January 1, 2013 represents a turning point for the Department of Defense if sequestration is allowed to go in to effect. The cuts that will be mandatory on that date will affect almost every area of the agency except military personnel accounts. The Administration is exempting those accounts from the process, and has notified Congress as it is required to do. The effect of this action will be additional cuts in other DoD budget lines.

The Worker Adjustment and Retraining Notification Act requires employers with over 100 employees to provide their workers with sixty days notice of mass layoffs. As the Wall Street Journal notes, sequestration on January 1 means that WARN Act notices need to be provided to affected defense contractor employees by November 2, 2012. In addition, the economic effects of possible sequestration to a publicly held corporation must be disclosed in various SEC filings before January 1.

The Labor Department has issued “guidance” on the topic. It is holding that the WARN Act does not apply. Their primary reasoning is that Congress and the Administration have until January 1 to solve the problem. That uncertainty means that no WARN Act notices need to be sent out.

That document does not solve the dilemma facing defense contractors. It is unclear if the “guidance” provides legal relief from the requirements of the Act. The financial penalties for not sending a Warn Act notice are severe. There is no apparent penalty for sending out the notices. At least one contractor has told its employees that about 10,000 employees could face layoff under sequestration in anticipation of WARN Act notices.

There have been announcements that an agreement has been reached to fund the 2013 budget via a continuing resolution for six months. This would avoid the January 1 sequestration by delaying it until April 1. As yet, there has been no action beyond the announcement of an agreement. The dilemma faced by Congress, the White House and Labor Department, the DoD and defense contractors is that WARN Act notices would have to be sent out less than a week before the November 6 national election.

Charles Simmins brings thirty years of accounting and management experience to his coverage of the news. An upstate New Yorker, he is a free lance journalist, former volunteer firefighter and EMT, and is owned by a wife and four cats.

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Charles Simmins brings thirty years of accounting and management experience to his coverage of the news. An upstate New Yorker, he is a freelance journalist, former volunteer firefighter and EMT, and is owned by a wife and four cats.