WARN Act and Sequestration

Bradley Arant Boult Cummings issued an instructive client alert discussing the impact of the Worker Adjustment and Retraining Notification Act (29 USC 2101-2109) on Department of Defense contractors whose contracts may be terminated or reduced in the event of sequestration.

Generally, the WARN Act requires employers with at least 100 employees to provide written notice to affected employees 60 days before ordering certain plant closings or mass layoffs if they are reasonably foreseeable. Employers that do not give the required notice may be liable for back pay and benefits, as well as civil penalties.

The client alert identifies a Department of Labor advisory letter, as confirmed by a September 28 executive memorandum, as providing guidance to DoD contractors “whose contracts may be terminated or reduced in the event of sequestration on January 2, 2013.” Those contractors are not required to give the 60-day WARN Act notice to employees working under those contracts.   The memorandum also provides that if a DoD contractor has followed a course of action consistent with DoL guidance, then any resulting employee compensation costs for WARN Act liability as determined by a court, would qualify as allowable costs.

The client alert cautions that the DoL guidance is generally a “best practices” statement, not a binding legal decision, and that the executive memorandum contains a disclaimer and may not answer all of a contractor’s business and legal questions. The alert advises that contractors “may want to dig a little deeper before making your decision about whether or not you follow the Executive Memorandum and Guidance Letter or take the more conservative approach of complying with the WARN Act.”

For more information, see the client alert.

 

About William Van Huis

Bill Van Huis is a Senior Writer/Analyst for Wolters Kluwer Law & Business who tracks and analyzes new regulations impacting federal government contracting. He also follows court decisions involving bid protests and contract disputes. You can find his work in WK publications like Government Contract Reports and the FAR and DFARS Matrix Tools. Bill is a Certified Professional Contracts Manager, and he has a law degree from Southern Illinois University, where he graduated summa cum laude. Prior to joining WK, Bill worked both inside and outside state and local government in the areas of procurement and municipal finance. Bill also worked as a staff attorney for the Illinois Supreme Court.
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