Further, McKeon 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.
"Even though the (White House budget office) directive purports to protect the defense industry against the costs of not complying with the WARN Act, they cannot guarantee how the courts would rule in such an action. Thus the president has pledged to compound the impact of sequestration by dedicating already scarce resources to cover needless court costs," McKeon said.
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.