[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]







                  SEQUESTRATION: EXAMINING EMPLOYERS'
                       WARN ACT RESPONSIBILITIES

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, FEBRUARY 14, 2013

                               __________

                            Serial No. 113-3

                               __________

  Printed for the use of the Committee on Education and the Workforce





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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Tom Price, Georgia                   Ruben Hinojosa, Texas
Kenny Marchant, Texas                Carolyn McCarthy, New York
Duncan Hunter, California            John F. Tierney, Massachusetts
David P. Roe, Tennessee              Rush Holt, New Jersey
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Timothy H. Bishop, New York
Brett Guthrie, Kentucky              David Loebsack, Iowa
Scott DesJarlais, Tennessee          Joe Courtney, Connecticut
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Jared Polis, Colorado
Trey Gowdy, South Carolina           Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania             Northern Mariana Islands
Martha Roby, Alabama                 John A. Yarmuth, Kentucky
Joseph J. Heck, Nevada               Frederica S. Wilson, Florida
Susan W. Brooks, Indiana             Suzanne Bonamici, Oregon
Richard Hudson, North Carolina
Luke Messer, Indiana

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                    TIM WALBERG, Michigan, Chairman

John Kline, Minnesota                Joe Courtney, Connecticut,
Tom Price, Georgia                     Ranking Member
Duncan Hunter, California            Robert E. Andrews, New Jersey
Scott DesJarlais, Tennessee          Timothy H. Bishop, New York
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Gregorio Kilili Camacho Sablan,
Richard Hudson, North Carolina         Northern Mariana Islands














                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on February 14, 2013................................     1

Statement of Members:
    Courtney, Hon. Joe, ranking member, Subcommittee on Workforce 
      Protections................................................     4
        Prepared statement of....................................     6
    Walberg, Hon. Tim, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Eisenbrey, Ross, vice president, Economic Policy Institute...    41
        Prepared statement of....................................    43
    Furchtgott-Roth, Diana, senior fellow, Manhattan Institute...    48
        Prepared statement of....................................    49
    Gies, Thomas, partner, Crowell & Moring, LLP.................    26
        Prepared statement of....................................    28
    Notestine, Kerry E, Esq., Littler Mendelson, P.C.............    16
        Prepared statement of....................................    18
    Oates, Hon. Jane, Assistant Secretary, Employment and 
      Training Administration, U.S. Department of Labor..........     8
        Prepared statement of....................................    11

Additional Submissions:
    Chairman Walberg:
        Article: ``At White House Request, Lockheed Martin Drops 
          Plan to Issue Layoff Notices''.........................    68

 
     SEQUESTRATION: EXAMINING EMPLOYERS' WARN ACT RESPONSIBILITIES

                              ----------                              


                      Thursday, February 14, 2013

                     U.S. House of Representatives

                 Subcommittee on Workforce Protections

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2175, Rayburn House Office Building, Hon. Tim Walberg 
[chairman of the subcommittee] presiding.
    Present: Representatives Walberg, Kline, DesJarlais, 
Bucshon, Hudson, Courtney, Andrews, Bishop, Fudge. Also 
present: Davis.
    Staff present: Owen Caine, Legislative Assistant; Molly 
Conway, Professional Staff Member; Ed Gilroy, Director of 
Workforce Policy; Benjamin Hoog, Legislative Assistant; Marvin 
Kaplan, Workforce Policy Counsel; Nancy Locke, Chief Clerk/
Assistant to the General Counsel; Donald McIntosh, Professional 
Staff Member; Brian Newell, Deputy Communications Director; 
Molly McLaughlin Salmi, Deputy Director of Workforce Policy; 
Alexa Turner, Staff Assistant; Joseph Wheeler, Professional 
Staff Member; Mary Alfred, Minority Fellow, Labor; Tylease 
Alli, Clerk/Intern and Fellow Coordinator; Jody Calemine, 
Minority Staff Director; John D'Elia, Minority Labor Policy 
Associate; Daniel Foster, Minority Fellow, Labor; Brian Levin, 
Minority Deputy Press Secretary/New Media Coordinator; Celine 
McNicholas, Minority Senior Labor Counsel; Richard Miller, 
Minority Senior Labor Policy Advisor; Megan O'Reilly, Minority 
General Counsel; Michele Varnhagen, Minority Chief Policy 
Advisor/Labor Policy Director; and Michael Zola, Minority 
Senior Counsel.
    Chairman Walberg. A quorum being present the subcommittee 
will come to order. Good morning, and welcome to the first 
hearing of the Workforce Protection Subcommittee of the 113th 
Congress. I would like to welcome our members and thank our 
witnesses for being with us today. I would like to extend a 
special good morning to Assistant Secretary Oates. Thank you 
for participating with us this morning.
    Finally, I would like to recognize our colleague from 
Connecticut, the man who is willing to make sure history is 
accurate. Lincoln is upheld as well as his state of Connecticut 
and the efforts they had on emancipation. And thanks for giving 
some notoriety to our subcommittee by just being here as well. 
Joe Courtney has taken on the role as senior Democratic member 
for the 113th Congress. I look forward to working together over 
the next 2 years and I will try to make sure my facts are 
accurate as well.
    As part of the Budget Control Act of 2011 President Obama 
insisted on a process known as sequestration, a series of 
across-the-board spending cuts that will impact most defense 
and domestic programs. Sequestration is not how Washington 
should conduct the people's business. It has created even more 
uncertainty in an already difficult environment.
    Twice House Republicans have taken action to replace 
sequestration with common sense cuts and reforms. 
Unfortunately, the president has failed to offer his own 
proposal that will help control runaway spending and get this 
economy moving again. With our nation fast approaching $17 
trillion in debt and more than 12 million Americans searching 
for work, the time for leadership is now.
    As we eagerly await the president's plan, we have a 
responsibility to examine the impact of sequestration on 
policies within our jurisdiction. The committee's continued 
oversight of the Worker Adjustment and Retraining Notification 
or WARN Act is part of that effort.
    Congress approved the WARN Act to help workers plan for 
possible job losses, as well as allow them time to assess 
various employment services provided by the states and federal 
government. The law requires employers with more than 100 
employees to give workers 60 days notice of mass layoffs or 
plant closings. A legal notice must include specific details, 
including the expected date of the first layoffs and the job 
titles that will be affected.
    The law also includes provisions for conditional notices, 
as well as exceptional circumstances when an employer wouldn't 
be required to issue a 60-day notice. Employers who fail to 
provide proper notices can be sued in federal court, liable for 
back wages and benefits, and be forced to pay monetary 
penalties.
    Numerous federal contractors have advised Congress that 
sequestration may lead to layoffs in their workplaces. As job 
losses become more eminent, employers have legal 
responsibilities they must follow. While there are longstanding 
concerns with the act, it is a law, a law of the land. 
Political shenanigans should not interfere with an employer's 
obligation to follow the law or the Labor Department's role in 
administering the law.
    However, last summer the Obama administration managed to 
inject even more uncertainty into sequestration. On July 30, 
the department released guidance that states the WARN Act does 
not apply to sequestration and instructed employers not to 
issue notices. The department's guidance raises a number of 
concerns.
    First, the guidance contradicts current regulations that 
encourage employers to provide as much notice as possible, even 
when they are uncertain which jobs will be cut and when. And 
while the law creates an exemption for unexpected 
circumstances, to be legally protected employers must still 
issue notices as soon as layoffs are reasonably foreseeable.
    Additionally, the department has no enforcement authority 
over the WARN Act. Federal judges are responsible for enforcing 
the law and they ultimately decide through costly litigation 
whether an employer complied with the law.
    Finally, the guidance creates the impression that employers 
who follow the administration's opinion will be immune from 
future litigation. Nothing could be further from the truth. If 
a worker feels they have been denied proper notice, they have 
every right to take their employer to court.
    Perhaps this explains why the Office of Management and 
Budget explicitly promised to use taxpayer's dollars to cover 
the legal expenses an employer might face for failing to warn 
workers of future layoffs. That is right, the Obama 
administration is telling employers to ignore the law and 
forcing taxpayers to pick up the tab.
    Assistant Secretary Oates, these are important concerns, 
and I am sure you feel the same way, concerns that require a 
serious response. I am disappointed. The administration has 
refused to cooperate in good faith with this committee's 
oversight investigation into this matter.
    Providing over 400 pages of materials that were slipped 
under a door in the middle of the night, last night, before a 
congressional hearing, when those materials were first 
requested 6 months ago is really an insult to this committee. 
Congress deserves better. Americans, America's workers, 
employers, and taxpayers deserve better. It is time we got 
answers to the questions we have been asking, and I hope today 
will be that opportunity.
    Again, I would like to thank our witnesses for joining us. 
And I will now recognize my distinguished colleague Joe 
Courtney, the senior Democratic member of the subcommittee, for 
his opening remarks.
    [The statement of Chairman Walberg follows:]

           Prepared Statement of Hon. Tim Walberg, Chairman,
                 Subcommittee on Workforce Protections

    Good morning and welcome to the first hearing of the Workforce 
Protections Subcommittee in the 113th Congress. I'd like to welcome our 
members and thank our witnesses for being with us today. I'd like to 
extend a special good morning to Assistant Secretary Oates. Thank you 
for participating in today's hearing.
    Finally, I would like to recognize our colleague from Connecticut, 
Joe Courtney, who has taken on the role as senior Democratic member for 
the 113th Congress. I look forward to working together over the next 
two years.
    As part of the Budget Control Act of 2011, President Obama insisted 
on a process known as sequestration, a series of across the board 
spending cuts that will impact most defense and domestic programs. 
Sequestration is not how Washington should conduct the people's 
business. It has created even more uncertainty in an already difficult 
environment.
    Twice House Republicans have taken action to replace sequestration 
with commonsense cuts and reforms. Unfortunately, the president has 
failed to offer his own proposal that will help control runaway 
spending and get this economy moving again. With our nation fast 
approaching $17 trillion in debt and more than 12 million Americans 
searching for work, the time for leadership is now.
    As we eagerly await the president's plan, we have a responsibility 
to examine the impact of sequestration on policies within our 
jurisdiction. The committee's continued oversight of the Worker 
Adjustment and Retraining Notification (WARN) Act is part of that 
effort.
    Congress approved the WARN Act to help workers plan for possible 
job losses, as well as allow them time to access various employment 
services provided by the states and federal government. The law 
requires employers with more than 100 employees to give workers 60 
days' notice of mass layoffs or plant closings. A legal notice must 
include specific details, including the expected date of the first 
layoffs and the job titles that will be affected.
    The law also includes provisions for conditional notices, as well 
as exceptional circumstances when an employer would not be required to 
issue a 60-day notice. Employers who fail to provide proper notices can 
be sued in federal court, liable for back wages and benefits, and be 
forced to pay monetary penalties.
    Numerous federal contractors have advised Congress that 
sequestration may lead to layoffs in their workplaces. As job losses 
become more eminent, employers have legal responsibilities they must 
follow. While there are long-standing concerns with the act, it is the 
law of the land. Political shenanigans should not interfere with an 
employer's obligation to follow the law or the Labor Department's role 
in administering the law.
    However, last summer the Obama administration managed to inject 
even more uncertainty into sequestration. On July 30, the department 
released guidance that states the WARN Act does not apply to 
sequestration and instructed employers not to issue notices. The 
department's guidance raises a number of concerns.
    First, the guidance contradicts current regulations that encourage 
employers to provide as much notice as possible, even when they are 
uncertain which jobs will be cut and when. And while the law creates an 
exemption for unexpected circumstances, to be legally protected 
employers must still issue notices as soon as layoffs are reasonably 
foreseeable.
    Additionally, the department has no enforcement authority over the 
WARN Act. Federal judges are responsible for enforcing the law and they 
ultimately decide through costly litigation whether an employer 
complied with the law.
    Finally, the guidance creates the impression that employers who 
follow the administration's opinion will be immune from future 
litigation. Nothing could be further from the truth. If a worker feels 
they've been denied proper notice, they have every right to take their 
employer to court.
    Perhaps this explains why the Office of Management and Budget 
explicitly promised to use taxpayer dollars to cover the legal expenses 
an employer might face for failing to warn workers of future layoffs. 
That's right: the Obama administration is telling employers to ignore 
the law and forcing taxpayers to pick up the tab.
    Assistant Secretary Oates, these are important concerns that 
require a serious response. I am disappointed the administration has 
refused to cooperate in good faith with this committee's oversight 
investigation into this matter. Providing over 400 pages of materials 
that were slipped under a door in the middle of the night before a 
congressional hearing--when those materials were first requested six 
months ago--is an insult to this committee. Congress deserves better. 
America's workers, employers, and taxpayers deserve better. It is time 
we got answers to the questions we've been asking.
    Again, I'd like to thank our witnesses for joining us, and I will 
now recognize my distinguished colleague Joe Courtney, the senior 
Democratic member of the subcommittee, for his opening remarks.
                                 ______
                                 
    Mr. Courtney. Well, first of all, thank you, Chairman 
Walberg, for convening this hearing. Thank you for your kind 
words this morning.
    The two of us entered Congress together in 2006, and who 
knew that a short time later we would again be able to help 
lead one of, in my opinion, the most important subcommittees in 
Congress, which is about making sure that people who get up to 
work every day come home safe and sound and are able to 
actually support their families. And again, I look forward to 
working with you.
    We had a good meeting this morning to talk about our mutual 
end goal here, our mutual mission, which is to actually make 
this subcommittee produce real results and hopefully not just 
degenerate into a debate club. So again, thank you again, for 
your nice words. And I look forward to working with you.
    And I want to thank the panel for coming here this morning 
as well; again, just a stellar background and credentials to 
have this important discussion here. And again, I think this 
topic of sequestration is probably the most critical facing our 
country in the near term.
    Yesterday my other committee, the House Armed Services 
Committee, held a hearing with the Joint Chiefs, the general 
who is in charge of the National Guard. There were 27 stars on 
the witnesses that were there. So, you know that is tough to 
match.
    However, I am sure you are going to be just as informative 
today as they--as these amazing individuals who serve our 
country. And frankly the message they conveyed in terms of 
sequestration is impact, aside from the issue that we are 
talking about today. I mean we are talking about an immediate 
damage to the military readiness of this country.
    The Navy cancelled an aircraft carrier mission to the 
Middle East, which is going to provide critical support for our 
troops in terms of air cover. Making sure that the Strait of 
Hormuz is kept clear for, again, 20 percent of the world's oil 
supply.
    This is an issue which we must deal with immediately. And 
frankly, I am quite disappointed that we are not in session 
next week. Our work schedule, frankly, does not match the 
gravity of the challenge that our country faces right now. And 
again, hopefully maybe this hearing will help the cause in 
terms of trying to get really what I think is the real solution 
to this problem, which is to make sure that we come up with a 
deficit reduction plan that hits the target of the Budget 
Control Act.
    I would like to point out that when the Budget Control Act 
was passed in August of 2011 it was negotiated between the 
White House and the Republican House leadership and the Senate 
Democratic leadership. Speaker Boehner, after the vote, said 
that he got 98 percent of what he was looking for; not 50 
percent, not just the part beside sequestration, but 98 percent 
of what his caucus and what his party was looking for.
    So, the fact of the matter is sequestration is something 
that both sides have their skin in the game, and frankly both 
sides need to solve. And I think if you look at the true 
legislative history, as long as we are talking about history 
this morning, of sequestration, what we actually did in August 
of 2011 was incorporate the 1985 sequestration statute, Gramm-
Rudman, and just basically update the measure to this era that 
we are living in right now.
    The structure of sequestration is identical to the one that 
was passed in 1985 by--led by Gramm and Rudman. And I think if 
you go back and read Senator Gramm's comments about what the 
legislative intent of sequestration was when they passed it, he 
says it is very clear. It was never the objective of Gramm-
Rudman to trigger sequester. The objective of Gramm-Rudman was 
to have the threat of sequester force compromise and action.
    So, again, the--and if you look at what happened in the 
wake of 1985, again very difficult moments occurred in terms of 
coming up right to the edge of having that chainsaw go through 
the government. But cooler heads prevailed. People did their 
job. They sat down and negotiated and compromised, and they 
came up with a result.
    And if you look at, again, at the fiscal cliff bill that 
passed on January 1st, just a few days ago, we delayed 
sequester by 2 months. And how did we do it? We paid for it 
with a mixture of revenue that was 50 percent of the pay for 
and 50 percent were cuts. And that in fact is precisely the 
same Da Vinci Code, the same formula that was used by the 
Congress, by our predecessors to avoid having, again, a 
devastating impact on our national security and on domestic 
priorities that are so critical to our country.
    Sequestration would be a disaster for this country in terms 
of having, again, an indiscriminate mechanism go through the 
domestic budgets and national security budgets of this country. 
And again, that should be our priority here today.
    Lastly, I would just say coming from a district where the 
largest manufacturer is Electric Boat, 9,000 employees. They 
have one customer, the U.S. Navy. And sitting on the Seapower 
Subcommittee we were following this WARN notice issue like a 
box score because it affected, again, thousands of people who 
live in southeastern Connecticut.
    And I would just say this. I think the undersecretary got 
it right. The fact of the matter is, is that procurement for 
programs like submarines, which take 5 years to build, or 
aircraft carriers, which from start to finish are 10 to 15 
years. The fact of the matter is the funding supply is procured 
over a period of years.
    So, even if sequestration did go into effect on January 
1st, but it did not thank God, the fact of the matter is, is 
that the obligation of funds, procurement of funds for programs 
like the Virginia-class submarine program or the Ohio 
replacement program or the carrier program that is being built 
in Virginia. Those funds are already well into the system so 
that the contracting officers who have to deal with these 
defense venders--I mean they are not going to turn the switch 
off on day one. It does not happen all on one day all at once.
    Again, I don't want to minimize the damage it would do in 
terms of having a real horizon down the road. But the idea that 
it would trigger something as immediate as a WARN Act notice, 
frankly is a notion completely divorced from the reality of how 
contracting actually takes place with defense contractors.
    And this is right in my wheelhouse. My nickname in Congress 
is ``Two-Subs Joe'' because we got the shipbuilding program 
enlarged over the last 2 years to get to two subs a year.
    So, I mean we follow this thing not just like a box score, 
but really microscopically. And the notion that that employer 
was obligated to have a mass blanket WARN notice, frankly, is 
just completely disconnected from the reality of how they hire 
and how they build programs that take years to complete from 
start to finish.
    So, again, I am looking forward to having this hearing 
today flush out some of these issues in terms of the real 
mechanics of what triggers a human resource officer to comply 
with the WARN notice. And again I look forward to your 
testimony and your answers to our questions.
    Thank you, Mr. Chairman. I yield back.
    [The statement of Mr. Courtney follows:]

