Fiscal cliff could cause layoffs for defense contractors

Visitors look at the Lockheed Martin's stand at an exhibition near Paris on June 11, 2012.

Jeremy Hobson: The big defense contractors -- including Lockheed Martin and Pratt & Whitney -- say they may have to send out mass layoff notices to their employees in a few months. That's because they're worried that hundreds of billions of dollars in expected cuts to the Pentagon's budget will have a big effect on them. But the Labor Department says such layoff notices are pre-mature, since the cuts are connected to the so-called "fiscal cliff" which is far from a done deal.

Marketplace's Eve Troeh reports.


Eve Troeh: A law called the WARN Act is meant to protect American workers. It says factories and other big employers must tell workers if they know about an event that will jeopardize their jobs, 60 days in advance.

A few big defense contractors say they see an event like that on the horizon -- federal budget cuts. If budget cuts kick in this January, aerospace and other manufacturers say they might have to lay off thousands of workers.

But American University professor Gordon Adams says, possible budgets cuts wouldn't normally trigger a WARN act notice.

Gordon Adams: Unless there's some specific expectation of a plant closure or a massive layoff, there's no reason for a contractor to be sending a WARN Act to any of its employees.

That's what the Department of Labor says, too. So why would defense companies notify employees of potential layoffs, if they didn't have to?

Politics, says Gordon Adams. A notice of potential job loss 60 days before January 2nd would be November 2nd -- yes, right before the election. Defense contractors aim to use the threat of layoff notices, Adams says, to get promises of funding from the candidates.

I'm Eve Troeh for Marketplace.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.

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