Morning Bell: Obama Administration Will Pay Companies to Violate the Law

Hans von Spakovsky / Amy Payne /

The Obama Administration’s disregard for the law has struck again—and this time, it’s encouraging others to violate the law at taxpayer expense.

That’s worth saying again: The Obama Administration is encouraging people to violate a law, and promising that it will use taxpayer money to cover fines incurred from this action.

The law: The law in question is called the WARN Act, and it requires that federal contractors send employees layoff notices 60 days before a plant closing or mass layoff.

The inconvenience: Massive defense spending cuts under sequestration are scheduled to hit on January 2, 2013. Defense contractors affected by the budget cuts would have to issue notice letters to employees by November 2 (four days before the election) to meet the January 2 start date for the spending cuts.

The penalty taxpayers would pay: Employers who violate the WARN Act are liable to their former employees for “back pay for each day of a violation” and “benefits under an employee benefit plan,” as well as a penalty of $500 for each day that notice has not been sent to the local government where the layoffs will occur.

As an example, Lockheed CEO Bob Stevens has said that 123,000 of his employees would receive layoff notices. If companies fail to meet the WARN Act’s deadline, lawsuits from employees could result—but the White House has provided a taxpayer-funded guarantee as a way to counter their fears of enormous litigation costs. This guarantee is not only unprecedented but also potentially unlawful.

This week, President Obama sent mixed signals about the fate of these budget cuts. He suggested at Monday’s debate that sequestration wouldn’t happen, but then days later indicated to an Iowa newspaper that it would.

It remains to be seen whether companies will take the Administration up on its offer. And government contractors who rely on this “guarantee” from the White House do so at their peril: If this Administration or a new Administration changes its mind and withdraws the guarantee, those contractors will have no cause of action against the government for the cost of WARN Act violations.

If this were a joke, the punchline would be that President Obama supported the WARN Act when he was a Senator—and even wanted to require that employers give more notice. In 2007, he argued that contractors should have to give 90 days’ notice.

Then-Senator Obama said:

American workers who have committed themselves to their employers expect in return to be treated with a modicum of respect and fairness. Failing to give workers fair warning…ignores their need to prepare for the transition.…Many of these workers support families that are living from paycheck to paycheck, squeezed by the demands of rising health care costs, the declining value of their homes, and wages that have been stagnant for decades. It adds insult to injury to close a plant without warning employees.

But this is no joke. This is the ultimate abuse of the President’s executive authority: inducing federal contractors to violate a federal law and promising to use taxpayer funds to reimburse them for any resulting liability that they incur for violating that law.

Refusing to follow federal law has become the hallmark of this Administration, but the White House’s latest arrogant, unlawful ploy goes even further and may end up costing the American taxpayer a great deal of money.

Read the full report: Urging Federal Contractors to Violate the WARN Act

Watch our video on the effects of sequestration

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