 Prepared Statement of Hon. Joe Courtney, Ranking Member, Subcommittee 
                        on Workforce Protections

    I want to thank all of our witnesses for coming to share their 
experience and expertise on the Worker Adjustment Retraining 
Notification Act (WARN) and, in particular, the responsibilities of our 
nation's employers under this law in the context of sequestration.
    Since 1988, the WARN Act has ensured the protection of our workers 
by requiring covered employers to provide affected workers with notices 
of impending plant closings and mass layoffs 60 days before they occur. 
The law ensures that employees are given a sufficient amount of time to 
seek and obtain alternative employment. Issuing a WARN notice also 
triggers rapid response from state departments of labor and unlocks 
worker retraining funds and other resources.
    Last summer, the applicability of WARN Act requirements relative to 
the impacts of sequestration become a hot topic ahead of the then-
looming trigger date of January 2, 2013. To clarify the WARN 
obligations of employers in anticipation of sequestration, the 
Department of Labor issued guidance indicating that such notifications 
were not required under the law and, in many ways, contrary to the 
law's intent to provide specific, detailed and accurate information to 
affected employees. The Department's guidance--issued under their 
longstanding practice to provide information guidance on laws and 
regulations under the department's purview--concluded that the law's 
unforeseeable business circumstance exemption applied in the case of 
sequestration.
    Much has been said about this guidance, and no doubt we will hear 
from some of our witnesses today why they believe the Department's 
guidance on this matter was not in line with their interpretation of 
the law. However, with the new sequester deadline of March 1, 2013 
rapidly approaching just fourteen days from today, the truth is that 
little has changed since the Department issued their July guidance.
    While sequestration appears more likely to be triggered today than 
it did last summer, I believe there remains bipartisan interest in both 
chambers of Congress to avoid these broad and indiscriminate cuts to 
our federal budget. And, in reality, the specific impacts of 
sequestration on particular programs, projects and contracts still 
remains to be seen--in the case of defense contracts, for example, it 
may take several months or even years before the actual impact of 
budget cuts from sequestration will be felt. Many other factors, such 
as the calculation of unobligated balances, adjustments to contract 
terms and timing and potential flexibility in a company to readjust 
their workforce between government and private work, could potentially 
be at play here.
    As such, broad notices are inappropriate until such time that more 
detailed information is known about specific impacts to contracts and 
projects--and their resulting impact on a company's workforce--should 
this process be triggered. Until then, the uninformed uncertainty and 
consternation--as well as the use of limited retraining dollars and 
resources by already cash-strained states--that is triggered by WARN 
notices would be premature and counterproductive.
    The reality is that the uncertainty surrounding sequestration is 
being felt now. On January 30, the U.S. Department of Commerce reported 
that gross domestic product fell at a 0.1-percent annual rate in the 
fourth quarter of 2012, down from three-percent growth in the quarter 
before. The sudden dip is due to uncertainty caused by the threat of 
sequestration. This uncertainty caused a drop in the defense sector, 
which fell at an alarming 22.2-percent annual rate in the quarter. 
Although personal consumption expenditures rose at a 2.2-percent rate, 
business spending on equipment and software rose at a 12.4-percent 
rate, and housing investment rose at a 15.4 percent clip, strong 
performances in those sectors were not enough to offset a severe 
slowdown in defense spending as the Pentagon and defense firms gird for 
sequestration.
    As we are all too well aware, the impact of sequestration goes well 
beyond the defense sector. For instance, more than 2,700 would see 
their Title I education funds cut at a time when local school systems 
are strained more than ever to provide our schools with the resources 
they need. Cuts to IDEA and special education programs would eliminate 
federal support for more than 7,200 teachers and staff who work each 
and every day to support children with disabilities. And, more than 
70,000 Head Start and Early Start students would have their early 
education reduced or eliminated. From food safety to economic 
development, law enforcement to supporting those struggling to make 
ends meet, sequestration's impacts will be felt far and wide in nearly 
every aspect of our economy.
    Let us remember that sequester was not a new concept that was 
thought up in the summer of 2011; this mechanism was first authorized 
27 years ago by the bipartisan Balanced Budget and Emergency Deficit 
Control Act of 1985 (commonly known as the Gramm-Rudman-Hollings Act). 
Notably, Senator Phil Gramm, one of the authors of the 1985 sequester 
law, told the Senate Finance Committee in 2011 that ``It was never the 
objective of Gramm-Rudman to trigger the sequester; the objective of 
Gramm-Rudman was to have the threat of the sequester force compromise 
and action.''
    The single more important thing that this Congress can do right now 
to provide employers and employees with the certainty they need is to 
come together to pass a balanced and bipartisan agreement to ward off 
the looming trigger of sequestration. It is my sincere hope that this 
Congress can once again make the compromises and take the action 
necessary to provide our employers with the certainty they need and 
avoid the self-inflicted damage to our economy that we have within our 
power to prevent.
                                 ______
                                 
    Chairman Walberg. I thank the gentleman.
    Pursuant to committee Rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record. And without objection the hearing 
record will remain open for 14 days to allow statements, 
questions for the record and other extraneous material 
referenced during the hearing to be submitted into the official 
record.
    It is now my pleasure to introduce formally our 
distinguished panel of witnesses.
    First, the Honorable Jane Oates is the Assistant Secretary 
for the Employment and Training Administration at the U.S. 
Department of Labor.
    Our second is Mr. Kerry Notestine--I hope I got that right, 
who is a shareholder and co-chair of the Business Restructuring 
Practice Group at Littler Mendelson law firm in Houston Texas. 
Welcome.
    Mr. Thomas Gies is a partner and founding member of the 
Labor and Employment Law Group at Crowell & Moring law firm in 
Washington, D.C. Welcome.
    Mr. Ross Eisenbrey is the vice president at the Economic 
Policy Institute in Washington, D.C. And I would say Go Blue to 
you as well.
    Ms. Diana Furchtgott-Roth is senior fellow at the Manhattan 
Institute for Policy Research in Washington, D.C.
    Thank you all for being here. None of you are novices at 
that table. You know the lighting system, the 5-minute process, 
the warning yellow light that comes on, and then our 
appreciation when you keep as close to that 5-minute time 
period as possible. And we will attempt to keep ourselves to 
the 5-minute time period as closely as possible as members 
also.
    So, having said all of that, Undersecretary Oates, thank 
you again for being here, and we would appreciate your comments 
now.
    Is the microphone on there?

 STATEMENT OF HON. JANE OATES, ASSISTANT SECRETARY, EMPLOYMENT 
     AND TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR

    Ms. Oates. Oh. There it is. I am sorry. As a former ninth 
grade teacher I did not want to bellow at you. I am sorry.
    Good morning. I appreciate the opportunity to discuss the 
Department of Labor's June 30th guidance to the State 
Dislocated Worker Units on whether as of that date the 
possibility of a January 2, 2013 sequestration would trigger 
the advance notice requirements of the Worker Adjustment and 
Retraining Notification Act, the WARN Act.
    The WARN Act was enacted in 1988, and many of you know the 
history better than I, with wide bipartisan support. The law 
provides protection to workers, their families and their 
communities by requiring employers subject to certain 
exceptions to give workers or their representatives 60 days 
advanced notice of plant closings and mass layoffs. Employers 
are also required to give notice to local government and State 
Dislocated Worker Units so that workers can promptly receive 
the appropriate assistance that they may need.
    The Department of Labor does not enforce the WARN Act, as 
you said, Mr. Chairman. That is left up to private parties and 
the courts. We do, however, have statutory authority to issue 
regulations, which we did soon after the law took effect in 
1988.
    Our objective in issuing those rules was to articulate 
clear principles and guidelines that could be applied in 
specific circumstances. These regulations require WARN Act 
notices to contain specific information. These requirements are 
consistent with the WARN Act's primary purpose, which is to 
give specific workers who are likely to lose their jobs a 
period of time in which they can find new work or make other 
arrangements, and can obtain assistance from the state and 
local workforce programs.
    These requirements are also consistent with the notion that 
advanced notice should not be provided to workers who are not 
likely to be affected. As the regulation's preamble explains, 
it is not appropriate for an employer to provide a blanket 
notice to workers.
    At the time we issued the regulations, the department 
recognized that the rules could not address every advance 
notice issue that might arise under the WARN Act. We have 
supplemented over time those regulations with less formal 
guidance to help State Dislocated Worker Units and employers 
carryout the law is important purpose.
    For example, we have a special Web site for the WARN Act 
that has compliance assistance materials containing, among 
other things, a worker's guide, an employer's guide and a fact 
sheet. Another type of informal guidance we frequently provide 
the states across our issues in ETA is our training and 
employment guidance letter known as TEGLs. Everything has an 
acronym.
    These advisories provide direction and information on 
procedural, administrative, management and program issues. One 
such issue arose last spring when Congress, state workforce 
agencies and others began asking whether the possibility of the 
sequestration was a sufficient predicate to require federal 
contractors to issue WARN notices.
    To provide clarity to state workforce agencies and others, 
the department issued a TEGL. The TEGL summarized the relevant 
WARN framework and reiterated a straightforward principle that 
a blanket notice is neither appropriate nor legally sufficient 
under the WARN Act.
    It also explained that because the law requires notice only 
for the specific employees who may reasonably be expected to 
experience an unemployment situation as a result of a plant 
closing or mass layoff, employers have no WARN Act notice 
obligation when particular employment losses are speculative.
    The TEGL then applied the WARN Act framework to the 
potential sequester on January 2, 2013. At the time the TEGL 
was issued, members of Congress and the administration had both 
indicated that their goal was to avoid sequestration. So the 
TEGL explained that the occurrence of sequestration was not 
necessarily foreseeable.
    In addition, the OMB had not directed federal agencies to 
begin planning for how they would operate in the event of 
sequestration. Agencies had not announced which contracts would 
be affected by sequestration should it occur. The TEGL stated 
that in the absence of additional information any potential 
plant closing or layoff that might come about through a 
sequestration-related contract termination or cutbacks were 
speculative and unforeseeable.
    WARN Act notices, the TEGL concluded, were not required 60 
days in advance of January 2, 2013. The TEGL also makes clear 
that the prospect of sequestration was part of a dynamic 
process, and that additional information would make the 
possibility of plant closings or layoffs less speculative and 
more foreseeable.
    It is important to keep in mind that a TEGL is an 
interpretative aid for state workforce agencies and their 
administrators and liaisons who on a daily basis field 
questions from federal contractors and help workers who are 
dislocated by plant closings and mass layoffs. The TEGL does 
not suggest that federal contractors don't need to take the 
WARN Act into account when considering the consequences of a 
possible sequestration.
    The department is committed to help ensure that WARN Act 
notices are provided in appropriate circumstances. However, 
providing WARN notices to workers who are not likely to lose 
their job can unnecessarily disrupt their lives, be disruptive 
for the employers because very important employees could choose 
to leave their job. And it also wastes government resources by 
forcing the state workforce agencies to kick in with rapid 
response efforts. These are serious situations that should be 
avoided.
    Let me close by saying that our analysis and guidance 
regarding the WARN Act's application to sequestration was and 
is correct. And workers and the state workforce system have all 
been well served as a result of the TEGL. Funds were not 
sequestered on January 2, 2013, nor were contracts terminated, 
plants shuttered, or to our knowledge unnecessary advanced 
notices sent. Just as important, lives and businesses were not 
disrupted unnecessarily, and resources were not wasted.
    Thank you for inviting me, and I look forward to your 
questions.
    [The statement of Ms. Oates follows:]


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                                ------                                

    Chairman Walberg. Mr. Notestine.

           STATEMENT OF KERRY NOTESTINE, SHAREHOLDER,
                       LITTLER MENDELSON

    Mr. Notestine. Thank you, Chairman Walberg, Ranking Member 
Courtney, members of the subcommittee.
    My name is Kerry Notestine. I am a shareholder in the 
Houston office of Littler Mendelson, the nation's largest law 
firm exclusively devoted to representing management in 
employment matters. I want to focus my time with you today on 
the uncertainty regarding employers' obligations to comply with 
the Worker Adjustment and Retraining Notification Act, or WARN, 
in response to the potential upcoming sequestration.
    As you may know, the WARN Act requires certain employers to 
provide their employees and government entities with 60-days 
advanced notice of mass layoff or plant closings, and subjects 
those who fail to provide notice with harsh penalties, 
including 60 days back pay plus benefits to affected employees, 
$500-a-day penalties to local government where the event 
occurred, and attorney's fees and litigation.
    WARN was enacted with workers in mind. The express purpose 
of the act is to provide workers and their families advance 
notice of potential job losses in order to give them time to 
adjust to the prospective loss of employment, seek and obtain 
alternative jobs, and, if necessary, enter skills training or 
retraining that will allow them to successfully compete in the 
job market. For this reason in the past the Department of Labor 
consistently has advocated employers should provide as much 
notice as possible for WARN events.
    Even President Obama while in the Senate advocated 
broadening the requirements of WARN to prevent employers from 
using what he called loopholes in the act to withhold notice. 
Specifically, in May 2008 at a hearing of a Senate Committee on 
Health, Education, Labor and Pensions, then-Senator Obama gave 
a prepared statement urging employers to provide as much notice 
as possible, even in ambiguous situations, stating that workers 
in their communities have the right to know when they are 
facing a serious risk of plant closing.
    The upcoming sequestration arguably imposes just such a 
risk on thousands of federal contractors, subcontractors and 
their employees. Nevertheless, the Department of Labor in its 
July 30, 2012 guidance addressing federal contractor obligation 
under WARN, is taking a very different position than years' 
past. Advocating that contractors should provide no notice in 
advance of sequestration due to the uncertainty regarding 
whether those automatic cuts will take place at all, and if 
they do, when and where those spending cuts will occur.
    According to the Department of Labor, such uncertainty 
provides contractors with a statutory exception from complying 
with WARN, that is the unforeseen business circumstances 
exception. The OMB subsequently released its own guidance 
indicating that federal contractors who heed the Department of 
Labor's advice will be permitted to recover their liability and 
litigation costs from the contracting agencies.
    While the Department of Labor and OMB guidance appear to 
benefit employers by potentially relieving them of obligations 
under WARN, I would note that they appear to do so at the 
expense of thousands of employees who, as President Obama put 
it, deserve to know when their jobs are in jeopardy.
    Additionally, circumstances have changed since the DOL 
issued its opinion 6 months ago. Sequestration appears more 
likely to occur this time around. And new information is coming 
out every day regarding where the government will be 
implementing these cuts. The chances of employers successfully 
claiming that layoffs and plant closings are unforeseeable are 
diminishing every day.
    Finally, DOL and OMB guidance failed to disclose three key 
points that employers need to know when considering their 
obligations under WARN.
    First, they fail to disclose that the DOL's guidance is not 
binding on federal courts, those entities that are responsible 
for enforcing the act. We cannot say what about of deference, 
if any, a court will give the DOL's opinion in this matter, and 
it is therefore entirely possible that a contractor will heed 
the DOL's opinion only to find that a federal court disagrees 
and subjects it to significant liability.
    Second, they failed to mention that employers must give as 
much notice as possible once the layoff or closure becomes 
reasonably foreseeable. And along with that notice they must 
provide a brief statement explaining the reason for reducing 
the notification period. Importantly, without this additional 
statement, the statutory exception relied upon by the DOL 
becomes unavailable.
    Third, they failed to mention that notwithstanding federal 
WARN there are numerous other potential areas of liability that 
a contractor may be subjecting itself to by failing to provide 
notice. For instance, many states have their own mini-WARN 
statutes that contain different eligibility requirements and 
notice periods. Some states, like California and New Jersey for 
example, don't include in their statute an exception for 
unforeseen business circumstances.
    Additionally, employers may have contractual notice 
obligations under collective bargaining agreements or 
individual employment agreements. DOL and OMB fail to mention 
any of these potential liability areas, leaving employers 
uncertain about their responsibilities.
    More importantly, these three critical omissions may have 
some--leave some contractors with the mistaken belief that by 
following DOL's guidance they are free from potential 
liability; a fact, which I have described is not the case.
    Chairman Walberg, Ranking Member Courtney, I thank you 
again for inviting me. I am happy to answer any questions that 
you have.
    [The statement of Mr. Notestine follows:]

             Prepared Statement of Kerry E Notestine, Esq.,
                        Littler Mendelson, P.C.

