DesJarlais. Okay. Are contractors correctly considering
sending out WARN notices despite the encouragement from DOL and
OMB to refrain from sending such notices?
Mr. Gies. I think each company is thinking hard about that,
as you have heard from lots of people on this panel. And each
company will make its own decision based on what they know.
Mr. DesJarlais. Okay. I assume you have had an opportunity
to read Assistant Secretary Oates' written testimony.
Mr. Gies. I did.
Mr. DesJarlais. In your opinion does her testimony make
clear the department's guidance and any assurance it provided
stakeholders applies to the current March 1st sequester?
Mr. Gies. It is not clear to me.
Mr. DesJarlais. That is all I have. I yield back.
Chairman Walberg. I thank the gentleman.
I now recognize for questioning, Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chairman. Thank you for holding
this hearing.
I first want to observe that I am--how delighted I am. This
is my sixth term on this committee and I am delighted to see
that we are having a hearing, the purpose of which, I hope, is
to protect worker rights. That is a rare occurrence on this
committee.
We spend most of our time in this committee when the
Republicans are in the majority taking up measures or looking
at issues in which we are endeavoring to pursue the protection
of employer rights, often at the expense of employees. And so I
am delighted that we are focusing on a concern for employees.
I also think that we are engaged in what might be called
revisionist history, and we are also engaged in some denial of
current reality. I noted the chairman in his opening statement
said that President Obama insisted on the sequester. I note
that we now are referring to the sequester as the
``Obamaquester.''
I also note, as the ranking member said, the chairman--that
Speaker Boehner said that he got 98 percent of what he wanted
out of the deal that brought us the sequester. And I think we
can all agree that the sequester constitutes a touch more, a
touch more than 2 percent of the deal.
I also note that the chairman said that sequestration is
not how Washington should conduct the people's business. I
couldn't agree more. I absolutely agree. But I think it is
instructive to enter into the record statements that our
colleagues on the Republican side of the aisle have made.
Representative Mike Pompeo, ``The sequester is here. It is
time. We have got to get these spending reductions in place. It
is going to be a home run.''
Representative Cynthia Lewis, ``Sequestration will take
place. I am excited. It will be the first time since I have
been in Congress that we really have significant cuts.''
Representative Paul Broun, ``I want to see sequestration go
into place.''
Representative Steve Scalise, ``The consensus is we want
the sequester numbers to come in and to finally see spending
reduced in Washington.''
Representative Mick Mulvaney, ``We want to see--keep the
sequester in place, and take the cuts we can get.''
And finally, Representative DesJarlais, a member of this
committee, ``Sequestration needs to happen. Bottom line, it
needs to happen, and that is the deal we struck to raise the
debt limit.''
So, this is not an issue, clearly, where there is unanimity
on the Republican side of the aisle that this is ``not the way
we should conduct the people's business.'' In my view it is not
the way we should conduct the people's business. And 14 days
away from a self-imposed crisis, we should be focusing all of
our efforts on how to avoid sequestration in a fair and
balanced way, not by trying to score political points and
assess blame.
So, let me ask Ms. Furchtgott-Roth a question. In the--on
the last page of your written testimony you say, and I am now
going to quote. I am going to read from it. ``I am not privy to
internal White House discussions, but it is likely that the
White House asked contractors to break the law in the interest
of the reelection of President Obama.''
You then go on to say two paragraphs later ``On January
20th and 21st President Obama was sworn in for his second term.
He took the oath of office in which he swore to defend the
Constitution. The Constitution's Article II Section 3 states
that the president shall `take care that the laws be faithfully
executed' yet the White House has told some of the largest
corporations in America to break the law in order to help
reelect the sitting president.''
That is a pretty serious charge. Now, may I ask, aside from
what I presume to be a willingness to attribute to the
president the most nefarious of motives whenever he takes a
position, what evidence do you have to substantiate that pretty
serious charge?
Ms. Furchtgott-Roth. The OMB memo. The OMB----
Mr. Bishop. Have you----
Ms. Furchtgott-Roth [continuing]. Is out of the White
House.
Mr. Bishop [continuing]. Submitted your concerns to the
Department of Justice?
