Many employees have successfully transitioned to remote working as a result of Covid-19. Jobs that were not previously considered remote-friendly have now been proven to be fully functional remote positions. An effect of identifying new remote areas is that those jobs may now be considered for outsourcing. When deciding whether to outsource, companies need to consider applicable employment laws, the outsourcing model it should adopt, and the specific outsourcing company it should hire.
There are multiple outsourcing models. One outsourcing plan includes terminating all employees in one area of the business, such as accounting, human resources, or customer service, and retaining a company to conduct those tasks. The main employment issue under this model is whether the employees can be terminated.
Employees are at will in most states and can be legally terminated at any time for any reasons except for an unlawful one. Employees can be terminated as long as there is no collective bargaining agreement or employment contract which dictates termination. In such a case, companies must abide by the termination provisions of the agreements.
Be mindful of specific job areas that are dominated by one race, gender, age or other protected characteristic. This would not prevent outsourcing, but the company should consider the risks of employment discrimination claims and be proactive to prevent employment discrimination claims being lodged against the company.
Another outsourcing model requires the business to terminate the employees and the outsourcing company hires them the same day so that there is no break in employment. This usually occurs when the tasks are company specific and the employees are vital to the continuation of the work. Generally, the employees spend months, and sometimes years, training others to do their specific job tasks. Once the job tasks are learned by others, then the outsourcing company will either maintain the employees for another job or terminate the employees.
Because the employees are at will, they have the freedom to determine if they want to accept the employment offered by the outsourcing company or leave altogether. It is common for the outsourcing contract between the outsourcing company and the company to include a provision that the transitioned employees are employed by the outsourcing company for one year. One purpose of this provision is to protect the main company from employment discrimination claims by the transitioned employees.
Most employment discrimination claims contain a statute of limitations that is a year or less than a year. After the statute of limitations period has passed, save certain exceptions, the employees can no longer bring employment law claims against the company. If the employee is offered employment with the same or similar pay, working conditions and benefits at the outsourcing company than the employee will have little to no damages even if the employee could prove discrimination. If the employee refuses to accept the position with the outsourcing company, there is an argument that the employee failed to mitigate his or her damages again rendering little to no damages. If the outsourcing company terminates the employee after one year, the employee can no longer bring an employment discrimination claim against the main company save certain exceptions.
The outsourcing contract should be drafted to minimize the risks of a finding that the main company and the outsourcing company are joint employers to the employees. If there is a finding of joint employment, the company could continue to be liable for employment related claims brought by the employees. In addition to a strongly drafted outsourcing contract, the employees should be under the sole control and management of the outsourcing company once they are transitioned to the outsourcing company to avoid joint employment problems.
For all outsourcing models, the company is trading people for products. The company will no longer employ individuals who do the work. The company will pay for the services from another company. This saves on labor costs, avoids many potential employment claims and other forms of possible liability. As a tradeoff, the company cannot control the work, it loses intimate knowledge of the details of the jobs and it must add procedures and steps to avoid any data breaches or privacy violations. Be careful not to exchange quality for the cost savings.
Businesses should hold themselves morally accountable for the actions of the outsourcing company. It is important to vet the outsourcing company prior to any engagement. The outsourcing company with the lowest rates should not necessarily be the company hired.
You can access the article by Sara Blackwell HERE.
