McCain vows to shield tax dollars from fallout over defense layoffs

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White House urging contractors not to issue layoff notices

Lockheed Martin originally warned notices would be required by law

Sen. John McCain vowed Tuesday to block any money intended to help defense contractors elude the provisions of a layoff notification law, objecting to financial assistance that McCain and other Republicans have criticized as politically motivated.

The Obama administration has advised defense contractors not to warn employees of looming layoffs 60 days in advance, as specified in the law, as Congress and the White House hurtle closer to a deadline for avoiding severe defense spending cuts in January. Both sides of the aisle say they intend to prevent those cuts from happening, though they face an uphill climb to reaching an agreement.

Republicans particularly object to promises made to the contractors to pick up the cost -- at taxpayer expense -- of any financial liability the contractors incur for withholding the layoff notifications.

"Companies have a choice whether to rely on (the Office of Management and Budget's) politically-motivated guidance or to comply with the law," McCain, the Arizona Republican, said. "But I can assure them that I will do everything in my power to ensure that taxpayer dollars are not used to compensate contractors who do not comply with the law."

Rep. Buck McKeon, R-Calif., chairman of the House Armed Services Committee, said the notice amounted to a "threat" to contractors. And warned that the administration was using tax dollars to win over companies to follow the "dubious" and "politically motivated" guidance to ignore the federal law known as the WARN Act.

Sen. John Thune, R-S.D., also said it was "troubling that the Obama administration would openly encourage the violation of federal law and offer to pay the legal fees that resulted."

Sen. Lindsey Graham, R-S.C., claimed Obama was trying to prevent layoff notices from hitting mailboxes "right before the election."

"This is typical Barack Obama politics -- being supportive of the WARN Act when convenient and against it when it creates political downside," Graham said. "This is the most outcome-based White House in memory."

Lockheed Martin has reportedly already backed off threats to issue thousands of layoff warnings ahead of the election, in response to the administration's latest assurances and guidance.

The offer to pay the legal fees was included in a memorandum issued by the administration Friday that also restated the Labor Department's position from July that contractors should not issue written notices to employees because of the "uncertainty" over the across-the-board cuts to the defense budget and other federal spending that will occur Jan. 2 unless Congress reaches a new deal.

The notices are required under the Worker Adjustment and Retraining Notification Act and generally require employers with more than 100 employees to provide 60-day notices of "mass layoffs if they are reasonably foreseeable."

The projected $500 billion in Pentagon cuts under the so-called sequestration will occur because Congress failed to agree on a deficit-reduction plan in the wake of the deal last summer to raise the debt ceiling. The guidance issued by the Labor Department this summer stated "it is neither necessary nor appropriate" for federal contractors to issue the warnings.

The latest memorandum states the federal government would cover employee compensation under the WARN Act -- "irrespective of the outcome" as long as the contractor follows the Labor Department guidelines.

The Associated Press contributed to this report.