Managing Legal Risks In Labour Outsourcing

Introduction

The need to cut costs and remain competitive in the global market has  fuelled the growth of outsourcing as a business model. But while outsourcing offers numerous benefits and opportunities for the client companies and the labour contractors respectively, this business model is not without its legal risks and challenges.

From the client companies’ perspective, there is the potential risk of making the client company a co-employer of the outsourced staff with attendant joint liabilities, especially in cases where the client companies have exercised evidence-based control over such staff. Our Courts have held that client companies may become co-employers where the ‘primacy of facts’ dictate such conclusi on. And because labour outsourcing creates a triangular employment relationship, it is sometimes difficult to locate rights, duties and responsibilities among the parties.

There are also potential corporate and reputational risks. Where a company retains outsourced employees, will such employees demonstrate acceptable ethics, loyalty and professionalism? Would client companies’ trade secrets be safe with them or will it get to the competitors? How do we also guarantee the welfare of the outsourced employees to prevent industrial relations crisis and disruptive staff exit?