Guidance from the U.S. Office of Management and Budget (OMB), issued Sept. 28, urges the defense industry and other government contractors to not issue mass layoffs in light of the pending sequestration set to take effect on Jan. 2. OMB even went so far as to say that the contracting agencies could cover any potential litigation costs or employee compensation costs that could follow.

Some defense companies, including BAE Systems and EADS North America, have said they expect to send notices to their employees 60 days before sequestration takes effect to comply with the Worker Adjustment and Retraining Notification Act, which requires companies give advance warning to workers deemed reasonably likely to lose their jobs.

Companies appeared undeterred by July 30 guidance from the Labor Department, which said issuing such notices would be inappropriate, due to the possibility sequestration may be averted and because companies do not have enough information about how the cuts might be implemented to determine which workers or specific programs could be affected.