    Good morning Chairman Walberg, Ranking Member Courtney and 
distinguished members of the subcommittee. Thank you for the invitation 
to be here before you. My name is Kerry Notestine, and I am pleased to 
provide this testimony to address the issues surrounding the effects of 
sequestration on American workers and employers. Specifically, I will 
address issues related to the WARN Act and other legal obligations 
associated with reducing a company's workforce because of contract 
cancellation. I am a Shareholder/Partner with Littler Mendelson, P.C., 
the world's largest labor and employment law firm representing 
management. With over 950 attorneys and 56 offices nation and world-
wide, Littler attorneys provide advice, counsel and litigation defense 
representation in connection with a wide variety of issues affecting 
the employee-employer relationship. Additionally, through its Workplace 
Policy Institute, Littler attorneys remain on the forefront of 
political and legislative developments affecting labor, employment and 
benefits policy and participate in hearings such as this in order to 
give a voice to employer concerns regarding critical workplace issues. 
Nevertheless, the comments I provide today are my own, and I am not 
speaking for the firm or the firm's clients.\1\
I. Executive Summary
    With the January 1, 2013 passage of the American Taxpayer Relief 
Act of 2012, Congress addressed the expiration of the Bush-era tax 
cuts, but delayed resolution of the automatic spending cuts known as 
``sequestration.'' Defense and other federal contractors stand to be 
significantly impacted by massive budget cuts that, by virtue of the 
new law, are now scheduled to begin on March 1, 2013, unless Congress 
acts before then. If the sequestration of federal funds occurs, 
affected employers face potentially dramatic cuts in federal contracts 
and, as a possible result, may need to implement significant furloughs 
or layoffs, or even close some facilities. The prospect of sudden and 
dramatic downsizing raises important employment law concerns, including 
the requirement under the Worker Adjustment and Retraining Notification 
(WARN) Act that employers provide employees 60 days' advance notice of 
certain mass layoffs and plant closings, or face significant penalties.
    On July 30, 2012, the U.S. Department of Labor (DOL) issued 
Training and Employment Guidance Letter No. 3-12, which offered 
guidance on the applicability of WARN to potential layoffs by federal 
contractors in the wake of sequestration. The DOL guidance letter 
concluded that, given the federal WARN unforeseeable business 
circumstances exception, employers would not be required to provide the 
Act's full 60-day notice period and the obligation to provide notice 
would not be triggered until specific layoffs or facility closures 
became reasonably foreseeable. In addition to the DOL's guidance 
letter, the President's Office of Management and Budget (OMB) issued a 
memo on September 28, 2012, stating that compensation, litigation and 
other costs resulting from federal WARN Act liability for those 
employers who followed the DOL guidance letter would qualify as 
allowable costs and be covered by the contracting agency.
    While these statements would appear to benefit employers by 
potentially relieving them of obligations under WARN, lawmakers and 
commentators have rightfully expressed concern and skepticism about the 
DOL's legal conclusions (as it is not clear what degree of deference 
courts will give the DOL's guidance letter) and about the authority of 
the OMB to cover resulting litigation costs. In addition, these 
statements undermine retraining and advance notice benefits that 
workers would receive if employers provided 60-day WARN notice. My 
testimony addresses those concerns in additional detail.
II. Introduction
    I am a member of the Texas state bar and board certified by the 
Texas Board of Legal Specialization in labor and employment law. In my 
practice, which is based in Houston, Texas, I have represented 
employers across the country in all aspects of employment matters, 
including litigation under federal, state, and local statutes and 
common law; administrative proceedings before various federal and state 
government agencies; and counseling employers regarding employment 
issues, particularly issues related to business restructuring and 
reductions-in-force (RIF). I am the Co-Chair of Littler's national 
practice group on business restructuring, and have advised clients on 
hundreds of RIF's including assisting employers with compliance issues 
under WARN, the Older Worker Benefit Protection Act, and the many 
federal, state, and local anti-discrimination laws. I also have 
represented clients in litigation resulting from RIF's, including 
acting as lead defense counsel in a class action alleging WARN Act 
violations as a result of a client's 1,800-person mass layoff. Together 
with other attorneys from Littler, I have drafted a 50-state survey of 
release requirements by which employers must abide when conducting 
layoffs. My experience in advising clients with respect to RIF's and 
alternative cost-cutting measures gives me considerable insight into 
the legal challenges defense and other government contractors face 
because of the looming sequestration.
III. Sequestration
    The Balanced Budget and Emergency Deficit Control Act of 1985 
(BBEDCA), as amended by the Budget Control Act of 2011 (BCA), 2 U.S.C. 
901a(7)(A) and (8), required that, in the event the Joint Select 
Committee on Deficit Reduction (i.e., Super Committee) failed to 
produce deficit reduction legislation with at least $1.2 trillion in 
cuts, then Congress could grant a $1.2 trillion increase in the debt 
ceiling, but this would trigger across-the-board cuts in both mandatory 
and discretionary spending by reducing both non-exempt defense accounts 
and non-exempt non-defense accounts by a uniform percentage. Following 
the Super Committee's announcement on November 21, 2011 that it had 
failed to reach bipartisan agreement on deficit reduction legislation, 
sequestration became an apparent inevitability--set to automatically 
occur on January 2, 2013, unless Congress took action to avoid its 
effects. This deadline and the negotiations leading up to it became 
commonly referred to as the ``fiscal cliff.'' However, with only one 
day remaining before reaching the fiscal cliff, Congress passed the 
American Taxpayer Relief Act of 2012. Seen as a temporary resolution to 
the fiscal cliff, the act delayed the effects of sequestration until 
March 1, 2013.
IV. The WARN Act
    Leading up to the January 2013 fiscal cliff deadline, several U.S. 
employers with large federal contracts began publically questioning 
whether and to what extent they would be required to comply with the 
Worker Adjustment and Retraining Act (WARN), 29 U.S.C. Sec. Sec.  2101-
2109, a federal law requiring employers to provide employees with 
advance notice of mass layoffs and plant closings. In a nutshell, WARN 
requires employers with 100 or more employees to give at least 60 days' 
advance notice of either a plant closing or mass layoff (i.e., a ``WARN 
Event''). The Act defines a plant closing as the termination of 50 or 
more employees at a single site, and defines a mass layoff as a layoff 
involving either 500 employment terminations at a single site of 
employment, or, if fewer, 50 or more employment terminations that 
constitute 33% of those working at a single site of employment.
    The purpose of WARN is to provide advance notice of potential job 
losses to workers and their families, in order to allow them some 
transition time to adjust to the prospective loss of employment, to 
seek and obtain alternative jobs and, if necessary, to enter skill 
training or retraining that will allow these workers to successfully 
compete in the job market. WARN also provides for notice to State 
dislocated worker units so that dislocated worker assistance can be 
promptly provided.
    Where there will be a WARN Event, there are very technical 
requirements for both the notice which must be given, how it is 
delivered, and to whom it is given. The Act requires an employer to 
notify several different entities or individuals. See 20 CFR Sec.  
639.7. If the facility is unionized, the employer must give written 
notice to the chief elected officer of the exclusive representative or 
bargaining agent of the affected employees.\2\ Notice for unionized 
employees must include: (a) the name and address of the affected 
employment site and the name and telephone number of a company official 
to contact for further information; (b) a statement indicating whether 
the shutdown or layoff is expected to be permanent or temporary and, if 
the entire plant is to be closed, a statement to that effect; (c) the 
expected date of the first separation and schedule of anticipated 
separations; and (d) the job titles of positions to be affected and the 
names of workers currently in those positions. 20 CFR Sec.  639.7(c).
    In non-union facilities or departments, and with respect to 
employees not represented by a union, an employer must provide written 
notice individually to each employee who reasonably may be expected to 
lose employment.\3\ Written notice to each affected, non-unionized 
employee must include: (a) a statement indicating whether the shutdown 
or layoff is expected to be permanent or temporary and, if the entire 
plant is to be closed, a statement to that effect; (b) the expected 
dates when the individual employee will be terminated or laid off and 
when mass layoffs or the plant closing will commence; (c) an indication 
of whether bumping rights exist; and (d) the name and telephone number 
of a company official to contact for further information. 20 CFR Sec.  
639.7(d).
    An employer must also notify the state dislocated worker unit and 
the chief elected official of the local government where the closing or 
layoff will occur. 29 U.S.C. Sec.  2102(a)(2). This written notice to 
the government must contain: (a) the name and address of the affected 
employment site and the name and telephone number of a company official 
to contact for further information; (b) a statement indicating whether 
the shutdown or layoff is expected to be temporary or permanent and, if 
the entire plant is to be closed, a statement to that effect; (c) a 
schedule of layoffs or terminations; (d) the job classifications of 
affected positions and the number of employees in each such position; 
(e) an indication of whether bumping rights exist; and (f) the name and 
address of each union and chief elected officer representing affected 
employees. 20 CFR Sec.  639.7(e).\4\
    WARN subjects employers who fail to abide by the Act's requirements 
to significant penalties, including 60-days' back pay plus benefits for 
all affected employees, $500 a day to the local government where the 
reduction in force occurred, and attorneys' fees in litigation.
    Accordingly, in the summer of 2012, defense industry and other 
government contractors and subcontractors began considering their 
obligations under WARN when anticipating the effects the automatic 
sequestration cuts would have on their government contracts and, by 
extension, their workforces.
V. DOL Guidance and the Unforeseeable Business Circumstances Exception
    In response to these concerns, on July 30, 2012, the Department of 
Labor (DOL) issued its Training and Employment Guidance Letter No. 3-
12, addressing the WARN Act's requirements in the event of 
sequestration.\5\ The DOL concluded that federal contractors were not 
required to provide WARN Act notices to potentially thousands of 
employees 60 days in advance of sequestration (which would have been on 
or about November 2, 2012) because of uncertainty about whether 
Congress would act to avoid sequestration and if they did not act, what 
effect the sequestration would have on particular governmental 
contacts.
            A. Unforeseeable Business Circumstances
    In advising employers not to provide advance notice of potential 
layoffs, the DOL relied on the ``unforeseeable business circumstances'' 
exception to the WARN Act. This exception allows an employer to provide 
fewer than 60 days' notice if a plant closing or mass layoff was caused 
by business circumstances not reasonably foreseeable at the time that a 
60-day notice would have been required. 29 U.S.C. Sec.  2102(b)(2)(A). 
The Code of Federal Regulations provides that an important indicator of 
a business circumstance that is not reasonably foreseeable is that the 
circumstance is caused by ``some sudden, dramatic, and unexpected 
action or condition outside the employer's control.'' 20 CFR Sec.  
639.9(b)(1). Examples of such circumstances include a client's sudden 
and unexpected termination of a contract, a strike at a major supplier, 
unanticipated and dramatic economic downturn, or a government-ordered 
closing of an employment site that occurs without prior notice. Id.
    It is an employer's reasonable business judgment, rather than 
hindsight, which dictates the scope of the unforeseeable business 
circumstances exception. Loehrer v. McDonnell Douglas Corp., 98 F.3d 
1056, 1061 (8th Cir. 1996). As such, courts evaluate whether a 
``similarly situated employer in the exercise of commercially 
reasonable business judgment would have foreseen the closing'' when 
determining whether a closing was caused by unforeseeable business 
circumstances. Hotel Employees Int'l Union Local 54 v. Elsinore Shore 
Assocs., 173 F.3d 175, 186 (3d Cir. 1999). Thus, the WARN Act provides 
flexibility for predictions about ultimate consequences that, though 
objectively reasonable, may prove to be wrong. See Halkias v. General 
Dynamics Corp., 137 F.3d 333, 336 (5th Cir. 1998), cert. denied, 525 
U.S. 872 (1998) (observing that the ``reasonable foreseeability'' 
standard envisions the probability, not the mere possibility, of an 
unforeseen business circumstance).
    In the context of defense contracts, several courts have found that 
the unforeseeable business circumstances exception exempted an employer 
from providing notice. International Ass'n of Machinists & Aerospace 
Workers v. General Dynamics Corp., 821 F. Supp. 1306 (E.D. Mo. 1993) 
(Within the unique context of defense contracting it is rare for the 
government to cancel contracts despite delays and cost overruns. 
Therefore, it was a commercially reasonable business judgment to 
conclude that the contract would not be canceled, and the subsequent 
cancellation qualified as an unforeseeable business circumstance.). 
Nevertheless, even under this exception, notification is required as 
soon as practicable along with a brief statement of the basis for 
reducing the notification period. 29 U.S.C. Sec.  2102(b)(3).
VI. What the DOL Guidance Doesn't Tell Employers
            A. Additional Notice Requirements under the Unforeseeable 
                    Business Circumstances Exception
    The statutory section of WARN that makes the unforeseeable business 
circumstances exception available to employers has an additional notice 
requirement when the exception is to be invoked: An employer relying on 
this subsection shall give as much notice as is practicable and at that 
time shall give a brief statement of the basis for reducing the 
notification period. 29 U.S.C. Sec. 2102(b)(3). The DOL Guidance fails 
to mention that employers are still required to provide some advance 
notice upon the employer's realization of a WARN Event (even if the 
exception allows for less than 60 days' notice) and that the notice 
must specify why the employer reduced the notification period.
    Importantly, failure to give this required brief statement in the 
written notice has very severe consequences: The statutory exception 
becomes unavailable. Childress v. Darby Lumber Co., 126 F. Supp. 2d 
1310, 1318 (D. Mont. 2001), aff'd, 357 F.3d 1000 (9th Cir. 2004); 
Grimmer v. Lord Day & Lord, 937 F. Supp. 255, 257-58 (S.D.N.Y. 1996); 
see also, Alarcon v. Keller Industs., Inc., 27 F.3d 386, 389-90 (9th 
Cir. 1994). Thus, employers relying solely on the DOL's Guidance may 
not provide written notice at all, or may provide notice lacking the 
brief statement, in which case the exception is no longer available.
            B. Authority of DOL to Issue Its Guidance
    It is highly questionable whether the DOL even has authority to 
issue its Guidance in this instance. Indeed, the WARN regulations 
specifically provide that ``[t]he Department of Labor has no legal 
standing in any enforcement action and, therefore, will not be in a 
position to issue advisory opinions of specific cases.'' 20 CFR Sec.  
639.1(d) (emphasis added). On the contrary, the regulations provide 
that the federal courts are the sole arbiters of WARN compliance and 
thus, the DOL's opinion is not binding on these courts. As a result, it 
is unclear what amount of deference, if any, a court would apply to 
such an opinion.
    Indeed, in the past when the DOL has tried to issue specific 
guidance with respect to WARN requirements, the Department has made it 
clear in the guidance that its answers were not binding on courts. For 
example, in a Fact Sheet issued by the DOL following Hurricane Katrina, 
the Department specifically warned that its Fact Sheet responses 
``represent the U.S. Department of Labor's best reading of the WARN Act 
and regulations,'' and ``employers should be aware that the U.S. 
Federal Court solely enforces the Act and these answers are not binding 
on the courts.'' Notably, the DOL provided no such disclaimer in the 
guidance regarding sequestration.
VII. Why Courts May Independently Determine that the Unforeseeable 
        Business Circumstances Exception Does Not Apply to 
        Sequestration.
    While the Department of Labor has no enforcement responsibility, 
the agency did promulgate regulations regarding WARN. See 20 CFR Sec.  
639. These regulations indicate that employers are encouraged, even 
when not required, to provide advance notice to employees about 
proposals to close a plant or significantly reduce a workforce. 20 CFR 
Sec.  639.1. Furthermore, in its regulations, the Department of Labor 
concedes that the statute can be very vague when an attempt is made to 
apply WARN to a specific situation. The regulations read in part:
    In practical terms, there are some questions and ambiguities of 
interpretation inherent in the application of WARN to business 
practices in the market economy that cannot be addressed in these 
regulations. It is therefore prudent for employers to weigh the 
desirability of advance notice against the possibility of expensive and 
time-consuming litigation to resolve disputes where notice has not been 
given. The Department encourages employers to give notice in all 
circumstances.
    20 CFR Sec.  639.1(e) (emphasis added). Moreover, in the Fact Sheet 
the DOL issued following Hurricane Katrina, the Department advised 
employers to provide ``as much notice as possible,'' even in situations 
where the hurricane had destroyed the employer's plant and all 
employment records were gone. According to the DOL, providing some form 
of notice (even by posting in a public place, publishing in a 
newspaper, or mailing to the employees' last known addresses) showed 
the employer's good faith compliance with WARN.\6\
    Thus the recent DOL Guidance on sequestration strangely contravenes 
the Department's own past advice, as well as the express purposes of 
the WARN Act. Again, according to the Department's own regulations:
    Advance notice provides workers and their families some transition 
time to adjust to the prospective loss of employment, to seek and 
obtain alternative jobs and, if necessary, to enter skill training or 
