Rather than hold out for Congress to reverse a scheduled $500 billion in spending cuts, defense firms are opting to go against Labor Department guidelines and move forward in issuing layoff warnings to employees.
Defense contractors say they are prepared to send layoff notices to thousands of employees in preparation for the looming spending cuts, which would kick in Jan. 2 if Congress can't agree to a deficit reduction deal.
Last month, Lockheed Martin CEO Bob Stevens escalated the threats by saying he planned to send layoff notices to the company’s full 123,000-employee workforce. And on Wednesday, David Hess, the president of the aircraft engine manufacturer Pratt & Whitney, warned of the looming cuts and the potential impacts on U.S. jobs.
"Make no mistake: sequestration budget cuts are a threat to American jobs, the economy and U.S. national security," Hess said at a rally to stop the cuts. "Sequestration is the wrong way to address the country's fiscal challenges, and instead risks damaging a vital industrial sector as a consequence of a historic political gamble."
The Labor Department and some administration supporters say it's inappropriate for the firms to send employees speculative warnings, since Congress could yet come to a deal. And even if it doesn't, says the department, it's unclear just where the cuts will come from.
“There is no reason to needlessly alarm hundreds of thousands of workers when there is no way to know what will happen with sequestration,” Rep. Adam Smith, the top Democrat on the House Armed Services Committee, said earlier this month.
But the contractors say they're only trying to comply with the federal Worker Adjustment and Retaining Notification Act, which requires a 60-day notice. That would mean the notifications would occur right before the November election, in which economic concerns will be pivotal.
A report funded by the Aerospace Industries Association estimates that the across-the-board spending cuts could ultimately cost the nation two million jobs.