The company said it would not send out layoff slips this year, given new government estimates from the Office of Management and Budget, The Hill newspaper reported Monday.
The report known as a guidance said the Pentagon was not canceling any contracts as of Jan. 2 and that the federal government would honor its commitment on severance costs.
But company spokeswoman Jennifer Allen said, "After careful review of the additional guidance provided by the Office of Management and Budget and the Department of Defense, we will not issue sequestration-related WARN notices this year."
The timing of the guidance, however, has been called into question by Republicans who believe the guidance was staged to assist President Obama in his re-election bid.
"I will do everything in my power to make sure not one taxpayer dollar is spent reimbursing companies for failure to comply with WARN Act. That is so beyond the pale -- I think it's patently illegal," said Sen. Lindsey Graham, R-S.C, who considered the timing of the guidance politically motivated.
He also said he would do what he could to block taxpayer funds from being used to pay severance packages for defense contract workers.
The controversy began in June, with Lockheed Chief Executive Officer Bob Stevens declaring he would give pink slips to all 123,000 Lockheed employees in Nov. 2, just before the election.
The Worker Adjustment and Retraining Notification Act or WARN mandates companies provide workers with 60 days notice before laying them off.
In July, the Obama administration said that would be "inappropriate."
The guidance takes that a step further saying the administration would cover legal expenses for companies that failure to comply with WARN so long as they held off on making layoff announcements.