retraining that will allow these workers to successfully compete in the 
job market. WARN also provides for notice to State dislocated worker 
units so that dislocated worker assistance can be promptly provided.
    29 CFR Sec.  639.1(a). The current DOL Guidance, meanwhile, 
advocates providing no notice, stating that providing notice to workers 
who may not ultimately suffer an employment loss, ``both wastes the 
state's resources in providing rapid response activities where none are 
needed and creates unnecessary uncertainty and anxiety in workers,'' 
both of which the DOL now claims ``are inconsistent with the WARN Act's 
intent and purpose.''
    Indeed, the DOL Guidance appears to even contravene President 
Obama's assessment of what protections WARN should provide. On May 20, 
2008, the Senate Committee on Health, Education, Labor and Pensions 
held a hearing examining plant closings and focusing on workers' rights 
and the WARN Act's 20th anniversary. During the hearing, a then-Senator 
Obama remarked on his days as a community organizer working on the 
south side of Chicago helping people in communities affected by steel 
plant closings get back on their feet. According to Senator Obama, one 
of the things he learned early on, and saw over and over again, was 
that ``American workers who have committed themselves to their 
employers expect in return to be treated with a modicum of respect and 
fairness.'' He therefore reasoned that ``failing to give workers fair 
warning of an upcoming plant closing ignores their need to prepare for 
the transition and deprives their community of the opportunity to help 
prevent the closing.'' \7\ Furthermore, in his closing remarks, Senator 
Obama reasoned:
    Workers and their communities have a right to know when they are 
facing a serious risk of a plant closing. Making that information 
available before the plant closes can, in the best case scenario, help 
communities come together to prevent the loss and, in the worst case 
scenario, help workers and communities prepare for the difficult 
transition to come.
    Clearly, President Obama felt that workers facing potential 
separation from employment deserved advance notice, regardless of 
whether the WARN Act required such notice. The DOL now appears to take 
an about-face to this position, encouraging employers to withhold 
advance notice, even where the notice may be able to assist the workers 
(and their communities) to prepare for the potential transition to 
come. While the DOL is understandably concerned that some employees may 
suffer unnecessary anxiety by receiving a notice and then not suffering 
an employment loss, such concern fails to protect those employees who 
actually do suffer an employment loss.
    Furthermore, the DOL's new position seems to conflict with its own 
past advice that providing some notice, even conditional notice, is 
better than providing no notice at all. Indeed, the DOL's regulations 
specifically allow employers to issue conditional notice:
    Notice may be conditioned on the occurrence or non-occurrence of an 
event, such as the renewal of a major contract, only when the event is 
definite and the consequences of its occurrence or nonoccurrence will 
necessarily, in the normal course of business, lead to a covered plant 
closing or mass layoff less than 60 days after the event. For example, 
if the non-renewal of a major contract will lead to the closing of the 
plant that produces the articles supplied under the contract 30 days 
after the contract expires, the employer may give notice at least 60 
days in advance of the projected closing date which states that if the 
contract is not renewed, the plant closing will occur on the projected 
date.
    20 CFR Sec.  639.7(a)(3). Similarly, courts reviewing this issue 
may ultimately determine that employers should have provided 60 days' 
conditional notice to employees in advance of the sequestration, 
stating that, in the event sequestration occurs and funding to a 
particular project is cut, the plant closing or mass layoff will occur 
on a projected date. Although the regulations state that the notice 
must be specific, they also provide that the notices must be based on 
the best information available at the time notice is given. 20 CFR 
Sec.  639.7(a)(4). Thus, a court will look to the individual 
circumstances and what information the employer had available at the 
time to determine whether a ``similarly situated employer in the 
exercise of commercially reasonable business judgment would have 
foreseen the closing.'' See Hotel Employees Int'l Union Local 54, 173 
F.3d at 186 (3d Cir. 1999).
    Finally, courts may find it hard to agree with the DOL's six-month-
old advice that sequestration is an unforeseeable business 
circumstance. Specifically, the Guidance states that ``even the 
occurrence of sequestration is not necessarily foreseeable'' and 
``Federal agencies, including DOD, have not announced which contracts 
will be affected by sequestration were it to occur.'' While that may 
have been true with respect to the January 2 deadline, as the new March 
1 deadline looms closer, it appears far more likely that the cuts will 
actually go into effect this time around. Indeed, even House Budget 
Committee Chairman Paul Ryan has publically stated his belief that 
``the sequester is going to happen.'' \8\ Likewise, additional 
information is being released every day with respect to where the cuts 
will likely take place. For example, just last week, our nation's 
military branches released documents outlining their proposals for 
complying with the sequestration. As more information becomes 
available, courts are more and more likely to find that employers who 
fail to provide advance notice of resulting plant closures and layoffs 
are in violation of WARN and less likely to apply the unforeseeable 
business circumstances exception.
VIII. The OMB Guidance Only Raises Additional Questions
    Further confusing the issue for employers, on September 28, 2012, 
the President's Office of Management and Budget (OMB) issued its 
``Guidance on Allowable Contracting Costs Associated with the Worker 
Adjustment and Retraining Notification (WARN) Act'' to address whether 
federal contracting agencies would cover WARN Act-related liability and 
litigation costs. The OMB stated in its Guidance that:
    If (1) sequestration occurs and an agency terminates or modifies a 
contract that necessitates that the contractor order a plant closing or 
mass layoff of a type subject to WARN Act requirements, and (2) that 
contractor has followed a course of action consistent with DOL 
guidance, then any resulting employee compensation costs for WARN Act 
liability as determined by a court, as well as attorneys' fees and 
other litigation costs (irrespective of litigation outcome) would 
qualify as allowable costs and be covered by the contracting agency, if 
otherwise reasonable and allocable.
    While the OMB Guidance appears to be aimed at reassuring employers 
by promising them indemnification against potential WARN-related 
liability, attorneys' fees and litigation costs in the event they 
follow the DOL Guidance by failing to issue WARN notices, the OMB 
Guidance may unintentionally be providing employers false assurances 
that all liability and litigation costs will be covered. Specifically, 
Federal WARN is only one avenue amongst several that employees may take 
to challenge the results of a reduction-in-force and seek damages for 
failure to provide advance notice. Other areas of potential liability 
include state Mini-WARN laws and laws requiring advance notice of 
changes to employee pay and/or hours worked, as well as contractual 
obligations found in collective bargaining agreements and individual 
employment agreements. It is not clear whether and to what extent the 
OMB Guidance provides for indemnification of these potential liability 
areas.
            A. State Mini-WARN Acts and Other State Law
    Approximately twelve states have ``mini-WARN'' acts that provide 
additional requirements beyond what Federal WARN requires. California, 
for example, applies different threshold requirements under its state 
law--requiring notice from facilities employing 75 or more individuals 
within the preceding 12 months (rather than 100 individuals under 
Federal WARN). CAL. LAB. CODE Sec. Sec. 1400--1408. Additionally under 
California law, a layoff of 50 or more employees within any 30 day 
period (regardless of percentage at the facility) is a mass layoff, and 
any shutdown of a covered facility is a plant closing, regardless of 
the number of employment losses. Id. As a result, employees whose jobs 
are eliminated in California may qualify for protection under the 
state's mini-WARN act but not qualify for protection under Federal 
WARN. Other states such as Illinois, Iowa, New Hampshire, and Wisconsin 
require 60 days' advance notice for layoffs involving as few as 25 
employees. 820 Ill. Comp. Stat. 65/1-99 (2008); Ill. Admin. Code tit. 
56, Sec.  230 (2008); Iowa Code Sec. Sec.  84C.1-84C.5 (2011); N.H. 
Rev. Stat. Ann., Chapter 275-F; Wis. Stat. Sec.  109.07(1)(b). Other 
states require more notice than the Federal WARN's 60-days. New York, 
for example, requires 90 days advance notice of WARN Events and applies 
to companies with as few as 50 employees. NY LAB. LAW Sec. 860 McKinney 
(2008). New Jersey WARN, meanwhile, provides an additional penalty for 
noncompliance in addition to the 60 days' back pay--employers are 
required to provide one week's pay for each full year of an employee's 
service. This is significantly greater than the federal WARN Act's 
remedy of paying lost wages (back pay) for a maximum of 60 days.
    In addition to Mini-WARN laws, many states impose additional 
severance obligations on employers undertaking layoffs, outside the 
context of WARN. Connecticut, for example, has an statute requiring 
that for certain closings, the employer must pay for 100% of health 
care coverage for employees and dependents, to the extent that they are 
covered, for up to 120 days. CONN. GEN. STAT. Sec. Sec.  31-51(n), 31-
51(o), 31-51(s) (2008). Maine employers, meanwhile, must provide 
employees 60 days' notice in advance of a cessation of operations and 
severance pay computed at one week per year of service, payable to 
employees who have been employed at least three years. ME. REV. STAT. 
ANN. tit. 26, Sec.  625-B.
    Finally, where sequestration results in employee furloughs or 
reductions in employee hours and/or pay, there are other legal issues 
that an employer must consider. In furlough cases, it is advisable to 
provide advance notice to employees and have employees sign an 
agreement regarding the terms of the furlough. If the employer wishes 
the time to be unpaid, it should expressly inform employees, preferably 
in writing, not to do work while on the furlough.\9\ Some state laws 
require advance notice of changes in pay (the longest being a 30-day 
advance notice obligation in Missouri), and it is unresolved whether 
placing employees on an unpaid furlough may trigger those notice 
obligations. Employers arguably may have an excuse for failing to 
provide required notice for reasons similar to those addressed above 
related to WARN obligations, but employers are advised to provide as 
much notice as possible to maintain defenses to these notice 
obligations.
    The DOL does not purport to address such state laws in its Guidance 
(and, indeed, the DOL Guidance would do very little to protect 
employers in states like California or New Jersey where there is no 
comparable state-based exception for unforeseeable business 
circumstances). However, it is disconcerting that the DOL fails to even 
mention in its Guidance that failing to comply with the notice 
requirements under Federal WARN may subject employers to additional 
liability under state law. Such omission may leave some employers with 
the mistaken belief that, by following the DOL's Guidance, they are 
absolved of any potential liability--a belief which those same 
employers may believe is supported by the OMB Guidance.
    In fact, it is entirely unclear from the language of the OMB 
Guidance whether contracting agencies would indemnify employers of this 
additional state-based liability. Specifically, the OMB states that its 
guidance ``does not alter existing rights, responsibilities, 
obligations, or limitations under individual contract provisions or the 
governing cost principles set forth in the Federal Acquisition 
Regulation (FAR) and other applicable law.
            B. Collective Bargaining and Contractual Agreements
    In addition to state requirements, the National Labor Relations Act 
and collective bargaining agreements may require advance notification 
to unions representing employees and bargaining about the effects of a 
layoff due to sequestration. Additionally, employers may have entered 
employment agreements with certain employees, providing advance notice 
of separation. In both cases, compliance with the DOL Guidance would 
not necessarily address these additional contractual obligations. In 
the case of furloughed employees, employers may have obligations to 
bargain with unions representing furloughed employees or may have 
obligations under existing individual employment agreements that should 
be considered. In the event a grievance is filed by a union 
representative receiving only 5 days' notice of a plant closing, will 
contracting agencies indemnify employers for that? Will they indemnify 
for any breach of contract issues arising from an individual's 
employment agreement? Although the answer is likely no, often such 
claims are brought in conjunction with claims under the WARN Act. If an 
employee brings a lawsuit to assert both a contractual claim and a WARN 
Act claim, how will the contracting agency go about indemnifying the 
employer for litigation costs surrounding one cause of action and not 
the other?
            C. How Will the Litigation Costs be Covered?
    Other than stating that employee compensation costs, attorneys' 
fees and other litigation costs ``would be covered by the contracting 
agency,'' the OMB Guidance provides very little actual guidance to 
employers regarding how the indemnification process will actually work. 
For instance, will the contracting agency be covering the costs of 
litigation from its inception? Or will it wait until the case is 
resolved and reimburse costs at that time? The former option raises 
questions regarding what level of input or oversight the contracting 
agency will have over the selection of legal counsel. For instance, 
will government attorneys be required, or will the employers be allowed 
to select their own outside counsel? Will the contracting agency pay 
whatever hourly rates legal counsel is charging or will the employer/
attorneys be provided guidelines regarding what is ``otherwise 
reasonable and allocable?'' Additional questions are also raised 
regarding the level of input and oversight into the overall litigation 
strategy. For instance, will the contracting agency have any input into 
whether the employer seeks an early settlement or sees the litigation 
through to trial?
    On the other hand, the latter option (waiting until resolution of 
the action to indemnify the employer), creates its own issues. For 
instance, waiting until the end of the case to cover costs makes the 
promise of indemnification illusory for smaller employers who likely 
will be unable to afford paying the up-front costs of hiring a law firm 
and covering litigation expenses and attorneys' fees through the 
resolution of the case. Indeed, for those contractors or subcontractors 
whose entire business relies on federal contracts, their inability to 
pay such extraneous expenses up front is likely increased due to 
reduced revenue from cancelled or modified government contracts.
IX. Conclusion
    The guidances issued to employers by the DOL and OMB regarding WARN 
compliance have done little to reassure this employment lawyer. Indeed, 
I cannot understand why the DOL would issue a guidance advising 
employers to provide less notice rather than more when sequestration is 
the current law of the land. The OMB Guidance further complicates 
matters by suggesting that employers will have blanket immunity from 
liability in the event they follow the DOL Guidance--a proposition that 
may not ultimately be the case.
    Chairman Walberg, Ranking Member Courtney, I thank you again for 
inviting me to testify.
                                endnotes
    \1\ I thank Sarah Morton of Littler Mendelson, PC for her 
preparation of this statement, and to Michael Lotito and Ilyse Schuman 
of Littler Mendelson for their comments on prior drafts of this 
statement.
    \2\ This notice should be provided to all entities identified in 
the collective bargaining agreement as representatives of the 
bargaining unit employees. Many labor agreements are signed by a union 
local and the international union; notice should be provided to both. 
Failure to send notice to the international union could result in a 
ruling that notice was ineffective and the employer is liable for full 
penalties for non-compliance with the Act.
    \3\ This includes managerial and non-managerial employees alike. It 
also includes part-time employees who may be affected, even though such 
employees are not considered in determining whether the plant closing 
or mass layoff thresholds are reached.
    \4\ A shortened version of this notice can be given, and if the 
shortened notice includes the first day of layoff and the total number 
of employees to be laid off, the detailed schedule of layoffs and the 
details of the job classifications and number of occupants of each can 
be maintained at the site for governmental inspection. 20 CFR Sec.  
639.7(f).
    \5\ Although the Guidance addresses the effects of sequestration as 
it was originally set to occur on January 2, 2013, Congress voted on 
January 1, 2013 to extend sequestration until March 1, 2013.
    \6\ The good faith defense referred to there by the DOL is found in 
29 U.S.C. Sec.  2104(a)(4). Specifically, it provides that if an 
employer ``proves to the satisfaction of the court'' that the act or 
omission which violated WARN was done in good faith and with reasonable 
grounds for believing that its act or omission was not a violation, 
``the court may, in its discretion, reduce the amount of the liability 
or penalty.'' However, this defense is far from absolute and may only 
reduce the amount of liability--not eliminate it entirely.
    \7\ Senator Obama used the hearing to promote the FOREWARN Act, 
legislation he co-sponsored with Senator Sherrod Brown and then-Senator 
Hillary Clinton. The purpose of the FOREWARN Act he stated was to 
enhance WARN protections to ensure that ``workers are not chewed up and 
spit out without a job or a paycheck'' and to close loopholes in the 
act allowing ``employers to disregard the WARN Act without penalty.'' 
Notably, the proposed FOREWARN legislation aimed to provide the 
Department of Labor with enforcement authority over WARN violations, 
thus recognizing that the current state of the law does not provide the 
DOL with such authority.
    \8\ Interview with Paul Ryan, Meet the Press (January 27, 2013).
    \9\ Making or answering calls or email, checking voicemail, 
drafting documents, and similar tasks typically are considered work and 
non-exempt and exempt employees must be compensated for the time spent 
in such activities. Non-exempt employees may be compensated in hourly 
or less increments depending on the employer's policy, while exempt 
employees generally must be paid their full salary for the entire 
workweek if they perform work at any time during the workweek.
                                 ______
                                 