Ms. Furchtgott-Roth. No.
Mr. Bishop. Have you asked any member of Congress to
institute proceedings in which the impeachment of the president
would be undertaken for failure to uphold the Constitution?
Ms. Furchtgott-Roth. I was not asked my opinion by any
member of Congress.
Mr. Bishop. I am asking your opinion right now.
Ms. Furchtgott-Roth. I have not spoken to any member of
Congress.
Mr. Bishop. Will you? This is a very serious charge you
have leveled against the president.
Ms. Furchtgott-Roth. Will I ask a member of Congress----
Mr. Bishop. Yes. Yes.
Ms. Furchtgott-Roth [continuing]. To start an impeachment
proceeding?
Mr. Bishop. Yes.
Ms. Furchtgott-Roth. I am just an economist and I
wouldn't----
Mr. Bishop. I understand. I understand that. But you have
leveled a very serious charge against the president of the
United States in a subcommittee of the United States Congress.
Ms. Furchtgott-Roth. Well, it is very serious when the
Office of Management and Budget asks defense contractors to
break the law because the----
Mr. Bishop. And the Office of Management and Budget----
Ms. Furchtgott-Roth [continuing]. Was supposed to go out
November----
Mr. Bishop. The Office of Management and Budget memorandum
to which you refer specifically says that contractors should
break the law?
Ms. Furchtgott-Roth. It says--it advises them not to send
out the WARN notices, and it says the contract agency----
Mr. Bishop. But we have----
Ms. Furchtgott-Roth [continuing]. Will pick up----
Mr. Bishop. We have an advisory opinion from the Department
of Labor that says that sending out the WARN notice is not
required in this circumstance. Is that not correct?
Ms. Furchtgott-Roth. That is what the Labor Department
said. I don't think that that is true.
Mr. Bishop. Are you attributing nefarious motives to the
Labor Department as well?
Ms. Furchtgott-Roth. No, but I am saying they are
incorrect. Companies should follow the law.
Mr. Bishop. They are incorrect.
Ms. Furchtgott-Roth. Yes.
Mr. Bishop. So, if the OMB followed what you characterize
as an incorrect guidance, you have inferred from the following
of that incorrect guidance that OMB was encouraging the
president to break the law. So at a minimum is it not fair to
understand that if the OMB--pardon me, the Department of Labor
guidance was incorrect, an opinion I don't share, and OMB acted
on an incorrect guidance, is it not fair, reasonable, if all of
those factors were in place, to assume that the OMB acted
incorrectly and advised the president incorrectly as opposed to
advising the president to break the law? Is that not a
reasonable conclusion from the set of facts that you are
presenting?
Ms. Furchtgott-Roth. That certainly is one possible
conclusion. Another is that the WARN notice----
Chairman Walberg. The gentleman's time is expired. We have
offered the latitude for that. I think questions--the
comments----
Mr. Bishop. I thank the chairman.
Chairman Walberg. Thank you.
I now recognize Dr. Bucshon.
Mr. Bucshon. Thank you, Mr. Chairman.
In deference to Mr. Bishop's attack to try to divert the
conversation away from the real issue, I really find it ironic
that the administration and people on the other side of the
aisle are here essentially arguing against employer's rights--
employee's rights. This is a hearing about employee's right to
know.
It is very ironic because the discussion, in my view, is
clearly about that. And let us be clear. This was about
reelecting the president. This was about large amounts of
employees not knowing they were going to be let go, but prior
to November 6th of 2012. In my view that is what this is about.
Let me quote from Senator Obama, and this has been quoted
already when he talked about this. ``American workers''--this
is in the discussion of the WARN Act 2008. ``American workers
who have committed themselves to their employers expect in
return to be treated with a modicum of respect and fairness.
Failing to give workers fair warning ignores their need to
prepare for the transition. It adds insult to injury to close a
plant without warning employees. Workers and their communities
have a right to know when they are facing a serious risk of a
plant closing.''
We are not talking about a blanket statement. We are
talking about companies that know if they are facing the loss
of a contract or other things, specifically which employees are
going to lose their jobs. They know that. And if they don't,
then they are not doing their job.
This is just a long list of things where the administration
subverts Congress. And I can list; it is a long list.
