Global outsourcing transactions often require companies to navigate not only complex commercial issues, but also employment-related regulations and local practices that can vary significantly across jurisdictions. As organizations continue to transform their operations through outsourcing, managed services, and digital and AI transformation initiatives, labor and employment considerations have become an increasingly important part of transaction planning.
Partner Kat Gibson advises multinational companies on the employment issues that arise in outsourcing transactions, including employee transfers, workforce restructurings, reductions in force, consultation obligations, and cross-border employment compliance.
We recently sat down with Kat to discuss some key labor issues companies should be thinking about when planning global outsourcing transactions.
Q&A with Kat Gibson
1. Labor and employment issues are often viewed as a downstream workstream in outsourcing transactions. Why should companies be thinking about them much earlier in the process?
Labor issues frequently drive the transaction timeline, costs, and overall feasibility of an outsourcing arrangement. In many jurisdictions, companies must satisfy statutory consultation obligations, negotiate with works councils or unions, or comply with employee transfer regulations before implementation can occur. Bringing employment counsel into the conversation early allows organizations to identify these issues upfront, properly allocate risk between the parties, and avoid delays later in the transaction.
2. When employees are impacted by an outsourcing transaction, what are the biggest differences companies encounter across jurisdictions?
One of the biggest challenges is that there is no single global approach. Some countries have automatic employee transfer regimes, where employees move to the new service provider by operation of law. Others require termination and rehire processes, while still others impose consultation or notification obligations without requiring a transfer at all. Companies operating globally need to understand these jurisdiction-specific rules because the employment implications—and associated costs—can vary significantly from country to country.
3. What are some of the most common mistakes you see organizations make when managing employee impacts during an outsourcing transaction?
A common mistake is assuming the employment aspects can simply be addressed after the commercial deal is negotiated. In reality, workforce issues often influence pricing, transition planning, service commencement dates, and ongoing operational responsibilities. Another challenge is underestimating the importance of clear employee communications and local legal requirements. Careful planning and coordination across legal, HR, and business stakeholders can make a significant difference in achieving a smooth transition.
4. AI is changing the way companies think about outsourcing and service delivery. How is AI influencing workforce planning, and what should companies consider from a labor and employment perspective when AI is part of an outsourcing strategy?
AI is prompting organizations to rethink not only how services are delivered, but also the skills their workforce will need in the future. In many outsourcing transactions, companies are evaluating opportunities to automate certain functions while simultaneously identifying where employees will need to be reskilled or redeployed into higher-value roles. Those decisions can have significant employment law implications, particularly where workforce reductions, changes in job responsibilities, or consultation obligations are involved.
From the outset of a transaction, organizations should consider how AI may affect the future-state operating model—not just today’s workforce. That includes assessing whether existing employees can be retrained, understanding any legal obligations related to role changes or redundancies, and ensuring that workforce planning aligns with the organization’s broader transformation strategy. The most successful transactions are those where technology, commercial, HR, and legal teams are collaborating early to anticipate these issues rather than reacting to them later.
5. As outsourcing models continue to evolve, what trends are you watching from a labor and employment perspective?
Organizations are increasingly pursuing complex, multi-country outsourcing arrangements alongside broader digital transformation initiatives. At the same time, employment laws continue to evolve, with greater scrutiny of worker protections, consultation obligations, and cross-border workforce changes. We’re also seeing clients focus more on workforce planning, retention of key talent during transitions, and integrating employment considerations into broader risk management strategies from the outset of a transaction.
As outsourcing transactions become increasingly global and complex, labor and employment considerations are no longer just implementation issues—they are strategic business considerations. Having an integrated team that understands both the commercial objectives of an outsourcing transaction and the employment obligations across jurisdictions enables clients to move forward with greater confidence.
Our global technology and outsourcing practice works with clients on the employment issues that can arise in outsourcing transactions, including employee transfers, workforce changes, consultation obligations, and cross-border compliance. Our team helps clients identify these issues early and structure transactions with those considerations in mind.
Kat’s experience is an excellent complement to Morgan Lewis’s global technology and outsourcing practice, and we’re excited to continue bringing clients practical insights on the workforce issues shaping today’s outsourcing landscape.
