Office of Management and Budget Guidance on the Worker Adjustment and Retraining Notification (WARN) Act
B-324146: Sep 12, 2013
In anticipation of the potential January 2, 2013, sequestration, federal contractors were considering issuing notices under the Worker Adjustment and Retraining Notification (WARN) Act, which generally requires employers to notify affected employees at least 60 days before ordering a plant closing or mass layoff. Subsequent to issuance of guidance by the Department of Labor (DOL) advising that the WARN Act does not require such notification 60 days prior to the potential January 2, 2013, sequestration, federal contractors asked the Office of Management and Budget (OMB) whether federal agencies would reimburse them for costs they might incur for failure to provide WARN Act notices. In response, OMB issued guidance providing that if a contractor has followed a course of action consistent with DOL's guidance, then should sequestration occur and an agency terminate or modify a contract necessitating a plant closing or mass layoff, any resulting employee compensation costs for WARN Act liability would qualify as allowable costs and be reimbursed by the contracting agency, if otherwise reasonable and allocable.
The Chairman of the House Appropriations Committee requested that GAO answer several questions regarding the effect of OMB's guidance on a contracting officer's ability to determine whether costs incurred by a contractor for failure to provide WARN Act notifications would be allowable for reimbursement by the federal government. We conclude that OMB's guidance does not mandate that WARN Act liability costs be treated as allowable for reimbursement by a contracting agency, or otherwise alter a contracting officer's responsibility to apply the Federal Acquisition Regulation (FAR) cost allowability requirements to a contractor's request for reimbursement of costs; a contracting officer has discretion to determine whether a contractor's costs incurred for failure to comply with the WARN Act are reasonable under the FAR; OMB's guidance does not alter the operation of a contract's limitation of cost or funds clause which provides a ceiling on the government's liability; and the guidance does not prohibit reimbursement of WARN Act related costs arising under circumstances not specified under the guidance.