Immigration, welfare, NLRB appointments that were proven to be
unconstitutional, and they have even attempted to tell Congress
when or when we are not in session. So, it is not about a
blanket notice.
What I wanted to ask you, Ms. Oates, is do you have a list
and the letters from the specific states and the specific
people that ask you to give guidance on this? Who--I--and if
you do I would like those submitted to the committee because I
am assuming they don't just pick up the phone and say can you
do a guidance on this. There is written correspondence between
the Labor Department and people who request these things.
If that is true, then I am requesting that all of those
letters from everyone that requested this guidance be submitted
to Congress. Can you do that? Can you provide that?
Ms. Oates. Well, let me first answer your question,
congressman. The conversations that I have with people--and
this is how I conduct operations as many of the members of this
committee know, I do have state labor commissioners from both
parties who pick up the phone and call me on my office phone or
my cell phone.
I also spend a lot of time, once a month I meet with all
the IGOs and spend a lot of time when I am out in the areas.
Mr. Bucshon. In this type of controversial guidance that
you knew was going to be controversial--this is a huge issue,
wouldn't you--I would expect that it would be more than a call
to your cell phone asking this kind of guidance to be released.
Ms. Oates. Sir, with great respect, at the time that we
offered this guidance there was not a sense that there was
going to be any controversy. I mean we had heard from a number
of----
Mr. Bucshon. I would disagree with that opinion.
Ms. Oates. Well, but I am telling you honestly that we
heard from a number of state and local workers----
Mr. Bucshon. I am not denying that you are. I just want to
know who they are.
Ms. Oates. I could get--I would be happy to share my
calendar so you could see an area where--who I met with----
Mr. Bucshon. I just want Congress to know you are talking
about states submitting requests for guidance, companies
submitting requests.
Ms. Oates. No, sir. I never said anything about a company.
What I said----
Mr. Bucshon. Okay. States. That is fine. And----
Ms. Oates. I didn't say they submitted----
Mr. Bucshon. I would like to know which states.
Ms. Oates. They----
Mr. Bucshon. Because my argument will be that it is a bunch
of blue states that are--that are doing this. And if that is
not true I would just like to know the--I would just like to
have the list.
Ms. Oates. I don't have any correspondence to give you,
sir, so----
Mr. Bucshon. The other question I had--have is on this. Who
made the decision to offer taxpayer funds to corporations that
don't comply with the WARN Act? Did you make that decision? Or
who told--who told you, as part of your guidance, to offer--
just offer taxpayer funds to companies if they get sued because
they have violated this act? I would like to know
specifically----
Ms. Oates. Certainly.
Mr. Bucshon [continuing]. Who told you to do that.
Ms. Oates. With great respect, that was not mentioned in my
guidance. I think your staff may be referring you to the OMB
guidance. And I think those questions would be best directed to
OMB. I had no conversation about that.
Mr. Bucshon. So, it is not-that is the other tactic is it
is the other guy all the time. And you know----
Ms. Oates. Sir, I am sorry you feel that way.
Mr. Bucshon. Well, because we have this hearing after
hearing. We just had it yesterday on an NLRB hearing. That it
is not--you know where does the buck stop? You released the
guidance. You were responsible.
Ms. Oates. Sir, that wasn't mentioned in the guidance
released by the Department of Labor.
Mr. Bucshon. Who also made the decision ultimately to
release the guidance? Did you? I mean because somebody has--you
get all these requests. And my time is expired, but--so I will
just make a statement.
You get all these requests to release the guidance that you
say you have been requested. Who actually makes the decision to
release the guidance? And if that is you then I think I
respectfully ask you to submit the list of people who requested
to be guided.
Thank you. I yield back.
Chairman Walberg. Thank the gentleman whose time is
expired.
I now recognize the gentlelady from Ohio, Ms. Fudge.
Ms. Fudge. Thank you very much, Mr. Chairman.
I have been sitting, listening to this. So what I would
like to do is to get away from the spin that I am hearing from
the other side, and get away from the politics and the
political attacks on you, madam. So let's go to the act itself.
Let's see if we can be clear.
I want to start with my first question to Mr. Eisenbrey.