    Chairman Walberg. Thank you.
    Mr. Gies.

               STATEMENT OF THOMAS GIES, PARTNER,
                     CROWELL & MORING, LLP

    Mr. Gies. Good morning, Chairman Walberg, Ranking Member 
Courtney and other distinguished members of the subcommittee. 
My name is Tom Gies. I am a partner with the Crowell & Moring 
law firm based here in Washington. And I thank you for the 
invitation to provide testimony this morning.
    Many federal contractors are increasingly apprehensive as 
we get closer to March 1. This anxiety stems in part from 
ambiguities regarding their obligations under the WARN Act in 
light of the lack of clarity about the specific impacts of the 
looming sequester. The reality facing contractors today, 
particularly in the defense sector, is that the sequester calls 
into doubt both the availability of funding for future contract 
awards and the contracting agency's ability to continue funding 
under many existing contracts.
    The Navy's cancellation of the A-12 fighter bomber program 
back in 1991 is a cautionary tale. Both McDonnell Douglas and 
General Dynamics had numerous discussions with the Navy over a 
several-month period. This led to several exchanges of 
proposals and communications, including employee communications 
issued by both contractors, prepared with an eye towards WARN 
compliance.
    The upshot was that the Navy terminated the contracts with 
only a few days' notice. Both companies got sued for WARN 
violations. And neither was vindicated until they went all the 
way through costly trials and federal court.
    Fast forward to March 1. Contractors will soon begin to get 
more specific information about the plans of contracting 
agencies regarding sequestration. We are aware that the 
military departments within DOD, for example, are currently 
preparing specific plans. But these plans are unlikely to 
identify particular contracts, options, task orders or other 
contract vehicles that the military departments may terminate 
or elect not to proceed upon if sequestration were to occur.
    Without more detail it is doubtful that any contractor can 
accurately predict today the specific impacts of sequestration 
on its business. But, as information becomes more--becomes 
available, contractors will have to begin making tougher 
decisions. Mindful of legal risks, many companies are likely to 
conclude they should begin providing some sort of notice within 
the next 2 weeks, or as soon as they learn of anything more 
specific.
    Depending on specific government procurements, one can 
envision a subsequent wave of conditional notices as more 
information becomes available. These communications will cause 
significant disruption and confusion, both for employers and 
employees. Productivity will suffer as employees become 
increasingly anxious about job security.
    There is the very real worry of a major league brain drain 
at some companies. Notwithstanding weaknesses in the overall 
labor market, in the technology sector competition remains 
fierce for highly talented and skilled employees like software 
design engineers.
    The complexities of WARN compliance itself will add to the 
challenge facing many companies. Two examples should illustrate 
that problem. Counting the right number of employees who will 
be affected is often difficult. WARN has arcane aggregation 
rules requiring a company to consider, in some circumstances, 
other workforce reductions that took place before and after the 
particular planned event in order to determine whether the WARN 
targets have been met.
    WARN likewise makes it difficult to determine, in some 
cases, whether a particular job loss impacts a single site of 
employment. The regulations and case law make razor fine 
distinctions in situations involving, for example, groups of 
structures that form a campus or an industrial park, or 
separate facilities across the street from each other. Because 
each company's situation is likely to be unique we can expect 
numerous lawsuits filed around the country against contractors 
accused of guessing wrong on a variety of WARN issues.
    For many companies their decision about how to manage 
upcoming layoffs will be driven in part by the government's 
position on whether the costs associated with workforce 
reductions will be viewed as allowable costs, and thus 
reimbursed by the government. There is no definitive one-size-
fits-all answer to the question of whether, in the event of 
sequestration, a contractor's costs of complying with the WARN 
Act or of defending against alleged violations of the statute 
would be deemed allowable by the contracting agency.
    That said, a contractor's costs of complying with the WARN 
Act or of successfully defending its compliance with the 
statute would generally be deemed an allowable cost. The 
central question and the inevitable litigation will be the 
latest version of the old question of what did they know and 
when did they know it?
    You have heard testimony about the guidance issued last 
year by the Department of Labor. By its terms that does not of 
course address the question of what a contractor should do 
after March 1. And as we sit here today, many of even the most 
sophisticated federal contractors aren't sure about what to do.
    Chairman Walberg, Ranking Member Courtney, I thank you 
again for inviting me to testify. I would be happy to answer 
any questions.
    [The statement of Mr. Gies follows:]


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    Chairman Walberg. Thank you.
    Mr. Eisenbrey, welcome.

 STATEMENT OF ROSS EISENBREY, VICE PRESIDENT, ECONOMIC POLICY 
                           INSTITUTE

    Mr. Eisenbrey. Mr. Chairman--thank you Mr. Chairman. It is 
a pleasure to be here. As you know, I was the staffer to 
Congressman Bill Ford, who was the principle House author of 
the bill. I worked on the legislation for 9 years and helped 
negotiate the conference report with the Senate, and helped 
draft a couple of rounds of comments that are in one of your 
committee prints, which I helpfully brought for you. And so I 
have a long history with this act.
    I have three main points today. One is that what the 
department did was completely appropriate. Giving guidance to 
employers is part of their responsibility. They have been doing 
it ever since the law passed, and that is totally appropriate.
    Number two, if federal contractors--you have heard there is 
really no doubt about this now. If contractors had given 60 
days' notice back in November because of the proposed 
sequester, it would have been counterproductive and needlessly 
disruptive. It would have done a lot of damage in fact to the 
contractors themselves and their communities.
    The issues--finally, the issues of the WARN Act and its 
potential for mass layoffs is only here before us because 
Congress hasn't dealt with sequestration. And as Mr. Courtney 
said, that is the real problem. That is what has to be 
addressed. And we should be looking forward, I think it would 
be more helpful than looking back to what the department did or 
didn't do.
    But, in any event, what the department did was appropriate. 
You know that on the department's Web site is, as Ms. Oates 
said, is guidance that they have given in Katrina without any 
objection from anybody, guidance that they gave in 2003 when 
they put together the employer handbook for the WARN Act.
    It--on the one hand you can't say that those, as my 
colleagues, my fellow panelists have said, that those things 
were appropriate and somehow this wasn't. The department should 
give guidance. And they have been proven right.
    I mean, that is the other thing. They said this was 
speculative. It might not happen. In fact, it is less likely to 
happen than to happen on January 2nd. So, giving notice, even 
conditional notice would be inappropriate. The department was 
right.
    The law in this area has been dealt with in the 
submissions, but you know I think it is important to just read 
one thing from the A-12 cases that Mr. Gies mentioned. And that 
is that the court said this isn't a case of a single contract 
cancellation. They said the question of reasonable 
foreseeability begs another question.
    By adopting the standard, does the WARN Act envision the 
probability of an unforeseen business circumstance, i.e. a 
contract cancellation, or instead the mere possibility of such 
a circumstance? We can only conclude that it is the probability 
of occurrence that makes a business circumstance reasonably 
foreseeable.
    That is in the case of a single cancellation. Here we are 
talking about sequestration that will lead to who knows how 
many cancellations. The Department of Defense in its letter on 
the subject says for contracts in place that are incrementally 
funded, any action to adjust funding levels would likely occur, 
if it occurred at all, several months after sequestration.
    This is a point that Mr. Courtney said. It is way too early 
for employers to be giving these notices. And I am very 
confident that courts would agree with my interpretation of the 
law.
    Finally, let us talk about sequestration. This is a 
disaster. The CBO, I think, has said that there would be three 
quarters of a million jobs lost if it went forward. At my 
institute the economists at the Economic Policy Institute have 
estimated that 660,000 jobs will be lost just in 2013 if the 
sequestration were to take place on March 1st.
    That is the problem that Congress needs to be dealing with. 
It needs to be stopped. And I really encourage this committee 
and every committee to put their energy there. Thank you.
    [The statement of Mr. Eisenbrey follows:]


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                                ------                                

    Chairman Walberg. Thank you, Mr. Eisenbrey. And I certainly 
concur with you as I said in my opening statement that 
sequestration is a terrible thing to happen. And its time 
appears to have come, sadly, after this House on two occasions 
offered an alternative to that. Nonetheless, we are here today. 
So, thank you.
    Ms. Furchtgott-Roth, thank you for being with us. It is 
your time.

 STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN 
                 INSTITUTE FOR POLICY RESEARCH

    Ms. Furchtgott-Roth. Thank you very much for inviting me to 
testify today. Two days ago the Labor Department brought out 
its job openings and labor turnover data for December. That 
showed that the rate of job openings declined from 2.8 percent 
to 2.6 percent. The rate of hires declined from 3.3 percent to 
3.1 percent.
    Workers in America are hurting. That is why it is so 
important that if there is a chance that they are being laid 
off they need to be given their WARN notices. We are now at 
February 14. The sequester is due March 1st. Even though you 
passed two bills to avoid the sequestration, it doesn't look 
like Senate and President Obama are following suit.
    The biggest problem, I would say, in the economy is not 
sequestration. It is lack of economic growth. It is the growing 
government deficit. Government outlays have grown from about 20 
percent of GDP in 2007 to about 24 percent of GDP. The deficit 
has ballooned. The public debt has ballooned. We are talking 
about cutting 2 percent--about 2 percent of federal spending. 
Surely as you have shown with your alternative bills, we should 
be able to do that.
    In terms of these WARN notices we are not talking about 
blanket WARN notices. Large defense firms are undoubtedly 
planning for the sequester. It would be irresponsible of them 
not to do this. And the purpose of the WARN notices was just to 
allow them to share these plans with their employees so that 
their employees are not left surprised.
    Just as the CEOs are looking at plans for the companies and 
are looking at what their shareholders expect them to do, they 
should be sharing this information with the workers who also 
have the right to plan. And employees are not stupid. They know 
that the January 1 sequester was put off. Here it is February 
14. They might be thinking the March 1st one would be put off 
too. But it is up to them to have that knowledge.
    There are probably other cuts that could be made in DOD. I 
would just like to suggest one. Stop buying green fuels. The 
military has made a push towards green fuels. This is costing 
about $27 a gallon. Regular fuel is about $3.50 per gallon. I 
would suggest instead of eliminating the submarines or cutting 
back on submarines, instead of stopping to refuel the Lincoln 
they should be thinking about how to make the military more 
efficient rather than less efficient by going green.
    I calculate that if 10 percent of workers were laid off in 
the seven major defense firms penalties would be about $412 
million in back pay, plus about $100 million in benefits. And 
it is not up to the Office of Management and Budget to say well 
the Defense Department is just going to be paying those 
penalties and costs.
    Twenty percent, I calculate, it would be about $825 million 
in back pay, $200 million in benefits for about a billion 
dollars. And these amounts need to be appropriated and 
authorized by Congress, not just told by OMB that it would pay 
the penalties.
    It is unconscionable for the Office of Management and 
Budget, for our government to be telling companies that they 
should break the law and that they will pick up the penalties 
for doing this. This is the kind of thing we read about 
happening in countries such as Russia and Venezuela. We should 
be very shocked that it is happening here.
    And defense companies are being put in a very awkward 
position since the federal government is their major employer. 
And if someone comes to them and asks them to do this they are 
caught between a rock and a hard place.
    So, with that I would just like to summarize that I think 
economic growth is the most important thing to do. We need to 
be cutting spending. We should not be considering raising 
taxes, which we have just done on January 1st, because that 
slows economic growth.
    The American worker deserves a growing economy. A growing 
economy means an efficient economy, low taxes, low burden of 
regulation and clear, predictable rules for how to operate.
    Thanks very much for allowing me to testify today. I would 
be glad to answer any questions.
    [The statement of Ms. Furchtgott-Roth follows:]

      Prepared Statement of Diana Furchtgott-Roth, Senior Fellow,
                          Manhattan Institute

    Chairman Walberg, Ranking Member Courtney, members of the 
Committee, I am honored to be invited to testify before you today on 
the subject of employers' WARN Act responsibilities. I am a senior 
fellow at the Manhattan Institute. From 2003 until April 2005 I was 
chief economist at the U.S. Department of Labor. From 2001 until 2002 I 
served at the Council of Economic Advisers as chief of staff. I have 
also been a senior fellow at the Hudson Institute and a resident fellow 
at the American Enterprise Institute. I have served as Deputy Executive 
Secretary of the Domestic Policy Council under President George H.W. 
Bush and as an economist on the staff of President Reagan's Council of 
Economic Advisers.
    The Budget Control Act of 2011, signed into law by President Obama 
on August 2, 2011, put in place a sequester of $1.2 trillion over the 
next ten years if Congress did not cut spending.\i\ Though the original 
sequester was scheduled for January 2, 2013, the American Taxpayer 
Relief Act of 2012 moved the date to March 1, 2013.\ii\ Under current 
law, according to a September 14, 2012 White House report on details of 
the sequester, the Pentagon's spending will decline by over $500 
billion over ten years.\iii\
    This means that defense contractors will in all likelihood have to 
lay off workers, because of cuts to spending used to fund contractors' 
work. House Budget Committee Chairman Paul Ryan predicted recently that 
sequestration will occur in March. Like Congressman Ryan, businesses 
can foresee the layoffs that will be necessary--and this predictability 
triggers a legal requirement that they send out notices to their 
employees 60 days in advance. Currently, they are not doing so.
    The requirement that firms expecting mass layoffs, plant closings, 
or certain other employment losses inform their employees 60 days in 
advance comes from the Worker Adjustment and Retraining Notification 
Act of August 1988, passed by a Democratic Congress over President 
Ronald Reagan's veto.\iv\ The WARN Act is meant to allow workers to 
prepare themselves for the risk of layoff, temporary or permanent.\v\
    Congress was so adamant on the necessity of the WARN Act that it 
did not permit employer waivers. No government agency can exempt firms 
from issuing the notice of potential job loss.
    Sending out WARN notices is routine. Firms that sent out recent 
WARN notices include American Airlines, Pfizer, and Sodexo. In 2011 
Qimonda AG, an electronic memory products manufacturer, reached a $35 
million settlement for not sending out notices in time.\vi\
    Informed workers might look for other jobs, skip a planned 
vacation, or delay the purchase of a car or dishwasher. Or, another 
member of the family might start looking for a job.
    WARN notices serve a purpose, because laid-off workers generally 
see a decline in earnings. It is particularly hard to find a job in 
today's economy. In January the economy created only 157,000 jobs, and 
the unemployment rate rose to 7.9 percent.
    The economy has 3.2 million fewer jobs than at the start of the 
recession, in December 2007. On Tuesday the Bureau of Labor Statistics 
issued its Job Openings and Labor Turnover Survey results for December 
2012. It showed that rates of employer hiring, job openings, 
separations, and quits have not yet recovered from the recession.
    The poor economic climate makes it even more surprising that the 
Labor Department and the White House have asked federal contractors to 
break the law and not send out required WARN notices. Many contractors 
were expecting layoffs on January 2, and are now expecting layoffs on 
March 1. Some have already reduced hiring in anticipation of future 
spending cuts.
    The Labor Department, which supposedly has employees' best 
interests at heart, issued a guidance notice on July 30, 2012 
discouraging firms from issuing WARN notices.
    The guidance notice from Assistant Secretary Jane Oates said: 
``WARN Act notice to employees of Federal contractors, including in the 
defense industry, is not required 60 days in advance of January 2, 
2013, and would be inappropriate, given the lack of certainty about how 
the budget cuts will be implemented and the possibility that the 
sequester will be avoided before January.'' \vii\
    The July guidance letter was followed by a Memorandum for Chief 
Financial Officers and Senior Procurement Executives of Executive 
Departments and Agencies from the White House Office of Management and 
Budget. Dated September 28, 2012, the memo counseled defense employers 
not to issue layoff notices on November 1. It is the first time in 
history that the White House has asked firms not to file layoff 
notices.
    The reason for the memo was that ``Despite DOL's guidance, some 
contractors have indicated they are still considering issuing WARN Act 
notices, and some have inquired about whether Federal contracting 
agencies would cover WARN Act-related costs in connection with the 
potential sequestration.'' \viii\
    Daniel Werfel, Controller of OMB's Office of Federal Financial 
Management, and Joseph Jordan, Administrator for Federal Procurement 
Policy, assured employers that if they did not send out layoff notices 
and layoffs occurred, the ``contracting agency,'' namely the Pentagon, 
would absorb the penalties and attorneys' fees the employers would have 
to pay, a significant cost to taxpayers.
    The White House does not have the authority to offer to pay the 
costs, because such funds are authorized and appropriated by Congress, 
i.e. Members of this Committee. Some senators, such John McCain and 
Lindsay Graham, said in October that they will not allow government 
funds to be spent on penalties and costs.\ix\
    However, OMB's memo states that if sequestration occurs and the 
contractor has followed Labor Department guidelines, ``any resulting 
employee compensation costs for WARN Act liability as determined by a 
court, as well as attorneys' fees and other litigation costs 
(irrespective of litigation outcome), would qualify as allowable costs 
and be covered by the contracting agency, if reasonable and 
allocable.''
    If firms don't file WARN notices and certain levels of plant 
closings or layoffs occur, employers are liable for penalties of 60 
days back pay and benefits paid to workers.
    What could that cost?
    Lockheed Martin has stated that it expects to lay off 10,000 
employees if a sequester occurs. Given other firms' current payrolls, 
if they laid off 10 percent of their workers, I estimate that Boeing 
would lose 17,000 employees; General Dynamics, 9,500 employees; 
Northrop Grumman, 7,000; and Raytheon, 6,800, and SAIC 4,000. This adds 
up to 54,300 employees.
    If the firms do not file WARN Act notices, they might be liable for 
60 days back pay in penalties. Using BLS's average weekly earnings in 
the industry of $951, I calculate that the wage bill would come to 
about $76 million for Lockheed Martin for its 10,000 workers. Boeing 
would owe around $129 million; General Dynamics, $72 million; Northrop 
Grumman, $53 million; Raytheon, $52 million; and SAIC $30 million.
    These contractors and the Defense Department would be liable for 
$412 million in back pay, plus benefits. If 20 percent of employees 
were laid off, the bill would run to $825 million plus benefits.
    Benefits liabilities would be significant. A 2012 CBO study noted 
that 30 percent of a private-sector employee's total compensation cost 
was tied to benefits.\x\ Using even a conservative version of that 
ratio, benefits owed could top $100 million in a 10 percent layoff 
scenario.
    These amounts do not account for court costs and attorney fees, 
which might run into additional tens of millions.
    Defense contractors are being put in an untenable position. They 
can break the law and keep the White House happy, or follow the law and 
annoy their major customer.
    I am not privy to internal White House discussions, but it is 
likely that the White House asked contractors to break the law in the 
interests of the re-election of President Obama. The Obama 
administration was concerned that layoff notices mailed on November 1, 
2012, could cost the Obama-Biden ticket votes, especially in Ohio and 
Virginia, swing states with a strong defense presence.
    Since firms have stated they will not issue the WARN notices, their 
potential liability in penalties should be declared on their next 
quarterly SEC filings. Otherwise, they might be liable for additional 
millions from shareholder suits.
    However, this major campaign donation to President Obama has not 
appeared on any campaign disclosure forms.
    The Administration has devoted substantial resources to making sure 
that companies are run efficiently. The Dodd-Frank labyrinth, with its 
armies of regulators, is supposed to make sure that companies do not 
make financial mistakes. Yet the penalties for not filing WARN notices 
could reach into the millions of dollars. Should not shareholders be 
informed?
    On January 20 and 21, President Obama was sworn in for his second 
term. He took the oath of office, in which he swore to defend the 
Constitution. The Constitution's Article II, Section 3 states that the 
president ``shall take Care that the Laws be faithfully executed.'' Yet 
the White House has told some of the largest corporations in America to 
break the law in order to help re-elect a sitting president, and 
offered to pick up the penalties and court costs.
    If this were Russia, no one would think twice. But in America, if 
we're not shocked, something is very wrong.
                                endnotes
    \i\ 112th Congress, 1st Session, Budget Control Act of 2011, 
Section 251a, http://www.gpo.gov/fdsys/pkg/BILLS-112s365enr/pdf/BILLS-
112s365enr.pdf.
    \ii\ 112th Congress, 2nd session, American Taxpayer Relief Act of 
2012, Title IX, Section 901, http://www.gpo.gov/fdsys/pkg/BILLS-
112hr8eas/pdf/BILLS-112hr8eas.pdf.
    \iii\ White House Office of Management and Budget, OMB Report 
Pursuant to the Sequestration Transparency Act of 2012 (P. L. 112--
155), September 14, 2012, p. 5, http://www.whitehouse.gov/sites/
default/files/omb/assets/legislative--reports/stareport.pdf.
    \iv\ 110th Congress, House Report 110-410, http://thomas.loc.gov/
cgi-bin/cpquery/?&dbname=cp110&sid=cp1100AFa6&refer=&r--
n=hr410.110&item=&sel=TOC--18846&.
    \v\ U.S. Department of Labor, Employment and Training 
Administration, The Worker Adjustment and Retraining Notification Act 
Fact Sheet, http://www.doleta.gov/programs/factsht/warn.htm.
    \vi\ Klehr Harrison Harvey Branzburg LLP, Qimonda WARN Act Case 
Information, May 17, 2011, http://www.klehr.com/C7756B/assets/files/
News/SCN--20110517115438--001.pdf.
    \vii\ Oates, Jane, Guidance on the Applicability of the Worker 
Adjustment and Retraining Notification (WARN) Act, 29 U.S.C., 2101-
2109, to layoffs that may occur among Federal Contractors, including in 
the Defense Industry as a Result of Sequestration, Employment and 
Training Administration Advisory System, July 30, 2012.
    \viii\ Werfel, Daniel I. and Joseph G. Jordan, Memorandum for the 
Chief Financial Officers and Senior Procurement Executives of Executive 
Departments and Agencies, Executive Office of the President, Office of 
Management and Budget, M-12-19, September 28, 2012, http://
www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-19.pdf.
    \ix\ Senator Lindsey Graham, Senators Urge Defense Contractors To 
Follow The WARN Act, Press Release, October 5, 2012, http://
www.lindseygraham.com/2012/10/release-senators-urge-defense-
contractors-to-follow-the-warn-act/.
    \x\ Congressional Budget Office, Comparing the Compensation of 
Federal and Private-Sector Employees, January 2012, p. 9, http://
www.cbo.gov/sites/default/files/cbofiles/attachments/01-30-FedPay.pdf.
                                 ______
                                 
