Outsourcing Law - Offshoring Services Law



Outsourcing refers to the practice of contracting workers outside of a company or business for work duties or services previously performed by company employees or “in-house”. This practice is also often referred to as offshoring due to the increasingly prevalent use of “non-U.S.” service providers for these outsourced duties. However, strictly speaking, outsourcing can and does refer to the use of contracted labor provided by individuals outside of an organization, but still within the U.S.; whereas when these same services are provided outside the U.S., it is both outsourcing and offshoring.

Offshoring is most typically identified with physical business processes, such as manufacturing and office support services, such as IT and call centers.

The greatest motivating factor for outsourcing is economical. Businesses seek to save money by using cheaper labor available in other countries or locales. The ability to save money via this practice includes the use of workers for low wages; fewer labor laws and environmental regulations to contend with in certain countries; and the power of the U.S. dollar in these countries’ economies.

The North American Free Trade Agreement (NAFTA) played a large role in the increased popularity of offshoring, by making it easier for U.S. companies to move their physical manufacturing processes to Mexico.

When call center operations involve regulated business services (i.e. banking, life insurance sales, consumer credit and lending) or regulated professions (i.e. accounting, lawyers, engineers) they are subject to U.S. regulation and oversight. However, despite numerous and varied attempts to address the practice of outsourcing in a legal sense, to date, there still exists no viable legislation governing outsourcing. Time after time anti-outsourcing legislation, bills and laws have been defeated.

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Articles on HG.org Related to Outsourcing Law

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    Employers often hire independent contractors to perform work that is similar to the work employees perform. However, there are several advantages to employers hiring independent contractors, including not having to collect and pay payroll taxes for independent contractors. Employers withhold income tax, Social Security and Medicare tax from employee wages.
  • Employer Claims I Am an Independent Contractor but I Never Signed Paperwork
    Employers often hire independent contractors to perform work that is similar to the work employees perform. However, there are several advantages to employers hiring independent contractors, including not having to collect and pay payroll taxes for independent contractors. Employers withhold income tax, Social Security and Medicare tax from employee wages.
  • Are Wages to Independent Contractors Subject to Garnishment?
    Persons that work for themselves are considered independent contractors even if they are employed within the building of a company. These individuals are not considered employees and may not be subject to various regulations or stipulations, and this means that numerous aspects do not apply to these persons as they would a standard employee.
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    Employment and labor laws apply to companies within the United States. This means that every state within the country is required to ensure that the proper and predetermined payment is provided to these persons based on the laws of the land, so if these regulations are violated, the worker may be entitled to compensation.
  • Former Independent Contractors Breach of Non-Solicitation Clause
    When a business owner or manager has independent contractors, he or she often has them sign certain contracts that bind them to terms and conditions. If these individuals break the contract or breach the terms, they could be taken to court and the clauses may be enforced when necessary.
  • Planning for Technological Disruption in Small Business
    Technological disruptions are already changing the face of American business. We can assume that things are going to become more chaotic, rather than less, with changing regulatory compliance burdens, outsourcing, and automation. With the rapid rate of both internal and external change, one way business leadership can plan for agile adaptation is to write employment contracts and job descriptions with an eye to changing roles.
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    Freelancing legal requirements and aspects are often confusing to those that have only just started or that have not fully researched these matters. It is important for a freelancer to know what is legally required for the job, for tax purposes, the government and for his or her own personal protection.
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    Social media websites and other areas have been a major boon to businesses in finding assistance with all manner of materials, resources and employment opportunities. However, there could be legal risks that complicate these matters such as when the right contract has not been drafted the individual could leak vital data.
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    Interns are used widely in companies where these individuals learn the tips, tricks, procedures and processes within a company so that they may be hired on with the experience needed to do the job at the hiring point. However, many internships are unpaid, and numerous persons that work through an internship do so at the behest of a college course.
  • New York City Curtails Retail Businesses' and Fast Food Chains' Discretion in Scheduling Workers' Shifts
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Outsourcing Law - US

  • Creating American Jobs and Ending Offshoring Act

    This bill would give companies a two-year payroll tax holiday, reducing the amount of Social Security taxes they would have to pay, for new employees who replace workers doing similar jobs overseas. It also revokes provisions of the tax code that Democrats say encourage companies to outsource their work force.

  • Outsourcing - Policy Agenda - Anti-Outsourcing Bills

    * Although the number of US service jobs lost to outsourcing is currently small relative to the total work force, the fear of a seemingly limitless loss of jobs to lower-wage countries has caused widespread anxiety. * US companies dominate global services outsourcing, and India is the top developing-country destination. * National and state legislators have introduced a flurry of anti-outsourcing bills, but corporations are mounting a strong counter-attack.

Organizations Related to Outsourcing Law

  • Outsourcing Law

    Outsourcing-Law.com offers essential insights on governance, risk management and legal compliance for service businesses. Our resources help businesses to integrate internal and external resources using information technology, business processes and the contingent workforce to achieve flexible, manageable and sustainable competitive value chains. Our mission is to provide business-oriented legal analysis for operational performance through networked people, process and technology.

  • WashTech - Offshore Outsourcing

    Offshore outsourcing has become our top priority, and our efforts are paying off. The Seattle Times has called WashTech, "the technology union leading the national fight against offshoring." From tech workers around the country we raised enough money to take an ad out in the New York Times, highlighting the offshore outsourcing issue and demanding Congress take action. Legislation: We are fighting for legislation that protects workers at both the federal and state levels.

Publications Related to Outsourcing Law

  • Economics of Outsourcing

    Outsourcing policies vary greatly among nations and firms. Policy makers take a number of effects into account when making their policies.

  • EPI - Federal Contract Jobs

    The federal contract workforce—government workers paid with federal dollars but employed by private business—is swelling in size. Although the number of directly employed federal workers has remained steady at 2.7 million since 2000,1 federal contract workers have grown from 1.4 million to 2.0 million.

  • FDIC - Offshore Outsourcing of Data Services by Insured Institutions and Associated Consumer Privacy Risks

    This study presents the FDIC's findings with regard to the associated risks of offshore outsourcing (also known as "offshoring") by financial institutions from a safety and soundness perspective and with particular emphasis on the threats posed to customer privacy.

  • Outsourcing Law Blog

    Welcome to the Outsourcing-law.com blog. We hope to offer fresh insights into the law and practice of outsourcing and global services.

  • Outsourcing Technology Services Booklet - Laws, Regulations, and Guidance

    The Federal Financial Institutions Examination Council (FFIEC) Information Technology Examination Handbook (IT Handbook) “Outsourcing Technology Services Booklet” (booklet) provides guidance and examination procedures to assist examiners and bankers in evaluating a financial institution’s risk management processes to establish, manage, and monitor IT outsourcing relationships.




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