You talked about--you gave us a quote from the language. Let me
just see--let me give you a couple of other things I think that
are important because I see no ambiguity, not like the other
attorneys sitting here. I don't see the ambiguity they see, and
I too am an attorney, just for the record.
The preamble to the act says that they want to condemn an
overbroad notice. They say that they want to prevent unhelpful
blanket notice. They talk about, as you so aptly quoted, the
part about WARN notice, until a mass layoff is a probability
rather than a mere possibility.
So, the question is, just as a hypothetical or an example.
In your opinion do you believe that sending pink slips to all
the employees of a company, although only 10 percent will be
laid off, meets the probability threshold of the WARN Act's
requirements?
Mr. Eisenbrey. Well, it might for the 10 percent who the
companies knows are being laid off. But certainly that would be
a terrible thing to do to the other 90 percent who are not
being laid off.
Ms. Fudge. And it would be an overbroad application, would
it not be?
Mr. Eisenbrey. It would.
Ms. Fudge. Assistant Secretary Oates--by the way I think
that your position is a correct one. The actual impact of the
sequester as we know is unknown. Even though we don't want the
sequester, Democrats are very much against the sequester, it in
fact may happen, as we are not the majority of this House.
As you know, the notice required by the WARN Act must
include the name and location of the sites where the layoffs
will take place, and the positions of the people who will be
laid off. How would a company be able to comply with the WARN
Act requirements given the uncertainty that the sequester
poses? And how could a company provide the proper notification
when it is unclear whether its contract will even be affected?
Ms. Oates. That is exactly why we issued the guidance,
congresswoman. We--as soon as a company has those specific
elements, they are required--it triggers WARN notice. But until
they have those specifics WARN is not applicable.
Ms. Fudge. Thank you. Further, was it reasonably
foreseeable that sequestration was going to occur on January 2,
2013?
Ms. Oates. No, ma'am, it was not.
Ms. Fudge. Okay. Thank you.
Mr. Notestine, you said in your testimony that it is highly
questionable whether the Department of Labor has the authority
to issue guidance in this matter. Why would you make such a
statement, sir?
Mr. Notestine. Well, because--because they have authority
to make statements such as they did. They do have authority to
issue regulations. They did issue regulations some years ago.
And those regulations are very clear I believe, specifically
where it talks about notice in ambiguous situations.
It says it is therefore prudent for employers to weigh the
desirability of advance notice against the possibility of
expensive and time consuming litigation to resolve disputes
where notice has not been given. The department encourages
employers to give notice in all circumstances. And then they
come out with a statement in the TEGL which appears to me to be
inconsistent with that. And that was my concern.
Ms. Fudge. I am questioning the fact that you say they do
not have the authority to issue guidance.
Mr. Notestine. They don't--I do not believe they have
authority to issue something inconsistent with their
regulations.
Ms. Fudge. But that is not what you said. I just want to be
clear; they do in fact have the authority.
Mr. Notestine. They can issue TEGLs. There is no doubt
about it.
Ms. Fudge. I just wanted to be clear.
Thank you, Mr. Chairman. I yield back.
Chairman Walberg. I thank the gentlelady. I now recognize
the chairman of the committee, Mr. Kline.
Mr. Kline. Thank you, Mr. Chairman. Thanks to the witnesses
for being here.
Secretary Oates, I have just learned today about the
envelope that Chairman Walberg was talking about and I--it is
just astonishing to me that after hours last night an envelope
with a computer disk and a post-it note with a password was
slid under the door. And I heard your response that that is not
your doing.
Would it be--could you guess that it would be the
congressional liaison office who would have sent somebody over
here to slide this under the door? Who--where would it have
come from?
Ms. Oates. My assumption, sir, is that it came from someone
who works in OCIA.
Mr. Kline. So, I am just trying to imagine what that
discussion was that said, gosh I think it would be a really
good idea to take this disk, put a password on it and go over--
let us go over to Congress and slide it under the door. I just
would love to have heard that discussion. That is amazing.
