The Obama administration issued new guidance intended for defense contractors Friday afternoon, reiterating the administration’s position that the companies should not be issuing layoff notices over sequestration.

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But the Friday guidance from the Office of Management and Budget raised the stakes in the dispute, telling contractors that they would be compensated for legal costs if layoffs occur due to contract cancellations under sequestration — but only if the contractors follow the Labor guidance.

The guidance said that if plant closings or mass layoffs occur under sequestration, then “employee compensation costs for [Worker Adjustment and Retraining Notification] WARN act liability as determined by a court” would be paid for covered by the contracting federal agency.

Read the full piece at The Hill->