Jeffrey Zients, White House Budget Chief: Don't Send WARN Act Layoff Notices Before 'Fiscal Cliff'

Acting Budget Director Jeffrey Zients testifies on Capitol Hill in Washington, Wednesday, Aug. 1, 2012, before the House Arme
Acting Budget Director Jeffrey Zients testifies on Capitol Hill in Washington, Wednesday, Aug. 1, 2012, before the House Armed Services Committee hearing on defense cuts. Automatic cuts of $110 billion are slated to hit domestic and defense programs beginning Jan. 2 unless Congress can figure out a way to avert the reductions. The failure of the bipartisan congressional supercommittee to come up with $1.2 trillion in savings set the cuts in motion. (AP Photo/J. Scott Applewhite)

The latest chapter in budget cut politics opened Wednesday as the Obama administration's top fiscal guru stood by federal direction that some companies should not issue layoff notices days before November's elections.

Appearing before the House Armed Services Committee, White House budget chief Jeffrey Zients defended recent guidance from the Department of Labor that advises firms against sending out layoff notices as the so-called "fiscal cliff" nears. The 23-year-old WARN Act requires some employers to send out pink slips 60 days ahead of a "reasonably foreseeable" event -- in this case, massive spending cuts to defense and domestic programs triggered by the failure of the budget "super committee" last fall.

The looming sequester -- the formal name for wide-ranging budget reductions that are the result of a bipartisan deal that Congress passed last year -- would trim $110 billion from the federal budget on Jan. 2, 2013. That means some companies heavily reliant upon government contracts would have to notify soon-to-be-terminated workers the Friday before Election Day in order to comply with the WARN Act.

At a House Armed Services Committee hearing last month, the presidents and CEOs of four major defense contractors unanimously answered "yes" when chairman Buck McKeon (R-Calif.) asked them whether sequester-related layoffs at their respective companies are "reasonably foreseeable."

McKeon reminded Zients of the executives' consensus at Wednesday's hearing, but Zients stood his ground.

"These potential plant closings or layoffs are speculative and unforeseeable, so to give blanket notices both wastes taxpayer resources and creates unnecessary uncertainty," Zients responded. "So clearly the companies that you just talked about need to absorb this guidance from the Department of Labor, which is very clear, and they need to make their own decisions."

The DOL guidance maintains that the WARN Act does not apply to sequestration because any job losses incurred by the automatic cuts are still "not necessarily foreseeable" due to Congress' ongoing discussions.

In a memo released Tuesday, Zients recommended that federal agencies "continue normal spending and operations" as the fiscal cliff approaches, signaling that the Obama administration is banking on a legislative solution before the end of the year.

Don't hold your breath, some lawmakers told Zients on Wednesday.

"I agree with you, but our track record isn't that good," Rep. Silvestre Reyes (D-Texas) replied after Zients reminded committee members that the real onus is on them to stave off sequestration.

Zients' appearance did little to curb GOP skepticism over possibly political forces behind the DOL guidance, which would keep potential job losses out of the headlines as Americans prepare to vote in what is already expected to be a tight presidential race.

"And as a result of [Labor] Secretary [Hilda] Solis' politically motivated guidance, people will still get laid off because of the President's irresponsibility, but they won't have the notice to protect themselves and their families," McKeon said in a statement Monday.

On the Senate floor Tuesday, Minority Leader Mitch McConnell (R-Ky.) charged the White House with "telling people to keep the effects of these cuts secret ... until, of course, after the election."

Some Democrats on the committee, including ranking member Rep. Adam Smith (Wash.), have shot back that there is no need to scare workers when Congress could still work out an 11th-hour fix and prevent potential mass layoffs.

But John Irving, a former National Labor Relations Board counsel who helped shape some provisions of the WARN Act, said he would tell major defense contractors to think twice about disregarding the WARN Act.

It is unlikely that the DOL guidance would hold up in court if a terminated worker sued his employer for not giving proper notice, Irving said.

In other words, defense contractors cannot fall back on the Department of Labor memo if the federal government lurches off the fiscal cliff and a laid-off employee had not received a pink slip by early November.

"It strikes me that the guidance is so far off the mark that you wonder why it's being issued, and it's not a regulation -- it's a sort of statement of opinion, which is coming out because of what could be the consequence," Irving said. "It's trying to blunt that and head it off in a way makes it look like no notice is not necessary when it may be."