And I would like to know, following up to the chairman's
questions, if we can find out where that came from. I mean it
is just sort of an envelope slid under the door; a very, very
strange, I would opine, way of communicating with the Congress
of the United States. And I have been--because it is not your
disk, and not your note, you wouldn't know if there is any
sensitive material, if that password was available for the
people who are sort of cleaning the floor or--it is out of your
scan. Is that correct?
Ms. Oates. I wasn't involved in that, sir----
Mr. Kline. Okay.
Ms. Oates [continuing]. That is correct.
Mr. Kline. All right. Let's move onto something that you
are involved with.
Your testimony doesn't address sequestration's current
effective date at the end of this month. Does your guidance and
its analysis currently apply to sequestration? Or is that just
a thing of the past?
Ms. Oates. It would apply today, sir, but as we all know,
as the ranking member mentioned, there was testimony yesterday.
I have no idea when we will get guidance from OMB to begin
sequestration plans or what conversations they are having with
other people. But as of right now, yes, it does apply. And
again, the most important thing is any employer who has this
specific information should invoke the WARN when they have that
information.
So as employers are getting information from government
agencies--that is why I want to be careful. I mean, I think
that somebody could get the specific information they needed
and they would have to invoke WARN sooner than March 1st or on
March 1st.
But my guidance would still apply. Until you have that
level of specific information about the specific job titles
that will be impacted by reductions it doesn't impact WARN.
Mr. Kline. So then presumably OMB's guidance, which is
based on your guidance, is still applicable. Is that correct?
Ms. Oates. The OMB guidance that they issued, I have no
idea what their plans are on that, sir.
Mr. Kline. And so you haven't talked to them about it at
all?
Ms. Oates. No, sir.
Mr. Kline. Dark hole. Okay.
Thank you. I yield back.
Chairman Walberg. I thank the chairman.
I recognize the gentleman from New Jersey, Mr. Andrews.
Mr. Andrews. Thank you, Mr. Chairman.
Dr. Furchtgott-Roth, did I pronounce your name correctly?
Ms. Furchtgott-Roth. Yes. Yes, but I am not a doctor.
Mr. Andrews. Oh, well----
Ms. Furchtgott-Roth. Ms. Furchtgott-Roth.
Mr. Andrews. Okay. All right.
You make a statement that ``I am not privy to internal
White House discussions, but it is likely that the White House
asked contractors to break the law.'' Do you have any personal
knowledge of discussions between the Obama campaign and the
White House about this notice issue?
Ms. Furchtgott-Roth. No. That is why I said likely.
Mr. Andrews. Okay.
Ms. Furchtgott-Roth. I did not say it definitively.
Mr. Andrews. Okay. Did you have any personal knowledge of
discussions between the White House and any contractors about
this issue of these notices?
Ms. Furchtgott-Roth. No. That is why I said likely, not
definitively.
Mr. Andrews. I think it is likely that your statement is
motivated by political malice against the administration. Not
being a fact, I didn't say certainly; I said likely as well.
I want to ask you a question. In a few days, March 1st,
this sequester is about to take place and there are some
estimates that it will cost us 750,000 jobs. As an economist,
as a commentator on our economy, do you believe we should let
the sequester stay in place or try to lift it?
Ms. Furchtgott-Roth. I believe we should replace the
sequester with more sensible packages of spending cuts.
Mr. Andrews. And I agree with that actually.
Ms. Furchtgott-Roth. That is good that we agree on
something.
Mr. Andrews. In part. No, we agree on many things.
In part, Mr. Van Hollen, who is the senior Democrat on the
budget committee has a proposal that would defer the sequester
for a year and replace it with a combination of cuts and
revenue increases. Now, I am not asking you if you support that
proposal or not because I assume you have not read it. And if
you did I am not going to ask you that question. Do you think
that we should put that proposal up for a vote this week?
Ms. Furchtgott-Roth. Well, I am not a member of Congress.
There are many, many important things before Congress and I
don't know whether this--it is not up to me to say what should
be on the congressional calendar.
Mr. Andrews. I just want your opinion. What we are voting
on today is a rule that will let us debate a bill tomorrow. The
bill is to freeze the wages of federal employees for a certain
period of time.
