The Obama administration more clearly told federal contractors on Aug. 1 not to issue their employees notices of potential job losses that would take place if steep across-the-board budget cuts are instituted early next year.

But comments from Office of Management and Budget (OMB) acting Director Jeffrey Zients and a recent memo from the Department of Labor do not satisfy Republicans who contend that contractors could still face legal problems if they do not tell their employees about potential job losses due to the budget penalty known as sequestration.

That penalty will take place if Congress fails to reach a major deficit-reduction agreement or to replace current law. But another current law, the Worker Adjustment and Retraining Notification Act, also requires companies that employ more than 100 workers to provide 60 days’ warning of mass layoffs or plant closings. Companies including Lockheed Martin and others have said they anticipate having to issue those notices.

But with Election Day falling less than 60 days before the budget cuts would take effect, the debate over when and whether notices are sent out has dramatic campaign implications.

The administration now is clearly telling companies not to warn their employees. Zients pointed to Labor Department guidance discussed this week at a House Armed Services Committee hearing, which says contractors should not notify their employees, given the uncertainty surrounding the details of how much individual programs will be cut (Aerospace DAILY, July 31).

Notifying employees “would actually be inappropriate in light of the underlying purposes of the act,” Zients said, adding that the Labor memo was issued in response to questions from federal contractors.

Deputy Defense Secretary Ashton Carter elaborated: “We don’t want to unnecessarily alarm employees by notifying them of layoffs that might not happen.”

But Republicans at the emotionally charged hearing argued that neither Labor nor OMB are in a position to issue guidance on when to follow the WARN Act. Thus contractors could find themselves liable for civil damages if they are sued in the future because they did not notify their employees of the potential layoffs.