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06.27.12

Lockheed Martin’s Layoff Notices: An Empty Threat?

The defense giant says it might have to tell 123,000 employees they’re at risk of losing their jobs—right before the presidential elections. What’s really behind the move?

Lockheed Martin’s announcement this week that some 123,000 employees might receive notices that they’re at risk of being laid off had plenty of people on edge. Some labor lawyers and defense experts, on the other hand, were rolling their eyes.

The country’s largest defense contractor said that on Nov. 2—just days before the presidential election—it plans to tell the “vast majority” of its employees that they might be out of a job come January. That’s because if lawmakers don’t complete a budget deal by Jan. 2, cuts to the 2013 defense budget—to the tune of $55 billion—will automatically kick in. The sequester deal, as it’s called, would be disastrous for a defense industry dependent on government business. Lockheed says the move would cost jobs, and since a federal law known as the WARN Act requires companies to give 60 days’ notice before large firings, it has to give layoff notices by Nov. 2.

Sounds straightforward, right?

More like “political stunt making,” says Jack Raisner, a lawyer at Outten & Golden specializing in the WARN Act. Raisner says that with billions in government contracts at stake, Lockheed’s move is meant to wake up Congress by threatening to remind thousands of voters, days before they head to the polls, that government gridlock could cost them their jobs. What’s more, say Raisner and other legal experts, the company is improperly using the WARN Act, since the job cuts are still speculative and would not all occur on Jan. 2: “Giving a blanket WARN notice to everybody and anybody: that sounds like spite. It’s not a legitimate business feature.”

“The timing of it is really suspicious,” says Democratic strategist Garry South, adding that Lockheed appears to be “throw[ing] itself around in the political process.”

Even if Congress fails to stop the sequester deal before the end of the year and the defense budget gets cut, “everything doesn’t shut down the first week of January,” says Daniel Gordon, President Obama’s former administrator for federal procurement policy and a 17-year veteran of the Government Accountability Office. “I would not expect the sequestration to lead to a trigger of the WARN Act requirements in early November.” The $55 billion in 2013 military cuts would come with a yearlong whimper, not a bang, he said—less a fiscal “cliff” than a long, slow slide down a fiscal hill.

“The timing of it is really suspicious.”

Greg Walters, Lockheed’s vice president of legislative affairs who said Sunday that the company would send the November notices, didn’t respond to repeated requests for comment. A spokeswoman for the company, Kelli Raulerson, said that the announcement was consistent with past statements about potential layoffs.

Compliance experts and contractors say Lockheed Martin is far less tied to the 60-day notification requirement than it suggests. The act itself is riddled with loopholes. It isn’t triggered unless a company lays off at least 500 people in a given facility within 30 days. So, even if Lockheed did have to make early-2013 layoffs, it could fire 499 workers a month without sending notices. And even if it were found in violation, the maximum penalty would be just 60 days’ back pay and benefits for each affected worker. Even then, says Gordon, Lockheed could probably avoid paying a dime by arguing government unpredictability. “I’d be happy to take that case,” he said.

So far, no other major defense contractors have followed Lockheed’s lead. Randy Belote, vice president of strategic communications at Northrop Grumman, said “it’s mere speculation as to whether or not [layoff notifications] would be required” of his company.

Rob Doolittle, staff vice president for communications at General Dynamics, the world’s fourth-largest defense contractor, said that the company wouldn’t send WARN notifications until getting specific information from the Department of Defense about “what contracts would be changed.” “We’re not speculating on what we might do until we have that information,” he said, adding that a DoD “announcement on their plans” for sequester could arrive “if implementation of the law is imminent”—that is, after the election.

Neither presidential campaign responded to a request for comment about the layoff announcement.

The company is running a “grave risk” said Democratic strategist Mark Mellman. “For a company to wade into an election—a company that depends on government contracts—with a purpose in mind, on the eve of an election ... It’s something they don’t want to do."