We are leaving town tomorrow after that. We are not coming
back for I believe 9 or 10 days. Just in your opinion as a
citizen observer, do you think that we should come back next
week and vote on a proposal that would delay the sequester?
Ms. Furchtgott-Roth. No. I think that spending needs to be
cut, not the cuts in the sequester, but a more sensible
spending package. And you should vote on that. In fact you have
already passed it twice.
Mr. Andrews. Well, we have not passed it twice. The--do you
think that we should come back and consider your proposal, and
Mr. Van Hollen's and others' next week? Or that we should take
a recess? What do you think is the more responsible course?
Ms. Furchtgott-Roth. I think it would be responsible to
vote in place other spending cuts, even greater spending cuts
because federal spending as a percent of GDP has grown from 20
percent to 24 percent.
Mr. Andrews. Okay. Irrespective of which plan you want to
follow, that is not what I am asking you. The current plan of
the House leadership is to leave town on Friday and go God
knows where next week and do whatever. I am asking you if you
think it is a more reasonable proposal to reconvene next week
and let different members put up their plans as to what to do.
I told you Mr. Van Hollen's proposal. You have a different
thing that you would like to do. Don't you think we should come
back next week and do that?
Ms. Furchtgott-Roth. There have been two bills that were
already passed in the House that would transform the sequester
spending cuts into a more sensible package of cuts. And I think
the Senate should consider those. And perhaps the president
should consider signing those into law. And I gave the example
of the biofuels required by the Defense Department at $27 a
gallon when they could be paying $3.50 in diesel fuels.
Mr. Andrews. And you know what? Your idea may or may not
have merit. But I don't think there is any merit to taking a 9-
day vacation when there is 750,000 layoffs looming. Now you and
I have different views how to solve this problem----
Ms. Furchtgott-Roth. You should tell Speaker John Boehner.
Mr. Andrews. Excuse me. Well, maybe you should. You
probably talk to him more often than I do.
Ms. Furchtgott-Roth. I haven't----
Mr. Andrews. We have said to Speaker Boehner, who is a
friend who used to chair this committee that we think we should
stay here next week and put proposals on the floor and try to
pass something that the Senate would take up and move on. Don't
you think we should do that?
Ms. Furchtgott-Roth. I don't have any opinion on what the
congressional calendar should be. But I do think that spending
cuts need to be passed. But I don't know how. I mean why don't
you pass them----
Mr. Andrews. Excuse me. It is my time.
You must think that the Congress should try to pass some
law that would defer 750,000 layoffs. Don't you think that?
Ms. Furchtgott-Roth. I think perhaps you should do it today
or tomorrow and then go on the 9-day recess.
Mr. Andrews. I agree. So I will ask unanimous consent on
the floor today, with your blessing, to take up Mr. Van
Hollen's proposal and put it to a vote. Would you support that?
Ms. Furchtgott-Roth. I don't support Mr. Van Hollen's
proposal.
Mr. Andrews. But would you support taking a vote on it
because it is a way out of this problem?
Ms. Furchtgott-Roth. Since the vote isn't going to pass I
wouldn't support it.
Mr. Andrews. You only support things that will pass.
Ms. Furchtgott-Roth. I think it is time----
Mr. Andrews. You don't support the House plan because it
will not pass the Senate.
Ms. Furchtgott-Roth. I think it is time to take a realistic
view. Spending growth in the federal government is extremely
serious. It is gone from 20 percent of GDP in 2007 to 24
percent this year.
Mr. Andrews. I think it is likely that you have made an
unsubstantiated allegation for political reasons.
I yield back the rest of my time.
Chairman Walberg. The gentleman's time is expired. Thank
you.
I now recognize the ranking member, Mr. Courtney, for
closing comments. And I thank the panel for your testimony
today.
Mr. Courtney. And likewise. Thank you for your appearance
here today and your words.
You know I just want to end with what I thought was one of
the most powerful statements yesterday at the Armed Services
Committee. Admiral Jonathan Greenert, who is the chief naval
officer, runs the U.S. Navy, said to the Armed Services
Committee, there is still time.
I mean the fact of the matter is, and we saw this on
January 1st, that literally while people were home watching
football the House took up a bill that, again, avoided the
fiscal cliff and enacted a 2-month delay of sequestration, and
used again a combination of revenue and spending cuts to avoid
that from hitting.
