Market Overview

CAGW Names Jeffrey Zients Porker of the Month


Today, Citizens Against Government Waste (CAGW) named Office of Management and Budget (OMB) Director Jeffrey Zients its October 2012 Porker of the Month for promising to pay the legal fees of federal contractors who, under Department of Labor (DOL) orders, do not issue layoff notices to employees whose jobs could be in danger due to looming spending cuts. Large employers are obligated under the Worker Adjustment and Retraining Notification Act (WARN) to issue layoff notices 60 days in advance of a “reasonably foreseeable” event, such as the automatic spending cuts, or sequestration, triggered by the Budget Control Act of 2011. Instead, contractors who follow OMB's instructions have been promised that any litigation fees that arise from layoffs without prior notice will be covered by taxpayers.

Sequestration requires the $1.2 trillion in automatic spending cuts to take effect on January 1, 2013. Contractors would have a deadline of November 2, 2012 – the Friday before Election Day – to issue layoff warnings to their employees. However, those contractors were told in a memo from OMB to “minimize the potential for waste and disruption associated with the issuance of unwarranted layoff notices” by not issuing them at all. The memo goes on to state that “any resulting employee compensation costs for WARN Act liability as determined by a court, as well as attorneys' fees and other litigation costs, would be covered by the contracting agency” (emphasis added).

Sens. Charles Grassley (R-Iowa) and Kelly Ayotte (R-N.H.) issued a letter to Director Zients on October 1, 2012, demanding an explanation of DOL's legal authority to tell contractors not to provide WARN Act notices, the legal authority of OMB to do the same, and to “explain in detail why ... the Obama Administration did not have to first obtain approval from Congress before committing to pay tens or hundreds of millions of dollars (if not billions of dollars) in judgments, settlements and/or attorneys' fees.”

On October 5, Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) sent a letter to the 15 largest U.S. defense contractors warning that, should they follow OMB orders, they would be setting up their companies for “serious legal and financial repercussions,” and that the senators “will oppose any requested funding increase in the budget process ... to reimburse contractors for any expenses resulting from failure to comply with the law.” Whether a majority of senators agree with Sens. McCain and Graham remains to be seen.

“Director Zients' legally questionable decision to put taxpayers on the hook for legal fees incurred by DOL's reckless directives is appalling,” said CAGW President Tom Schatz. “It is hard to interpret OMB's actions as anything other than an attempt to force taxpayers to pay what amounts to hush money in the run-up to an election.”

For ordering federal contractors to subject themselves to lawsuits and promising that taxpayers will pick up the tab, all in the name winning votes, OMB Director Jeffrey Zients is CAGW's October Porker of the Month.

CAGW is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.

Leslie K. Paige, 202-467-5334
Luke Gelber, 202-467-5318

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