    Chairman Walberg. Thank you. We appreciate your comments.
    And thank you to all of the witnesses for your insights and 
your thoughts on this issue. I now recognize myself for 5 
minutes of questioning.
    Assistant Secretary Oates, again thank you for being here, 
were you aware of the efforts in letters from Chairman Kline, 
myself, from our committee, phone calls, meetings that have 
been going on for 6 months trying to get answers on this very 
issue had been undertaken? Were you aware of those efforts?
    Ms. Oates. Mr. Chairman, I was tangentially aware of the 
conversations back and forth. But oversight is handled by our 
Office of Congressional and Government Relations. It is not 
something handled in the Employment and Training 
Administration. So, I wouldn't have--I wouldn't be able to 
answer any specific questions.
    It is a small building. Everybody knows pretty much what 
everybody is doing. But I was not involved in any of it.
    Chairman Walberg. Well, that is a concern to me as well 
because you know last night as I mentioned in my opening 
comments, this packet was slipped under a door after 9:00. I 
really don't know what is in it other than a disk. Our staff 
doesn't know for certain all that is in it other than it is 
about 400 pages of information, hopefully containing 
information we request in our letters.
    Do you know if it does contain that information that we 
requested?
    Ms. Oates. The direct answer would be no, sir. But I need 
to tell you that the department takes seriously all of the 
questions that Congress puts up there. So, if you are asking my 
opinion, my opinion would be that OCIA answer to the best of 
their ability.
    Chairman Walberg. So the best ability in 6 months since we 
initiated the request on this, as we all would agree, a very, 
very critical issue of sequestration and the use of the WARN 
Act. Regardless of where we stand on the sequestration itself, 
whether we think it is going to result in as many layoffs as it 
potentially could.
    I would hope it wouldn't take calling a subcommittee 
hearing in order to get information like this, 400 pages of it, 
the night before the hearing. And I guess I would ask would you 
concur with that? That it shouldn't take calling a hearing to 
get information; that the oversight responsibility of this 
committee and many other committees have to be carried out.
    Ms. Oates. Sir, you know that I spent the majority of my 
career here in Washington on the other side of this bench 
staffing members. So, I understand your frustration.
    But I hope you understand that I am saying to you I am on a 
team and OCIA is part of that team. And I have to assume that 
they are doing everything in their power to answer your 
questions as fully as possible. And I will be happy to take 
your concerns back to them when I go back to the Department of 
Labor.
    Chairman Walberg. Well, I would appreciate that. I would 
appreciate if you could give me your assurance that in the 
future when we request information like this we won't have to 
go through this process, but we will have timely response. Even 
if it is saying we are still compiling.
    But I would hate to think that there is obstruction taking 
place of the efforts that we ought to be working together on. 
If I could have your assurance on that for the future I would 
appreciate that.
    Ms. Oates. I can't give you my assurance, sir. If you ask 
me that about ETA I would do my best to give you my assurance. 
What I can assure you of is that I will take your concerns back 
immediately to OCIA and to the departmental leadership.
    Chairman Walberg. Well, let's talk about ETA then----
    Ms. Oates. Okay.
    Chairman Walberg [continuing]. In relationship to this. In 
the wake, as was expressed by Mr. Eisenbrey, in the wake of 
Hurricane Katrina in 2005 the Employment and Training 
Administration issued a fact sheet to aid employers in 
understanding their requirements under the WARN Act. That is a 
matter of record.
    Ms. Oates. Yes, sir.
    Chairman Walberg. The fact sheet specifically states, and I 
quote--``employers should be aware that the U.S. federal court 
solely enforces the WARN Act, and these answers are not binding 
on the courts.'' That was what was stated in that advisory.
    Ms. Oates. Yes, sir.
    Chairman Walberg. You concur. Your most recent guidance in 
reference to what we are here about today contained no 
statement or qualification equal to this, or more importantly 
at all. Could you please explain the Employment and Training 
Administration's change in policy regarding binding nature of 
guidance issued on the WARN Act in this case?
    Ms. Oates. So, as you know, Mr. Chairman, I wasn't in this 
position in 2005. But that guidance still remains in place 
today and is used for a number of businesses that are incurring 
the same----
    Chairman Walberg. But was not in your guidance submitted--
--
    Ms. Oates. No, no.
    Chairman Walberg [continuing]. Or this particular 
situation.
    Ms. Oates. But it exists on our WARN Web page and is still 
used by people. The audience for that guidance in 2005 were 
employers, and it was very important to state that. The 
audience for my guidance that was issued last summer were the 
state workforce agencies and the local workforce agencies.
    Answering a question does someone giving a blanket 
statement about the possibility of sequestration respond to the 
requirements in the WARN Act? So, we were getting those 
questions from a number of people.
    The reason for the guidance was to make sure that states 
knew employers have the right to have good, strong 
communications with their employees at all times. But until 
they have the specific information required by the WARN Act, 
they could not use conversations about pending sequestration to 
count as their activities documented under the WARN Act.
    So, the importance of that guidance in the summer was to 
clarify that at that time we did not have sufficient 
information to be able to allow employees to give the 
information--I am sorry, employers--the specific information 
that they would need to comply with the WARN Act.
    Chairman Walberg. The--and I appreciate that explanation. 
But still the policy remains that you don't have the authority 
to make that statement to employers or state agencies dealing 
with what ought to be the part--what ought to be the 
requirements of the WARN Act. And that is our concern, that 
there seems to be a different means of handling it this time 
than others.
    My time has expired. But I hope that further questions 
bring to light why the change went on at this point. I thank 
you.
    I now recognize the ranking member, Mr. Courtney, for his 
questions.
    Mr. Courtney. Thank you, Mr. Chairman.
    Again, at the outset I just want to share with the group 
here today that when Undersecretary Carter was--for DOD--was at 
the hearing yesterday, again he did start to lay out specifics 
in terms of you know if the catastrophe occurs. And made it 
very clear, unfortunately, the civilian workforce at the 
Department of Defense is probably going to be subject to some 
pretty heavy layoffs, which is sickening.
    I mean 87 percent of those reside outside of D.C. I mean 
they provide critical support for military installations, you 
know programs of all sorts. O&M, you know Operations & 
Maintenance repair work again, would probably again be 
something that in this fiscal year would be sort of on the hit 
list or targeted, again, but not on March 1st.
    You know there is going to be sort of an implementation 
rationale even though this is an irrational process that they 
would try and lay out. So, again, I just--the granular 
presentation that was given to us yesterday, again, is that 
again, it is not going to be done by the department all at once 
on one single day.
    Undersecretary Oates, just to sort of talk TEGL here for a 
minute, again, a TEGL is not sort of some once in a lifetime 
event. I mean it is something that your department is in the 
business of issuing on a pretty frequent basis. Is that 
correct?
    Ms. Oates. Yes, Congressman.
    Mr. Courtney. And so I mean I have some statistics here 
that it looks like in 2012 you had a total of 51 TEGLs that 
were issued.
    Ms. Oates. Yes, sir.
    Mr. Courtney. Okay. So I mean this is nothing sort of 
extraordinary in terms of what the department was doing in 
terms of this normal administrative act.
    Ms. Oates. That is correct. We issue them so that there is 
consistency. There is over 1,000 employees nationwide in the 
Department of Labor under ETA. And anybody could call any of 
them. The TEGLs come out so that there is consistency. No 
matter who you ask they have the same information so you are 
not getting different information from different people.
    So, it is a routine thing. We also have other instruments 
like UPLs for UI and TENs. We issue, again, an equal number of 
those every year.
    Mr. Courtney. Okay. And just, again, just to underline the 
point, this request for an opinion did not come from the White 
House. It did not come from David Axelrod. It came from state 
labor departments across the country. Is that correct?
    Ms. Oates. And local labor force people too. But yes, sir; 
just to clarify, I never had a discussion with the White House 
about this guidance.
    Mr. Courtney. Thank you. Okay. And so----
    Ms. Oates. They don't routinely call me.
    Mr. Courtney. Yes. You are not alone.
    But in any case, Mr. Eisenbrey, again, when WARN was 
designed, I mean again it really was focused on trying to sort 
of trigger assistance to workers, right? I mean and that is why 
there is a pure--I mean a perfect logic to the fact that that 
would be the entity that would be contacting the Department of 
Labor looking for some help. Isn't that correct?
    Mr. Eisenbrey. That is right. The act was part of a larger 
effort to deal with waves of plant closings that were happening 
in the 1980s. It set up State Dislocated Worker Units to 
respond, that are part of the system that Ms. Oates oversees.
    And it required notice to the state so that they could 
respond to local governments so that they could begin to 
prepare for what could be a disaster in a small community, or 
it would always be of a concern anywhere, a mass layoff. And 
then for the workers, and they were supposed to get specific 
notice, not just we were very concerned and Congressman Ford 
and the other authors made sure that the department forbade 
blanket notices as a way to comply with the act.
    What we wanted was people not just to know that there was a 
concern, but that their job was going to be eliminated. They 
needed to change their behavior and prepare for what would be--
--
    Mr. Courtney. So----
    Mr. Eisenbrey [continuing]. Very hard.
    Mr. Courtney [continuing]. The opposite happened. You said, 
yes, you know WARN Act, all hands on deck. Notices went out. 
State labor departments you know kind of activated. I mean the 
fact is is that it would have been really obviously a stressful 
reaction for people. But at the end of the day it wouldn't have 
accomplished----
    Mr. Eisenbrey. Right. What would they have done? They 
wouldn't have known where to send their resources. A rapid 
response unit, where would they go to? I mean Ms. Furchtgott-
Roth talks about thousands and thousands of people who are 
going to lose their job.
    We don't know that yet, you know where they are going to 
be. Would they go to every employer, to every facility? It 
would be a real waste of resources to do that.
    Mr. Courtney. Thank you. I yield back.
    Chairman Walberg. Gentleman's time is expired. I recognize 
Dr. DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    Mr. Gies, would you expect litigation to ensue, even with 
the DOL and OMB guidance?
    Mr. Gies. Yes. Yes, congressman. And the reason I think, to 
elaborate briefly on that, is I think we find as lawyers 
representing companies any decision you make can be second-
guessed, and this would be like most others.
    Mr. DesJarlais. Okay. How long would a typical WARN Act 
cause of action take to complete if it were to go to trial?
    Mr. Gies. It depends on how busy the federal court is. It 
could very easily be 2 years before you get to jury trial if 
the case went that far. And I say jury trial; that is another 
open legal issue whether or not there is a right to a jury 
trial. But irrespective, in many busy federal courts it might 
be 2 years.
    Mr. DesJarlais. Okay. Can you discuss the cost associated 
with WARN Act litigation?
    Mr. Gies. Only generally. I mean, you have heard from the 
other witness an estimate of what the costs would be. I mean 
the statute is pretty clear in terms of what the back pay and 
benefits liability would be. Attorney's fees is like any other 
form of complex civil litigation how much it might cost.
    Mr. DesJarlais. Okay. The OMB guidance purports to 
reimburse contractors who are subject to litigation for 
following DOL guidance irrespective of litigation outcome. Is 
this generally an allowable cost?
    Mr. Gies. I think that is a contract-specific question. The 
general rule is that costs that are reasonable are reimbursed. 
But that is a decision made by the contracting officer on a 
contract-specific basis.
    Mr. DesJarlais. Okay. What triggers the need to provide a 
WARN Act notice?
    Mr. Gies. I am sorry, sir?
    Mr. DesJarlais. What triggers the need to provide a WARN 
Act notice----
    Mr. Gies. Oh, the trigger? Well, as you have heard in brief 
it is an employment loss of a certain number of employees. If 
it is a mass layoff or a plant closing, if it is a complete 
closure of a facility, that is a single side of business.
    Mr. DesJarlais. Does it have to be public knowledge?
    Mr. Gies. No.
    Mr. DesJarlais. It does not. Okay.
    Do you believe the administration's guidance from DOL and 
OMB will indemnity contractors from litigation on the federal 
WARN Act? What--do you believe it will indemnify contractors 
from litigation?
    Mr. Gies. I think it is impossible to know today.
    Mr. DesJarlais. Okay. Are contractors correctly considering 
sending out WARN notices despite the encouragement from DOL and 
OMB to refrain from sending such notices?
    Mr. Gies. I think each company is thinking hard about that, 
as you have heard from lots of people on this panel. And each 
company will make its own decision based on what they know.
    Mr. DesJarlais. Okay. I assume you have had an opportunity 
to read Assistant Secretary Oates' written testimony.
    Mr. Gies. I did.
    Mr. DesJarlais. In your opinion does her testimony make 
clear the department's guidance and any assurance it provided 
stakeholders applies to the current March 1st sequester?
    Mr. Gies. It is not clear to me.
    Mr. DesJarlais. That is all I have. I yield back.
    Chairman Walberg. I thank the gentleman.
    I now recognize for questioning, Mr. Bishop.
    Mr. Bishop. Thank you, Mr. Chairman. Thank you for holding 
this hearing.
    I first want to observe that I am--how delighted I am. This 
is my sixth term on this committee and I am delighted to see 
that we are having a hearing, the purpose of which, I hope, is 
to protect worker rights. That is a rare occurrence on this 
committee.
    We spend most of our time in this committee when the 
Republicans are in the majority taking up measures or looking 
at issues in which we are endeavoring to pursue the protection 
of employer rights, often at the expense of employees. And so I 
am delighted that we are focusing on a concern for employees.
    I also think that we are engaged in what might be called 
revisionist history, and we are also engaged in some denial of 
current reality. I noted the chairman in his opening statement 
said that President Obama insisted on the sequester. I note 
that we now are referring to the sequester as the 
``Obamaquester.''
    I also note, as the ranking member said, the chairman--that 
Speaker Boehner said that he got 98 percent of what he wanted 
out of the deal that brought us the sequester. And I think we 
can all agree that the sequester constitutes a touch more, a 
touch more than 2 percent of the deal.
    I also note that the chairman said that sequestration is 
not how Washington should conduct the people's business. I 
couldn't agree more. I absolutely agree. But I think it is 
instructive to enter into the record statements that our 
colleagues on the Republican side of the aisle have made.
    Representative Mike Pompeo, ``The sequester is here. It is 
time. We have got to get these spending reductions in place. It 
is going to be a home run.''
    Representative Cynthia Lewis, ``Sequestration will take 
place. I am excited. It will be the first time since I have 
been in Congress that we really have significant cuts.''
    Representative Paul Broun, ``I want to see sequestration go 
into place.''
    Representative Steve Scalise, ``The consensus is we want 
the sequester numbers to come in and to finally see spending 
reduced in Washington.''
    Representative Mick Mulvaney, ``We want to see--keep the 
sequester in place, and take the cuts we can get.''
    And finally, Representative DesJarlais, a member of this 
committee, ``Sequestration needs to happen. Bottom line, it 
needs to happen, and that is the deal we struck to raise the 
debt limit.''
    So, this is not an issue, clearly, where there is unanimity 
on the Republican side of the aisle that this is ``not the way 
we should conduct the people's business.'' In my view it is not 
the way we should conduct the people's business. And 14 days 
away from a self-imposed crisis, we should be focusing all of 
our efforts on how to avoid sequestration in a fair and 
balanced way, not by trying to score political points and 
assess blame.
    So, let me ask Ms. Furchtgott-Roth a question. In the--on 
the last page of your written testimony you say, and I am now 
going to quote. I am going to read from it. ``I am not privy to 
internal White House discussions, but it is likely that the 
White House asked contractors to break the law in the interest 
of the reelection of President Obama.''
    You then go on to say two paragraphs later ``On January 
20th and 21st President Obama was sworn in for his second term. 
He took the oath of office in which he swore to defend the 
Constitution. The Constitution's Article II Section 3 states 
that the president shall `take care that the laws be faithfully 
executed' yet the White House has told some of the largest 
corporations in America to break the law in order to help 
reelect the sitting president.''
    That is a pretty serious charge. Now, may I ask, aside from 
what I presume to be a willingness to attribute to the 
president the most nefarious of motives whenever he takes a 
position, what evidence do you have to substantiate that pretty 
serious charge?
    Ms. Furchtgott-Roth. The OMB memo. The OMB----
    Mr. Bishop. Have you----
    Ms. Furchtgott-Roth [continuing]. Is out of the White 
House.
    Mr. Bishop [continuing]. Submitted your concerns to the 
Department of Justice?
    Ms. Furchtgott-Roth. No.
    Mr. Bishop. Have you asked any member of Congress to 
institute proceedings in which the impeachment of the president 
would be undertaken for failure to uphold the Constitution?
    Ms. Furchtgott-Roth. I was not asked my opinion by any 
member of Congress.
    Mr. Bishop. I am asking your opinion right now.
    Ms. Furchtgott-Roth. I have not spoken to any member of 
Congress.
    Mr. Bishop. Will you? This is a very serious charge you 
have leveled against the president.
    Ms. Furchtgott-Roth. Will I ask a member of Congress----
    Mr. Bishop. Yes. Yes.
    Ms. Furchtgott-Roth [continuing]. To start an impeachment 
proceeding?
    Mr. Bishop. Yes.
    Ms. Furchtgott-Roth. I am just an economist and I 
wouldn't----
    Mr. Bishop. I understand. I understand that. But you have 
leveled a very serious charge against the president of the 
United States in a subcommittee of the United States Congress.
    Ms. Furchtgott-Roth. Well, it is very serious when the 
Office of Management and Budget asks defense contractors to 
break the law because the----
    Mr. Bishop. And the Office of Management and Budget----
    Ms. Furchtgott-Roth [continuing]. Was supposed to go out 
November----
    Mr. Bishop. The Office of Management and Budget memorandum 
to which you refer specifically says that contractors should 
break the law?
    Ms. Furchtgott-Roth. It says--it advises them not to send 
out the WARN notices, and it says the contract agency----
    Mr. Bishop. But we have----
    Ms. Furchtgott-Roth [continuing]. Will pick up----
    Mr. Bishop. We have an advisory opinion from the Department 
of Labor that says that sending out the WARN notice is not 
required in this circumstance. Is that not correct?
    Ms. Furchtgott-Roth. That is what the Labor Department 
said. I don't think that that is true.
    Mr. Bishop. Are you attributing nefarious motives to the 
Labor Department as well?
    Ms. Furchtgott-Roth. No, but I am saying they are 
incorrect. Companies should follow the law.
    Mr. Bishop. They are incorrect.
    Ms. Furchtgott-Roth. Yes.
    Mr. Bishop. So, if the OMB followed what you characterize 
as an incorrect guidance, you have inferred from the following 
of that incorrect guidance that OMB was encouraging the 
president to break the law. So at a minimum is it not fair to 
understand that if the OMB--pardon me, the Department of Labor 
guidance was incorrect, an opinion I don't share, and OMB acted 
on an incorrect guidance, is it not fair, reasonable, if all of 
those factors were in place, to assume that the OMB acted 
incorrectly and advised the president incorrectly as opposed to 
advising the president to break the law? Is that not a 
reasonable conclusion from the set of facts that you are 
presenting?
    Ms. Furchtgott-Roth. That certainly is one possible 
conclusion. Another is that the WARN notice----
    Chairman Walberg. The gentleman's time is expired. We have 
offered the latitude for that. I think questions--the 
comments----
    Mr. Bishop. I thank the chairman.
    Chairman Walberg. Thank you.
    I now recognize Dr. Bucshon.
    Mr. Bucshon. Thank you, Mr. Chairman.
    In deference to Mr. Bishop's attack to try to divert the 
conversation away from the real issue, I really find it ironic 
that the administration and people on the other side of the 
aisle are here essentially arguing against employer's rights--
employee's rights. This is a hearing about employee's right to 
know.
    It is very ironic because the discussion, in my view, is 
clearly about that. And let us be clear. This was about 
reelecting the president. This was about large amounts of 
employees not knowing they were going to be let go, but prior 
to November 6th of 2012. In my view that is what this is about.
    Let me quote from Senator Obama, and this has been quoted 
already when he talked about this. ``American workers''--this 
is in the discussion of the WARN Act 2008. ``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. It adds insult to injury to close a 
plant without warning employees. Workers and their communities 
have a right to know when they are facing a serious risk of a 
plant closing.''
    We are not talking about a blanket statement. We are 
talking about companies that know if they are facing the loss 
of a contract or other things, specifically which employees are 
going to lose their jobs. They know that. And if they don't, 
then they are not doing their job.
    This is just a long list of things where the administration 
subverts Congress. And I can list; it is a long list. 
Immigration, welfare, NLRB appointments that were proven to be 
unconstitutional, and they have even attempted to tell Congress 
when or when we are not in session. So, it is not about a 
blanket notice.
    What I wanted to ask you, Ms. Oates, is do you have a list 
and the letters from the specific states and the specific 
people that ask you to give guidance on this? Who--I--and if 
you do I would like those submitted to the committee because I 
am assuming they don't just pick up the phone and say can you 
do a guidance on this. There is written correspondence between 
the Labor Department and people who request these things.
    If that is true, then I am requesting that all of those 
letters from everyone that requested this guidance be submitted 
to Congress. Can you do that? Can you provide that?