And the admiral is totally right on the law that you know
we can do this today if we wanted to if we could get people to
agree. And we can certainly do it on February 28th or on March
1st itself or even on March 2nd because again it is not going
to all end on one day.
And that really should be, in my opinion, the takeaway for
all of us as members of Congress and as Americans that, you
know, in terms of the people who are out there defending our
country, the people who are out there keeping the airports safe
and planes landing on time, the people who protect the
homeland, the people who educate our children, the people who
care for seniors, they deserve better than to have, again, a
Congress not in session next week and not dealing with this--
the gravity of this issue.
And again, the law does not require a super committee to
have to do it. The fact of the matter is that two sides can
negotiate and fix this dilemma, that would be a completely
self-inflicted damage to the economy, as Mr. Eisenbrey, again,
testified. And as the Bipartisan Policy Center they actually
had a higher estimate. They said it would be a million lost
jobs if sequestration were allowed to fully implement.
So you know hopefully that will be our takeaway here today
as well. And you know that, I think again, is the mission that
we have before us.
I think the Department of Labor scrupulously followed the
law in terms of a request, a legitimate request that came in
from people who work hard out there to implement programs that
help workers and families deal with mass layoffs. And again, I
think events proved your judgment was in fact the correct one.
Again, Mr. Chairman, I want to thank you for my maiden
hearing, your gracious manner in terms of handling it. And with
that I would yield back.
Chairman Walberg. I thank the gentleman. And I concur that
this has been an important hearing, made even more important by
this request for information that should have been forthcoming
a long time ago. And the fact that it was slipped under the
door at 9:00 last night with a password on a sticky note
concerns me greatly.
But more than that, in testimony today, to hear that in a
small, small department that information that should have been
known that was going to be asked today. There is still a lot of
gaps in understanding, why, when, what for?
Sequestration is a huge thing, as has been mentioned on
both sides of the aisle. I concur with the fact that the whole
idea of sequestration was that it would never happen.
It would be the last-ditch resort because it is a terrible
process to undergo. And I would state for the record that this
subcommittee and I believe the full committee will pay very
close attention, very close attention to employees' protections
and rights as well as employers' protections and rights.
That is our responsibility. And we will be held accountable
for that. Not simply by our electorate, but by the future of
our nation and the outcome of our nation that is based upon
employers and employees working together in safe environment,
in as secure an environment as possible, and growing this great
economy which is called the United States of America. And I
commit you, my ranking member and members of the other side of
the aisle as well, that that will be a purpose here.
We may differ at times on how much we consider it is being
carried out. But we will make that a purpose. And we will make
it a purpose over politics. And I think that was our concern
when we initially drafted the letter and sent it for
information that I hope has been finally supplied to us.
It was to get beyond politics and to say there is a
sequestration date certain. We have changed that. But at that
time it was certain. It has impact, potentially on thousands of
lives, let alone our economy.
There is a law that is in place that we have one of the
drafters in the room today, thankfully. And there is a purpose
for that. And I think this--the gravity of this situation with
sequestration has been far stronger than any other time before.
And we deserve answers.
This subcommittee is responsible for oversight. We will do
oversight, as well as dealing with issues and policy. But to
make sure that our citizens are well served, we will do
oversight so that the Departments of State as well as the
members of Congress who represent our nation's citizens will be
teammates together as best possible, outside of politics. And
this function will produce good impact.
We will undertake looking at these 400 pages. And on the
basis of what we find out I guess we will decide where we go
from here. But I am disappointed that it took a committee
hearing to be called for us to get that. And so now it comes to
our responsibility of seeing how we make the process work more
fully and completely on behalf of our workers and our employees
and our nation for the future.
And with that I close my--oh. One thing, thank you for
reminding me, I get emotionally involved and I forget.
Also, I think we need to go back to a point that was made
and carried on in several ways with statements that were made
by specifically one of our witnesses. But it is not unique,
even in the fact that ABC News, Mary Bruce and Jake Tapper
reported in an article they wrote October 1, 2012, ``At White
House Request Lockheed Martin Drops Plan to Issue Layoff
Notices.''
