TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

The Outsourcing Accountability Act of 2019, which was introduced in July and would effectively require some public companies to report their outsourcing of jobs, passed the US House of Peoples Representatives on October 18.

The bill includes an amendment to the Securities Exchange Act of 1934 to “require the disclosure of the total number of domestic and foreign employees of certain public companies.” Specifically, the amendment would require public companies that are subject to the new requirements to include in their annual reports the number of employees domiciled in the United States and abroad, broken down by jurisdiction (e.g. states, countries, etc.), and a comparison to the corresponding figures in the company’s prior annual report calculated as a percentage change. The companies’ annual reports would therefore indicate outsourcing efforts of the company through these reported figures.

Even with the standard independent contractor provision in a Master Services Agreement, when employees of the contractor work at a client's site, there can be a heightened risk for joint employment liability, especially where such employees were hired by the contractor as part of an outsourcing arrangement. The US Department of Labor (DOL) recently issued a Notice of Proposed Rulemaking (NPRM) to update its interpretation of the standard for establishing joint-employer liability under the Fair Labor Standards Act (FLSA). The proposal is “designed to promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy” by making clear employers’ and joint employers’ respective obligations to pay the appropriate employee wages and overtime for a workweek.

Morgan Lewis will co-host an interactive master workshop on negotiations and contracting geared toward business leaders, sourcing professionals, and in-house counsel who work together on complex transactions such as digital transformations and vendor outsourcing. Edward J. Hansen, Vito Petretti, Donald G. Shelkey and Valerie A. Gross of our Technology, Outsourcing and Commercial Transactions practice will present and lead discussions on topics including:

The United Kingdom government’s Cabinet Office (the central procurement department for central government) is requiring major government suppliers to draft “living wills.” These are intended to safeguard the provision of services to the public sector in the event of the collapse of a supplier.

This measure follows the insolvency of outsourcing provider, and major government supplier, Carillion in January 2018. The well-documented Carillion collapse led to significant debate about the role of outsourcing within the UK public sector, with pronouncements about the extent to which outsourcing for the public sector has “fallen out of fashion.”

A shrinking in traditional outsourcing deal volumes since the United Kingdom's EU membership referendum vote on June 23, 2016, is being partially attributed to business caution following the “Brexit” decision.

According to consultants ISG, the traditional sourcing market in the UK pre-Brexit referendum had a deal volume of circa $900 million per quarter. However, the UK outsourcing market has only achieved this level of activity in one quarter since the referendum.

Morgan Lewis partner Edward Hansen and associate Valerie Gross have been invited to present at the Shared Services Council meeting on October 16 on Contracting for Digitization Initiatives. The presentation will discuss how successful digitization initiatives begin with the contract, which sets the stage for ongoing management of vendor software and services.

The presentation will take place on Tuesday, October 16, from 1:30 pm to 2:30 pm.

The Shared Services Council meeting will be hosted by the Conference Board at the Council Boardroom, at 845 Third Avenue, 3rd Floor, New York. The meeting will span two days, on October 16 and 17.

When in-house lawyers start thinking about how to support a business client that is looking to implement a new or replacement enterprise resource platform (or more commonly known as an ERP system), we often suggest that they first discuss these 10 framework issues to get a sense of the scale, complexity, and timing of the potential transaction. While the below list certainly does not cover all of the issues that will need to be considered, it is intended to help in-house lawyers understand the objectives, parameters, and potential risk areas of a transaction.

One of the keys to building a strong long-term commercial relationship with a supplier is the establishment of a robust governance structure that will help manage daily practices and future business goals. A recent post by advisory firm ISG highlights 10 tips for developing a governance structure that will help customers develop and maintain successful working relationships with their suppliers.

When a company outsources, it is looking to engage a third party to provide a service—not to assume risks with respect to the third party’s personnel. In fact, a key concern of a company looking to outsource is that it does not expose itself to claims by the third party provider’s personnel, such as claims relating to compensation and benefits, co-employment, hiring and/or termination practices, visa and immigration issues, and personal injury (that should otherwise be covered by the third party provider’s workers’ compensation policies).

On August 30, Morgan Lewis and the Sourcing Industry Group (SIG) will host a full-day Executive Immersion Program in Boston. This popular program provides advanced presentations, workshops, and case studies geared toward executive decision-makers. Speakers include Morgan Lewis partners and industry thought leaders Ed Hansen and Doneld Shelkey.

The Executive Immersion Program will include an interactive master contracting workshop geared toward sourcing professionals and in-house counsel. Participants in the contracting workshop will be given examples from experienced professionals that lead information technology–enabled transformations and manage outsourcing deals.