    Ms. Oates. Well, let me first answer your question, 
congressman. The conversations that I have with people--and 
this is how I conduct operations as many of the members of this 
committee know, I do have state labor commissioners from both 
parties who pick up the phone and call me on my office phone or 
my cell phone.
    I also spend a lot of time, once a month I meet with all 
the IGOs and spend a lot of time when I am out in the areas.
    Mr. Bucshon. In this type of controversial guidance that 
you knew was going to be controversial--this is a huge issue, 
wouldn't you--I would expect that it would be more than a call 
to your cell phone asking this kind of guidance to be released.
    Ms. Oates. Sir, with great respect, at the time that we 
offered this guidance there was not a sense that there was 
going to be any controversy. I mean we had heard from a number 
of----
    Mr. Bucshon. I would disagree with that opinion.
    Ms. Oates. Well, but I am telling you honestly that we 
heard from a number of state and local workers----
    Mr. Bucshon. I am not denying that you are. I just want to 
know who they are.
    Ms. Oates. I could get--I would be happy to share my 
calendar so you could see an area where--who I met with----
    Mr. Bucshon. I just want Congress to know you are talking 
about states submitting requests for guidance, companies 
submitting requests.
    Ms. Oates. No, sir. I never said anything about a company. 
What I said----
    Mr. Bucshon. Okay. States. That is fine. And----
    Ms. Oates. I didn't say they submitted----
    Mr. Bucshon. I would like to know which states.
    Ms. Oates. They----
    Mr. Bucshon. Because my argument will be that it is a bunch 
of blue states that are--that are doing this. And if that is 
not true I would just like to know the--I would just like to 
have the list.
    Ms. Oates. I don't have any correspondence to give you, 
sir, so----
    Mr. Bucshon. The other question I had--have is on this. Who 
made the decision to offer taxpayer funds to corporations that 
don't comply with the WARN Act? Did you make that decision? Or 
who told--who told you, as part of your guidance, to offer--
just offer taxpayer funds to companies if they get sued because 
they have violated this act? I would like to know 
specifically----
    Ms. Oates. Certainly.
    Mr. Bucshon [continuing]. Who told you to do that.
    Ms. Oates. With great respect, that was not mentioned in my 
guidance. I think your staff may be referring you to the OMB 
guidance. And I think those questions would be best directed to 
OMB. I had no conversation about that.
    Mr. Bucshon. So, it is not-that is the other tactic is it 
is the other guy all the time. And you know----
    Ms. Oates. Sir, I am sorry you feel that way.
    Mr. Bucshon. Well, because we have this hearing after 
hearing. We just had it yesterday on an NLRB hearing. That it 
is not--you know where does the buck stop? You released the 
guidance. You were responsible.
    Ms. Oates. Sir, that wasn't mentioned in the guidance 
released by the Department of Labor.
    Mr. Bucshon. Who also made the decision ultimately to 
release the guidance? Did you? I mean because somebody has--you 
get all these requests. And my time is expired, but--so I will 
just make a statement.
    You get all these requests to release the guidance that you 
say you have been requested. Who actually makes the decision to 
release the guidance? And if that is you then I think I 
respectfully ask you to submit the list of people who requested 
to be guided.
    Thank you. I yield back.
    Chairman Walberg. Thank the gentleman whose time is 
expired.
    I now recognize the gentlelady from Ohio, Ms. Fudge.
    Ms. Fudge. Thank you very much, Mr. Chairman.
    I have been sitting, listening to this. So what I would 
like to do is to get away from the spin that I am hearing from 
the other side, and get away from the politics and the 
political attacks on you, madam. So let's go to the act itself. 
Let's see if we can be clear.
    I want to start with my first question to Mr. Eisenbrey. 
You talked about--you gave us a quote from the language. Let me 
just see--let me give you a couple of other things I think that 
are important because I see no ambiguity, not like the other 
attorneys sitting here. I don't see the ambiguity they see, and 
I too am an attorney, just for the record.
    The preamble to the act says that they want to condemn an 
overbroad notice. They say that they want to prevent unhelpful 
blanket notice. They talk about, as you so aptly quoted, the 
part about WARN notice, until a mass layoff is a probability 
rather than a mere possibility.
    So, the question is, just as a hypothetical or an example. 
In your opinion do you believe that sending pink slips to all 
the employees of a company, although only 10 percent will be 
laid off, meets the probability threshold of the WARN Act's 
requirements?
    Mr. Eisenbrey. Well, it might for the 10 percent who the 
companies knows are being laid off. But certainly that would be 
a terrible thing to do to the other 90 percent who are not 
being laid off.
    Ms. Fudge. And it would be an overbroad application, would 
it not be?
    Mr. Eisenbrey. It would.
    Ms. Fudge. Assistant Secretary Oates--by the way I think 
that your position is a correct one. The actual impact of the 
sequester as we know is unknown. Even though we don't want the 
sequester, Democrats are very much against the sequester, it in 
fact may happen, as we are not the majority of this House.
    As you know, the notice required by the WARN Act must 
include the name and location of the sites where the layoffs 
will take place, and the positions of the people who will be 
laid off. How would a company be able to comply with the WARN 
Act requirements given the uncertainty that the sequester 
poses? And how could a company provide the proper notification 
when it is unclear whether its contract will even be affected?
    Ms. Oates. That is exactly why we issued the guidance, 
congresswoman. We--as soon as a company has those specific 
elements, they are required--it triggers WARN notice. But until 
they have those specifics WARN is not applicable.
    Ms. Fudge. Thank you. Further, was it reasonably 
foreseeable that sequestration was going to occur on January 2, 
2013?
    Ms. Oates. No, ma'am, it was not.
    Ms. Fudge. Okay. Thank you.
    Mr. Notestine, you said in your testimony that it is highly 
questionable whether the Department of Labor has the authority 
to issue guidance in this matter. Why would you make such a 
statement, sir?
    Mr. Notestine. Well, because--because they have authority 
to make statements such as they did. They do have authority to 
issue regulations. They did issue regulations some years ago. 
And those regulations are very clear I believe, specifically 
where it talks about notice in ambiguous situations.
    It says it is therefore prudent for employers to weigh the 
desirability of advance notice against the possibility of 
expensive and time consuming litigation to resolve disputes 
where notice has not been given. The department encourages 
employers to give notice in all circumstances. And then they 
come out with a statement in the TEGL which appears to me to be 
inconsistent with that. And that was my concern.
    Ms. Fudge. I am questioning the fact that you say they do 
not have the authority to issue guidance.
    Mr. Notestine. They don't--I do not believe they have 
authority to issue something inconsistent with their 
regulations.
    Ms. Fudge. But that is not what you said. I just want to be 
clear; they do in fact have the authority.
    Mr. Notestine. They can issue TEGLs. There is no doubt 
about it.
    Ms. Fudge. I just wanted to be clear.
    Thank you, Mr. Chairman. I yield back.
    Chairman Walberg. I thank the gentlelady. I now recognize 
the chairman of the committee, Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman. Thanks to the witnesses 
for being here.
    Secretary Oates, I have just learned today about the 
envelope that Chairman Walberg was talking about and I--it is 
just astonishing to me that after hours last night an envelope 
with a computer disk and a post-it note with a password was 
slid under the door. And I heard your response that that is not 
your doing.
    Would it be--could you guess that it would be the 
congressional liaison office who would have sent somebody over 
here to slide this under the door? Who--where would it have 
come from?
    Ms. Oates. My assumption, sir, is that it came from someone 
who works in OCIA.
    Mr. Kline. So, I am just trying to imagine what that 
discussion was that said, gosh I think it would be a really 
good idea to take this disk, put a password on it and go over--
let us go over to Congress and slide it under the door. I just 
would love to have heard that discussion. That is amazing.
    And I would like to know, following up to the chairman's 
questions, if we can find out where that came from. I mean it 
is just sort of an envelope slid under the door; a very, very 
strange, I would opine, way of communicating with the Congress 
of the United States. And I have been--because it is not your 
disk, and not your note, you wouldn't know if there is any 
sensitive material, if that password was available for the 
people who are sort of cleaning the floor or--it is out of your 
scan. Is that correct?
    Ms. Oates. I wasn't involved in that, sir----
    Mr. Kline. Okay.
    Ms. Oates [continuing]. That is correct.
    Mr. Kline. All right. Let's move onto something that you 
are involved with.
    Your testimony doesn't address sequestration's current 
effective date at the end of this month. Does your guidance and 
its analysis currently apply to sequestration? Or is that just 
a thing of the past?
    Ms. Oates. It would apply today, sir, but as we all know, 
as the ranking member mentioned, there was testimony yesterday. 
I have no idea when we will get guidance from OMB to begin 
sequestration plans or what conversations they are having with 
other people. But as of right now, yes, it does apply. And 
again, the most important thing is any employer who has this 
specific information should invoke the WARN when they have that 
information.
    So as employers are getting information from government 
agencies--that is why I want to be careful. I mean, I think 
that somebody could get the specific information they needed 
and they would have to invoke WARN sooner than March 1st or on 
March 1st.
    But my guidance would still apply. Until you have that 
level of specific information about the specific job titles 
that will be impacted by reductions it doesn't impact WARN.
    Mr. Kline. So then presumably OMB's guidance, which is 
based on your guidance, is still applicable. Is that correct?
    Ms. Oates. The OMB guidance that they issued, I have no 
idea what their plans are on that, sir.
    Mr. Kline. And so you haven't talked to them about it at 
all?
    Ms. Oates. No, sir.
    Mr. Kline. Dark hole. Okay.
    Thank you. I yield back.
    Chairman Walberg. I thank the chairman.
    I recognize the gentleman from New Jersey, Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    Dr. Furchtgott-Roth, did I pronounce your name correctly?
    Ms. Furchtgott-Roth. Yes. Yes, but I am not a doctor.
    Mr. Andrews. Oh, well----
    Ms. Furchtgott-Roth. Ms. Furchtgott-Roth.
    Mr. Andrews. Okay. All right.
    You make a statement that ``I am not privy to internal 
White House discussions, but it is likely that the White House 
asked contractors to break the law.'' Do you have any personal 
knowledge of discussions between the Obama campaign and the 
White House about this notice issue?
    Ms. Furchtgott-Roth. No. That is why I said likely.
    Mr. Andrews. Okay.
    Ms. Furchtgott-Roth. I did not say it definitively.
    Mr. Andrews. Okay. Did you have any personal knowledge of 
discussions between the White House and any contractors about 
this issue of these notices?
    Ms. Furchtgott-Roth. No. That is why I said likely, not 
definitively.
    Mr. Andrews. I think it is likely that your statement is 
motivated by political malice against the administration. Not 
being a fact, I didn't say certainly; I said likely as well.
    I want to ask you a question. In a few days, March 1st, 
this sequester is about to take place and there are some 
estimates that it will cost us 750,000 jobs. As an economist, 
as a commentator on our economy, do you believe we should let 
the sequester stay in place or try to lift it?
    Ms. Furchtgott-Roth. I believe we should replace the 
sequester with more sensible packages of spending cuts.
    Mr. Andrews. And I agree with that actually.
    Ms. Furchtgott-Roth. That is good that we agree on 
something.
    Mr. Andrews. In part. No, we agree on many things.
    In part, Mr. Van Hollen, who is the senior Democrat on the 
budget committee has a proposal that would defer the sequester 
for a year and replace it with a combination of cuts and 
revenue increases. Now, I am not asking you if you support that 
proposal or not because I assume you have not read it. And if 
you did I am not going to ask you that question. Do you think 
that we should put that proposal up for a vote this week?
    Ms. Furchtgott-Roth. Well, I am not a member of Congress. 
There are many, many important things before Congress and I 
don't know whether this--it is not up to me to say what should 
be on the congressional calendar.
    Mr. Andrews. I just want your opinion. What we are voting 
on today is a rule that will let us debate a bill tomorrow. The 
bill is to freeze the wages of federal employees for a certain 
period of time.
    We are leaving town tomorrow after that. We are not coming 
back for I believe 9 or 10 days. Just in your opinion as a 
citizen observer, do you think that we should come back next 
week and vote on a proposal that would delay the sequester?
    Ms. Furchtgott-Roth. No. I think that spending needs to be 
cut, not the cuts in the sequester, but a more sensible 
spending package. And you should vote on that. In fact you have 
already passed it twice.
    Mr. Andrews. Well, we have not passed it twice. The--do you 
think that we should come back and consider your proposal, and 
Mr. Van Hollen's and others' next week? Or that we should take 
a recess? What do you think is the more responsible course?
    Ms. Furchtgott-Roth. I think it would be responsible to 
vote in place other spending cuts, even greater spending cuts 
because federal spending as a percent of GDP has grown from 20 
percent to 24 percent.
    Mr. Andrews. Okay. Irrespective of which plan you want to 
follow, that is not what I am asking you. The current plan of 
the House leadership is to leave town on Friday and go God 
knows where next week and do whatever. I am asking you if you 
think it is a more reasonable proposal to reconvene next week 
and let different members put up their plans as to what to do.
    I told you Mr. Van Hollen's proposal. You have a different 
thing that you would like to do. Don't you think we should come 
back next week and do that?
    Ms. Furchtgott-Roth. There have been two bills that were 
already passed in the House that would transform the sequester 
spending cuts into a more sensible package of cuts. And I think 
the Senate should consider those. And perhaps the president 
should consider signing those into law. And I gave the example 
of the biofuels required by the Defense Department at $27 a 
gallon when they could be paying $3.50 in diesel fuels.
    Mr. Andrews. And you know what? Your idea may or may not 
have merit. But I don't think there is any merit to taking a 9-
day vacation when there is 750,000 layoffs looming. Now you and 
I have different views how to solve this problem----
    Ms. Furchtgott-Roth. You should tell Speaker John Boehner.
    Mr. Andrews. Excuse me. Well, maybe you should. You 
probably talk to him more often than I do.
    Ms. Furchtgott-Roth. I haven't----
    Mr. Andrews. We have said to Speaker Boehner, who is a 
friend who used to chair this committee that we think we should 
stay here next week and put proposals on the floor and try to 
pass something that the Senate would take up and move on. Don't 
you think we should do that?
    Ms. Furchtgott-Roth. I don't have any opinion on what the 
congressional calendar should be. But I do think that spending 
cuts need to be passed. But I don't know how. I mean why don't 
you pass them----
    Mr. Andrews. Excuse me. It is my time.
    You must think that the Congress should try to pass some 
law that would defer 750,000 layoffs. Don't you think that?
    Ms. Furchtgott-Roth. I think perhaps you should do it today 
or tomorrow and then go on the 9-day recess.
    Mr. Andrews. I agree. So I will ask unanimous consent on 
the floor today, with your blessing, to take up Mr. Van 
Hollen's proposal and put it to a vote. Would you support that?
    Ms. Furchtgott-Roth. I don't support Mr. Van Hollen's 
proposal.
    Mr. Andrews. But would you support taking a vote on it 
because it is a way out of this problem?
    Ms. Furchtgott-Roth. Since the vote isn't going to pass I 
wouldn't support it.
    Mr. Andrews. You only support things that will pass.
    Ms. Furchtgott-Roth. I think it is time----
    Mr. Andrews. You don't support the House plan because it 
will not pass the Senate.
    Ms. Furchtgott-Roth. I think it is time to take a realistic 
view. Spending growth in the federal government is extremely 
serious. It is gone from 20 percent of GDP in 2007 to 24 
percent this year.
    Mr. Andrews. I think it is likely that you have made an 
unsubstantiated allegation for political reasons.
    I yield back the rest of my time.
    Chairman Walberg. The gentleman's time is expired. Thank 
you.
    I now recognize the ranking member, Mr. Courtney, for 
closing comments. And I thank the panel for your testimony 
today.
    Mr. Courtney. And likewise. Thank you for your appearance 
here today and your words.
    You know I just want to end with what I thought was one of 
the most powerful statements yesterday at the Armed Services 
Committee. Admiral Jonathan Greenert, who is the chief naval 
officer, runs the U.S. Navy, said to the Armed Services 
Committee, there is still time.
    I mean the fact of the matter is, and we saw this on 
January 1st, that literally while people were home watching 
football the House took up a bill that, again, avoided the 
fiscal cliff and enacted a 2-month delay of sequestration, and 
used again a combination of revenue and spending cuts to avoid 
that from hitting.
    And the admiral is totally right on the law that you know 
we can do this today if we wanted to if we could get people to 
agree. And we can certainly do it on February 28th or on March 
1st itself or even on March 2nd because again it is not going 
to all end on one day.
    And that really should be, in my opinion, the takeaway for 
all of us as members of Congress and as Americans that, you 
know, in terms of the people who are out there defending our 
country, the people who are out there keeping the airports safe 
and planes landing on time, the people who protect the 
homeland, the people who educate our children, the people who 
care for seniors, they deserve better than to have, again, a 
Congress not in session next week and not dealing with this--
the gravity of this issue.
    And again, the law does not require a super committee to 
have to do it. The fact of the matter is that two sides can 
negotiate and fix this dilemma, that would be a completely 
self-inflicted damage to the economy, as Mr. Eisenbrey, again, 
testified. And as the Bipartisan Policy Center they actually 
had a higher estimate. They said it would be a million lost 
jobs if sequestration were allowed to fully implement.
    So you know hopefully that will be our takeaway here today 
as well. And you know that, I think again, is the mission that 
we have before us.
    I think the Department of Labor scrupulously followed the 
law in terms of a request, a legitimate request that came in 
from people who work hard out there to implement programs that 
help workers and families deal with mass layoffs. And again, I 
think events proved your judgment was in fact the correct one.
    Again, Mr. Chairman, I want to thank you for my maiden 
hearing, your gracious manner in terms of handling it. And with 
that I would yield back.
    Chairman Walberg. I thank the gentleman. And I concur that 
this has been an important hearing, made even more important by 
this request for information that should have been forthcoming 
a long time ago. And the fact that it was slipped under the 
door at 9:00 last night with a password on a sticky note 
concerns me greatly.
    But more than that, in testimony today, to hear that in a 
small, small department that information that should have been 
known that was going to be asked today. There is still a lot of 
gaps in understanding, why, when, what for?
    Sequestration is a huge thing, as has been mentioned on 
both sides of the aisle. I concur with the fact that the whole 
idea of sequestration was that it would never happen.
    It would be the last-ditch resort because it is a terrible 
process to undergo. And I would state for the record that this 
subcommittee and I believe the full committee will pay very 
close attention, very close attention to employees' protections 
and rights as well as employers' protections and rights.
    That is our responsibility. And we will be held accountable 
for that. Not simply by our electorate, but by the future of 
our nation and the outcome of our nation that is based upon 
employers and employees working together in safe environment, 
in as secure an environment as possible, and growing this great 
economy which is called the United States of America. And I 
commit you, my ranking member and members of the other side of 
the aisle as well, that that will be a purpose here.
    We may differ at times on how much we consider it is being 
carried out. But we will make that a purpose. And we will make 
it a purpose over politics. And I think that was our concern 
when we initially drafted the letter and sent it for 
information that I hope has been finally supplied to us.
    It was to get beyond politics and to say there is a 
sequestration date certain. We have changed that. But at that 
time it was certain. It has impact, potentially on thousands of 
lives, let alone our economy.
    There is a law that is in place that we have one of the 
drafters in the room today, thankfully. And there is a purpose 
for that. And I think this--the gravity of this situation with 
sequestration has been far stronger than any other time before. 
And we deserve answers.
    This subcommittee is responsible for oversight. We will do 
oversight, as well as dealing with issues and policy. But to 
make sure that our citizens are well served, we will do 
oversight so that the Departments of State as well as the 
members of Congress who represent our nation's citizens will be 
teammates together as best possible, outside of politics. And 
this function will produce good impact.
    We will undertake looking at these 400 pages. And on the 
basis of what we find out I guess we will decide where we go 
from here. But I am disappointed that it took a committee 
hearing to be called for us to get that. And so now it comes to 
our responsibility of seeing how we make the process work more 
fully and completely on behalf of our workers and our employees 
and our nation for the future.
    And with that I close my--oh. One thing, thank you for 
reminding me, I get emotionally involved and I forget.
    Also, I think we need to go back to a point that was made 
and carried on in several ways with statements that were made 
by specifically one of our witnesses. But it is not unique, 
even in the fact that ABC News, Mary Bruce and Jake Tapper 
reported in an article they wrote October 1, 2012, ``At White 
House Request Lockheed Martin Drops Plan to Issue Layoff 
Notices.''
    The opening sentence says ``Defense contractor Lockheed 
Martin heeded a request,'' so at least the perception was 
there, ``heeded a request from the White House today, one with 
political overtones, and announced it will not issue layoff 
notices to thousands of employees, just days before the 
November presidential election.'' That is concerning to me. And 
I would request that this be submitted as part of the record 
without objection.
    [The information follows:]

