Legalities Surrounding Outsourcing in Business

The structuring of companies in 2018 can arrive in many various forms. There are the traditional models that adopt a top-down system of management whilst others will embrace a more fluid style that has shared interests and a socialized ownership hierarchy that is flatter by design.


Another element that comes into play to complicate issues further is outsourcing – the casual hiring of a third party in the form of freelancers or an external company.


Seen as an ideal short-term option to reach a particular objective, there are legal concerns surrounding outsourcing that should be identified.



A contract that is entered into between two affiliates should recognize the need to include liability cover. Despite best efforts, the end result might not be reached and each side should specify how much liability will be afforded in the event that an unsatisfactory outcome will be presented.

Intellectual Property


The services that are provided by another party must be agreed upon beforehand where an agreement is reach. What could compromise or complicate these proceedings is the notion of intellectual property, an asset that could either be in possession of the employer or the employee depending on the nature of the partnership. A supplier license might need to be introduced to offer an insurance and guarantee that the intellectual property will be protect and not transferred in any manner.

Labor Law


The domain of labor law is vital, particularly if the outsourced party is located in a domestic setting. For US individuals or companies, there will be basic requirements surrounding minimum pay, weekly hour stipulations and anti-discrimination benchmarks that must be adhered to. This situation is complicated when overseas parties are engaged with, as this is an area that should be analyzed and discussed with between legal representatives.

Conflicts of Interest


Here is one legal issue that might arise from the area of outsourcing that is somewhat out of the box. Should an agreement be formed whereby a relationship is already in place where a potential tender is ignored, then a conflict of interest might very well be established. Organizations that are seeking the services of the best qualified candidates must not engage in prior relationships in these instances and those individuals who compromise this process could find themselves and their brands in legal jeopardy.



Before engaging in the practice of outsourcing, it is worthwhile reflecting on the rationale behind embracing this option. Are you seeking to up-skill your workforce? Is it purely a cost cutting exercise? Is there a specified outcome you are looking to achieve? Ensure that the advantages outweigh the disadvantages before proceeding with this practice.