Outsourcing transactions are different than the other complex transactions, such as acquisitions or divestitures, faced by in-house counsel. They are not zero-sum, win-lose negotiations, but are instead the beginning of a long-term relationship. The playing field may not be level since the vendor is an expert and the customer frequently is not. Also, unlike other negotiations handled by in-house counsel, the key business terms, such as price and scope, often fluctuate during the negotiation of the contract. For these reasons (and more), an attorney knowledgeable about outsourcing transactions has the opportunity to add significant value, both as a project manager and as a substantive expert. This article will address some of the areas that need to be “managed” by counsel to avoid what can be significant problems.

Employee Issues

One of the very first questions to ask your client is: Are employees being transferred to the vendor (sometimes called “rebadging”) or terminated as part of the transaction? If the answer is yes, it is critical to start addressing the possible issues early. To perhaps state the obvious, you must be thoughtful regarding when and what you communicate to your employees. On this topic, outsourcing transactions are in fact similar to divestitures – there is a significant risk that morale and productivity can plummet once employees find out about the pending transaction. Inside counsel should make sure that your HR and communications professionals are fully engaged and focused on these issues. In general, the approach should be (1) maintain confidentiality (if you can) for as long as is reasonable, and then (2) communicate clearly, and often, to your employees as inoculation against the rumors that will otherwise arise.