Lockheed Drops Plans to Issue Layoff Notices on U.S. Cuts

Photographer: Chris Ratcliffe/Bloomberg

The cockpit of a Lockheed Martin Corp. F-35 Lightning outside the company's stand at the Farnborough International Air Show. Close

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Photographer: Chris Ratcliffe/Bloomberg

The cockpit of a Lockheed Martin Corp. F-35 Lightning outside the company's stand at the Farnborough International Air Show.

Lockheed Martin Corp. (LMT), the world’s largest defense contractor, dropped plans to issue layoff notices in anticipation of across-the-board defense spending cuts set to begin Jan. 2.

Lockheed said today in an e-mailed statement that it decided notices under the Worker Adjustment and Retraining Notification Act aren’t needed “after careful review” of guidance issued last week by the White House Office of Management and Budget and the Defense Department.

Defense contractors led by Bethesda, Maryland-based Lockheed had said they might be compelled to warn thousands of workers their jobs might disappear unless President Barack Obama and Congress act before January to avert the spending cuts. Such 60-day notices would have gone out just before the Nov. 6 elections.

Sequestration, a process intended to reduce the federal deficit, will slice $1.2 trillion over a decade from planned spending, including more than $500 billion from defense.

The federal WARN Act, which became law in 1988, requires most employers with 100 or more workers to give 60 days’ notice of plant closings or “mass layoffs” -- labor cutbacks affecting 500 or more workers, or at least 33 percent of the workforce for companies with fewer than 500 employees.

The Labor Department said in July that blanket layoff notices would be “inappropriate” for sequestration given the uncertainty of the spending cuts and how they would affect federal contracts.

Budget Office

Richard Ginman, the Defense Department’s director of defense procurement and acquisition policy, wrote an industry group on Sept. 28 that “any action to adjust funding levels would likely occur, if it occurred at all, several months after sequestration.” The same day, the Office of Management and Budget said the government will cover legal and compensation costs if contractors are held liable in court for not giving enough notice.

The guidance “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,” Lockheed said in the statement.

House Majority Leader Eric Cantor, a Virginia Republican, said the administration was playing politics with its guidance on layoff notifications. Cantor’s home-state economy is the nation’s most dependent on defense spending, according to a Bloomberg Government study last year, and Virginia is a swing state that can go either way in presidential elections.

‘Political Interests’

“For an administration that talks a lot about transparency, it is disappointing that they apparently think it is more important to protect their political interests than give hard-working families any indication that they might in fact lose their job in 60 to 90 days due to inaction by the president and Senate Democrats,” Cantor said today in a statement.

A partisan fight has developed over the defense reductions. Republicans say the cuts should be reversed, while Democrats say added tax revenue should be part of any compromise. The cuts stem from last year’s clash over raising the debt limit. The automatic cuts were set in motion after Congress and Obama failed to agree on a broad debt-reduction package.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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