The opening sentence says ``Defense contractor Lockheed
Martin heeded a request,'' so at least the perception was
there, ``heeded a request from the White House today, one with
political overtones, and announced it will not issue layoff
notices to thousands of employees, just days before the
November presidential election.'' That is concerning to me. And
I would request that this be submitted as part of the record
without objection.
[The information follows:]
[From go.com, Oct. 1, 2012]
At White House Request, Lockheed Martin
Drops Plan to Issue Layoff Notices
By Mary Bruce and Jake Tapper
Defense contractor Lockheed Martin heeded a request from the White
House today--one with political overtones--and announced it will not
issue layoff notices to thousands of employees just days before the
November presidential election.
Lockheed, one of the biggest employers in the key battleground
state of Virginia, previously warned it would have to issue notices to
employees, required by law, due to looming defense cuts set to begin to
take effect after Jan. 2 because of the failure of the Joint Select
Committee on Deficit Reduction--the so-called Super-committee, which
was created to find a way to cut $1.5 trillion from the federal deficit
over the next decade.
Such massive layoffs could have threatened Obama's standing in the
state he won in 2008 and is hoping to carry again this November.
On Friday, the Obama administration reiterated that federal
contractors should not issue notices to workers based on
``uncertainty'' over the pending $500 billion reduction in Pentagon
spending that will occur unless lawmakers can agree on a solution to
the budget impasse, negotiations over which will almost definitely not
begin until after the election.
Contractors had been planning to send out notices because of the
WARN Act--Worker Adjustment and Retraining Notification Act--which
according to the Department of Labor requires ``most employers with 100
or more employees to provide notification 60 calendar days in advance
of plant closings and mass layoffs.''
In a statement Friday, GOP Senators John McCain, Lindsey Graham and
Kelly Ayotte accused Obama of putting ``his own reelection ahead of the
interests of working Americans and our national security by promising
government contractors that their salary and liability costs will be
covered at taxpayer expense if they do not follow the law that requires
advance warning to employees of jobs that may be lost due to
sequestration. * * * Apparently, President Obama puts politics ahead of
American workers by denying them adequate time to plan their finances
and take care of their families. The people who work in the defense
industry and other government contracting companies deserve as much
notice as possible that they are on track to lose their jobs.''
In July the Labor Department issued legal guidance making clear
that federal contractors are not required to provide layoff notices 60
days in advance of the potential Jan. 2 sequestration order, and that
doing so would be inconsistent with the purpose of the WARN Act.
In Friday's memo, the Office of Management and Budget reiterated
that notice, urging agencies' contracting officials and CFOs to
``minimize the potential for waste and disruption associated with the
issuance of unwarranted layoff notices.''
The guidance issued Friday told contractors that if the automatic
cuts happen and contractors lay off employees the government will cover
certain liability and litigation costs in the event the contractor is
later sued because it hadn't provided adequate legal warning to its
employees, but only if the contractor abides by the administration's
notice and refrains from warning employees now.
After ``careful review'' Lockheed announced today that it will
abide by the administration's guidance.
``We will not issue sequestration-related WARN notices this year,''
Lockheed announced in a written statement.
``The additional guidance offered important new information about
the potential timing of DOD actions under sequestration, indicating
that DOD anticipates no contract actions on or about 2 January, 2013,
and that any action to adjust funding levels on contracts as a result
of sequestration would likely not occur for several months after 2 Jan.
The additional guidance further ensures that, if contract actions due
to sequestration were to occur, our employees would be provided the
protection of the WARN Act and that the costs of this protection would
be allowable and recoverable.
``We remain firm in our conviction that the automatic and across-
the-board budget reductions under sequestration are ineffective and
inefficient public policy that will weaken our civil government
operations, damage our national security, and adversely impact our
industry. We will continue to work with leaders in our government to
stop sequestration and find more thoughtful, balanced, and effective
solutions to our nation's challenges,'' Lockheed said.
______
Chairman Walberg. Hearing no objection, it will be part of
our record.
Having said that, there being no further business, the
committee stands adjourned.
[Whereupon, at 11:34 a.m., the subcommittee was adjourned.]