Fox News' Stuart Varney and Charles Krauthammer have accused the Obama administration of breaking the law for advising federal contractors not to issue warnings of layoffs that may occur in the wake of budget “sequestration.” But the administration is in fact correctly following the WARN Act, which explicitly disallows blanket notices to all Department of Defense (DOD) contractors before Congress specifies what contracts are to be cancelled.

The Worker Adjustment and Retraining Notification (WARN) Act requires federal contractors to inform their employees of the impending loss of their jobs 60 days prior to layoffs. Both Varney and Krauthammer misrepresent the law's requirements by arguing DOD contractors must issue sequestration layoff warnings before the presidential election, contrary to the legal advice of the Department of Labor (DOL), Office of Management and Budget (OMB), and independent experts. In fact, because budget cuts mandated by sequestration are not currently specified and would not take place immediately, WARN Act layoff warnings would be inappropriate at this juncture and are not “the law...written in stone,” as erroneously asserted by Varney on the October 2 edition of America's Newsroom, nor is the administration's position “absolutely lawless,” as claimed by Krauthammer on the October 2 edition of Special Report.

As explained by the nonpartisan Center on Budget and Policy Priorities (CBPP), under the Budget Control Act of 2011, Congress' inability to negotiate a long-term budget plan triggers “sequestration -- a form of automatic cuts that apply largely across the board -- [which] is now scheduled to occur starting in January 2013 and to cover the period through 2021.” The CBPP has also pointed out that these automatic cuts to the federal budget include unspecified cuts to DOD spending -- including payments to defense contractors - which even after sequestration is formally triggered, would not be clear until months later. According to CBPP, "[w]hile the limit on spending authority will be imposed at the beginning of the year, the actual reductions in spending will occur over the course of the year and into subsequent fiscal years." 

Therefore, as The New York Times has reported, “no one knows what 'sequestration,' the term for the automatic cuts, will look like, not lawmakers, not the military.” Contractors are even more unlikely to know what the cuts will look like, as they won't be alerted by their agency until after Congress acts in January. Because no one knows which programs will be cut, and thus, which employees will be laid off when -- or if -- sequestration occurs, defense contractors cannot send out notices to those affected without notifying their entire workforce, a type of blanket alarm explicitly disallowed by the WARN Act. 

As detailed by the DOL:

The WARN regulations recognize that an employer may not always know exactly which workers will suffer an employment loss 60 days before it orders a plant closing or mass layoff...because circumstances make accurate prediction 60 days in advance difficult.  Although some commenters sought to have the final regulations allow broad notice in situations like these, the Department rejected these suggestions, and the final regulations provide for a more focused notice.  Indeed, in the preamble to the WARN final rule, the Department agreed with a comment that stated that “Congress clearly condemned” “overbroad notice.” In addition, the preamble states that “it is not appropriate for an employer to provide blanket notice to workers.”

Furthermore, even if information as to the affected employees materializes, DOL points to case law that holds an exception for speculative events under the WARN Act still applies and 60 day notice is thus not required. This analysis is seconded by employment law experts, as reported by the San Francisco Chronicle:

[William] Gould, a former chair of the National Labor Relations Board appointed by President Bill Clinton, said the Labor Department was correct when it said the possibility of sequestration-induced layoffs did not warrant WARN notices. “The courts have been very clear that mere conjecture does not trigger the obligation,” he said.

Rick McHugh, an attorney with the National Employment Law Project, agreed. “The obligation to give notice arises once the employer believes or should have known that a mass layoff or plant closing is going to happen at a particular worksite. At this point, no one knows with any certainty that layoffs will be taking place or not at a particular worksite,” he said.

Finally, Varney and Fox News' Greta Van Susteren dismiss as “extortion” and politics a recent OMB memo that indicates federal contractors following DOL's guidance on the WARN Act will be indemnified for legal costs if a laid-off employee alleges a violation of the WARN Act has occurred. Van Susteren slammed the Obama administration during the October 2 edition of Your World With Neil Cavuto for picking up those legal fees and called the actions “obscenely political.” But she also pointed out on the show, as well as during the October 1 edition of On the Record, that the federal government covered litigation expenses involved with the Fannie Mae lawsuits as well -- a liability arrangement The New York Times has reported as “typical of those across corporate America.” Indeed, despite repeated questioning from Fox News' Cavuto, Van Susteren would not repeat Varney and Krauthammer's claims that the Obama administration's actions were illegal.