Asymmetrical Information - Megan McArdle

10.04.12

Just Say No To Layoff Notices

Obama Administration pressures contractors not to warn workers of possible impending layoffs

Companies with more than 100 employees are required by law to warn workers of potential layoffs 60 days in advance.  If the sequester goes into effect, workers will get laid off.  Which means that unless something is done, layoff notices may go out to thousands of defense contractor employees right around election time.  

Naturally, the administration would prefer that this not happen. So they’ve offered to pay the legal costs of any firm that doesn’t send out the notices.

The Obama administration has sought to quell the fear of mass defense layoffs in presidential battlegrounds like Virginia, where letters sent in early November warning about the possibility of job losses could discourage thousands of defense workers from backing the incumbent.

The government’s guarantee to foot the bill for legal problems, as long as contractors heed OMB’s advice to refrain from warning about lob losses, is unusual.

“I don’t know of any situation where the government has done this in the past,” said William Gould, a labor professor at Stanford Law School.

Presumably the purpose of the law is not to create legal fees; it is to give employees notice of potential layoffs so that they can arrange their finances and otherwise plan for the hard times that may be coming down the road. If the Obama administration does not think that employees should have notice of these potential dangers, then it should say so forthrightly, and try to get this very bad law repealed. On the other hand, if it thinks that maybe it’s a good thing for employees to have advanced notice that they might soon not have a paycheck, then it seems odd to first, pressure contractors not to send those notices, and second, offer to help the contractors avoid paying any legal damages that their failure might have incurred.

Now, the administration argues that the notices aren’t required, because the sequester might not happen. But that’s a matter for the court to determine, not the administration. If the administration is correct, then there should be no need to sweeten the pot. But if there is a real risk that employees will win a lawsuit, then it seems wrong to put the taxpayers on the hook for what is essentially an Obama campaign expense.