LEGAL SPIN
BY JASON DICKSTEIN
BY JASON DICKSTEIN
U. S. Budget Dilemma Threatens Aerospace
T
he Department of Labor has issued new guidance for Defense Contractors (including those in the aerospace community) who face losses as a consequence of anticipated sequestration. Most Americans have no doubt heard some discussions about the upcoming budget sequestration. As a
result of the 2011 debt ceiling crisis, Congress decided to impose automatic defense spending cuts if it could not take steps toward balancing the budget before the end of 2012. $500 billion worth of cuts. At the time that the decision was made to do this, the thought was that this was so terrible an idea and would have such a devastating effect on our economy (not to mention military readiness) that it was a poison pill that Congress would never allow to be implemented. It would force Congress to work together to balance the budget. Unless it doesn’t.
The bipartisan “Super Committee,” created specifically to reach a fiscal compromise, failed to arrive at an
agreement on the budget that would have avoided making sequestration a reality. The result of this failure is that sequestration, and its mandatory cuts to defense and other spending, is scheduled to take effect January 2, 2013. There appear to be no serious plans being discussed on a bipartisan basis to forestall sequestration. There is a lot of rhetoric about why it is not desirable and why it should not happen; but no one is floating any serious plans in public for how to have a positive effect on the budget by using another mechanism. What does this mean for defense contractors? If sequestration goes into effect then it means that the Department of Defense will need to cut procurements and other contracts in order to meet the sequestration requirements. This means that billions of dollars in contracts – contracts that mean American jobs – will have to be terminated or suspended.
What does this mean for employees of defense contractors? If billions of dollars in contracts are being terminated,
then a tremendous number of American jobs will have to be cut. An interesting wrinkle is that most Defense Contractors are subject to the WARN Act because they have 100 or
more full-time workers and will need to lay off at least 50 people. AIA President Marion Blakey has suggested that businesses will need to lay off employees as of January 2, 2013. The WARN Act requires 60 days notice, which means that workers will be entitled to lay-off notices immediately before the November elections (note that some states require 90 days notice under their own versions of the WARN Act). Failure to provide the notices means that the employer owes the affected workers back pay and may owe the government civil penalties as well. Lay-off notices immediately before the November elections would NOT be good for the President’s re-election hopes, which explains why the Department of Labor has issued new guidance with respect to the WARN Act. The guidance notes that there are three exceptions to the full 60-day notice requirement. In each of these cases notice must be provided as soon as is practicable even when these exceptions apply. The exceptions are: • Faltering company: When a company is faltering, seeking capital, and reasonably believes that advance notice would preclude its ability to obtain such capital, then it may delay notice; • Unforeseeable business circumstances: When the closing or mass layoff is caused by business circumstances
that were not reasonably foreseeable, notice may be delayed until the layoffs are foreseeable; or • Natural disaster: When a plant closing or mass layoff is the direct result of a natural disaster, notice may be given after the natural disaster.
The Labor Department guidance specifies that the specific consequences of sequestration are unknown until such time as the specific contract terminations are announced, and therefore the specific cuts are unforeseeable. Businesses are specifically permitted to wait until the contract cuts are announced before they have to issue the WARN Act letters. And it is highly likely that the Administration will wait until after Election Day to announce these cuts, so that lay-off notices can be deferred until after the election. This is a politically expedient and manipulative abuse of the WARN Act requirements by the Administration. It is
absurd to believe that the government has failed to establish plans that identify the contracts that would be affected by sequestration (indeed, such a failure to plan for what is currently the existing state of the law would be negligent on the part of the government). Deputy Secretary of Defense Ashton Carter testified before Congress that DoD will effect across-the-board cuts of eight percent or 10 percent (depending on a potential election to exempt military pay that must be made or waived by the White House by August 10th) across each program, project, and activity. He specified a number of the programs that will be hard-hit and some of the trade-offs that have already been made in cuts within certain programs. In fact, Carter even specified that “we would buy four fewer F-35 aircraft, one less P-8 aircraft, 12 fewer Stryker vehicles, and 300 fewer Army medium and heavy tactical vehicles.” The Deputy Secretary of Defense seems to know where the cuts are coming from. But the Administration is electing not to disclose these plans to the American people.
For aviation businesses that have defense contracts, and are also subject to the WARN Act, this means that under the Administration’s interpretation of the WARN Act, you can wait until specific cuts are announced before
68 Aviation Maintenance |
avm-mag.com | August / September 2012
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72