In the absence of legislation to repeal or modify the automatic sequestration provisions contained in the Budget Control Act of 2011 (“BCA”), federal defense and non-defense programs will face automatic, across-the-board cuts of $109 billion on January 2nd, 2013. While the defense industry has remained very vocal in warning lawmakers of the grave national security and economic consequences of sequestration, other federal agencies and associated interest groups are also sounding the alarm. In a recent letter to Congressman Ed Markey (D-MA), the Department of Health and Human Services (“HHS”) warned that sequestration would have “profound consequences on the Department’s ability to protect Americans’ health and safety and provide critical services to vulnerable populations.”
On July 18th, 2012, the U.S. House of Representatives passed legislation, by a vote of 414-2, requiring the Administration to issue a report detailing how the sequestration would affect individual agency programs, projects and accounts (“PPAs”). Senate Majority Leader Harry Reid (D-NV) recently indicated that the full Senate might consider the House-passed measure (H.R. 5872) as early as this week.
Aside from legislative efforts to require the Administration to explain how the sequestration is applied across all federal programs, there appears to be increased discussion among Members about the possibility of delaying the defense-related automatic spending cuts for a year. This is not surprising, given the increasing unlikelihood of Congress reaching comprehensive accords on debt reduction and tax reform prior to the November election, yet details on potential sequestration delay proposals have yet to be released.
It also remains to be seen how or whether Congress will address contractors’ current obligations under the Worker Adjustment and Retraining Notification (“WARN”) Act. Under the WARN Act, many employers are required to notify employees and local government officials 60 days before anticipated large-scale layoffs or facility closings. Faced with the possibility that some of the country’s largest employers, particularly defense contractors, could begin issuing layoff notices in the days before the November election, Congress may move to waive or amend the existing statutory requirements, in the absence of an agreement that directly addresses sequestration.