                      [From go.com, Oct. 1, 2012]

                At White House Request, Lockheed Martin
                   Drops Plan to Issue Layoff Notices

                     By Mary Bruce and Jake Tapper

    Defense contractor Lockheed Martin heeded a request from the White 
House today--one with political overtones--and announced it will not 
issue layoff notices to thousands of employees just days before the 
November presidential election.
    Lockheed, one of the biggest employers in the key battleground 
state of Virginia, previously warned it would have to issue notices to 
employees, required by law, due to looming defense cuts set to begin to 
take effect after Jan. 2 because of the failure of the Joint Select 
Committee on Deficit Reduction--the so-called Super-committee, which 
was created to find a way to cut $1.5 trillion from the federal deficit 
over the next decade.
    Such massive layoffs could have threatened Obama's standing in the 
state he won in 2008 and is hoping to carry again this November.
    On Friday, the Obama administration reiterated that federal 
contractors should not issue notices to workers based on 
``uncertainty'' over the pending $500 billion reduction in Pentagon 
spending that will occur unless lawmakers can agree on a solution to 
the budget impasse, negotiations over which will almost definitely not 
begin until after the election.
    Contractors had been planning to send out notices because of the 
WARN Act--Worker Adjustment and Retraining Notification Act--which 
according to the Department of Labor requires ``most employers with 100 
or more employees to provide notification 60 calendar days in advance 
of plant closings and mass layoffs.''
    In a statement Friday, GOP Senators John McCain, Lindsey Graham and 
Kelly Ayotte accused Obama of putting ``his own reelection ahead of the 
interests of working Americans and our national security by promising 
government contractors that their salary and liability costs will be 
covered at taxpayer expense if they do not follow the law that requires 
advance warning to employees of jobs that may be lost due to 
sequestration. * * * Apparently, President Obama puts politics ahead of 
American workers by denying them adequate time to plan their finances 
and take care of their families. The people who work in the defense 
industry and other government contracting companies deserve as much 
notice as possible that they are on track to lose their jobs.''
    In July the Labor Department issued legal guidance making clear 
that federal contractors are not required to provide layoff notices 60 
days in advance of the potential Jan. 2 sequestration order, and that 
doing so would be inconsistent with the purpose of the WARN Act.
    In Friday's memo, the Office of Management and Budget reiterated 
that notice, urging agencies' contracting officials and CFOs to 
``minimize the potential for waste and disruption associated with the 
issuance of unwarranted layoff notices.''
    The guidance issued Friday told contractors that if the automatic 
cuts happen and contractors lay off employees the government will cover 
certain liability and litigation costs in the event the contractor is 
later sued because it hadn't provided adequate legal warning to its 
employees, but only if the contractor abides by the administration's 
notice and refrains from warning employees now.
    After ``careful review'' Lockheed announced today that it will 
abide by the administration's guidance.
    ``We will not issue sequestration-related WARN notices this year,'' 
Lockheed announced in a written statement.
    ``The additional guidance offered important new information about 
the potential timing of DOD actions under sequestration, indicating 
that DOD anticipates no contract actions on or about 2 January, 2013, 
and that any action to adjust funding levels on contracts as a result 
of sequestration would likely not occur for several months after 2 Jan. 
The additional guidance further ensures that, if contract actions due 
to sequestration were to occur, our employees would be provided the 
protection of the WARN Act and that the costs of this protection would 
be allowable and recoverable.
    ``We remain firm in our conviction that the automatic and across-
the-board budget reductions under sequestration are ineffective and 
inefficient public policy that will weaken our civil government 
operations, damage our national security, and adversely impact our 
industry. We will continue to work with leaders in our government to 
stop sequestration and find more thoughtful, balanced, and effective 
solutions to our nation's challenges,'' Lockheed said.
                                 ______
                                 
    Chairman Walberg. Hearing no objection, it will be part of 
our record.
    Having said that, there being no further business, the 
committee stands adjourned.
    [Whereupon, at 11:34 a.m., the subcommittee was adjourned.]