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Employment Law Outsourcing Checklist

When deciding to outsource, make sure to address all applicable legal obligations to employees. Use the following checklist to assist you with your compliance efforts.

by Andew J. Lauer, John Gliedman

Employee-related considerations are inherent in any HR department, but the decision to outsource adds a new dimension and pace, particularly where careers are affected. These considerations require understanding how the decision to outsource affects the business and legal aspects of employee benefit programs, severance programs, unlawful discrimination, worker notification, and employee-specific aspects of outsourcing agreements, just to name a few. Here are some items which may be used in analyzing outsourcing decisions directly impacting employees.

DEFINE THE GROUP

  • What is the business basis for the proposal?
  • Has the decision been fully documented, and will the business justification stand up to scrutiny?
  • Which employees are impacted by this proposal?
  • Are jobs going to be outsourced to the vendor or eliminated and replaced by vendor employees? If a combination, who is being selected/terminated, and what are the legitimate business criteria for such decisions?
  • What is the timeframe for the proposed deal, and how many employees will be impacted?
  • Designate “must-have” employees.
  • Designate employees to serve on joint customer-provider steering committee.

COMMUNICATION TO THE GROUP

  • Have we communicated our decision to the impacted group (and other company employees)?
  • Are we interested in offering retention incentives to key employees?
  • Have we discussed the benefits of outsourcing on the impacted group, as well as other company employees?
  • Have we set forth a clear timeline for the transition to the outsourcing vendor?
  • Have we scheduled in-person meetings with impacted employees?

LEGAL CONSIDERATIONS

  • General: Have we reviewed the impacted group for potential general labor and employment law issues?
  • Discrimination: Have we conducted an adverse impact analysis of the relevant group of employees, and are we satisfied with the results of such analysis? For example, are there any potential adverse impact arguments pertaining to a protected class of employees under employment law statutes such as Title VII, the ADEA, or the ADA?
  • Contract and tort: Have employment agreements for impacted employees been reviewed for potential obligations (i.e., term contracts, severance, etc.)? Have we reviewed the potential impact of local laws regarding breach of contract and breach of good faith and fair dealing claims?
  • Benefits: Have we coordinated the COBRA notice and addressed its impact? Have we reviewed any potential ERISA issues? Is there any severance impact related to a severance policy?
  • Notice requirements: Have we planned properly with regard to notice requirements? Does the WARN Act apply to the proposed outsourcing deal?
  • OSHA: Have we addressed any potential OSHA issues? Does the contract with the vendor address OSHA compliance and/or indemnity?
  • Workers’ compensation: Have we addressed any potential workers’ compensation issues? Who will be responsible for workers’ compensation claims? Do we want indemnities from the vendor?
  • Fair Labor Standards Act: Have all wage and hour issues been addressed?
  • Severance: Do we have to pay severance under company policy or pursuant to a contract? What is the severance impact and when must payments be made?
  • Labor Issues: Is the company a union shop? If so, does the collective bargaining agreement contain any provisions applicable to the outsourcing deal?
  • Immigration: Have we considered immigration issues?
  • Other issues: Have privacy and HIPAA concerns, with regard to the transfer of employee data from company to vendor, been addressed?

 

Remember to review the employee handbook for any impact. Schedule announcement and coordinate update communications to employees. Consider offering outplacement services to terminated employees. Finally, consider requiring releases from employees receiving severance or being transitioned to vendors.

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