Effects of Legislation on HR Outsourcing

Effects of Legislation on HR Outsourcing

In recent years, more companies are turning to human resource outsourcing as a way of cutting costs. In response to this, the local, state and federal governments have established regulations curtailing outsourcing. These regulations have come to be known as anti-outsourcing laws which are common in many states (Jamieson, 2012). State legislation of outsourcing is meant to curtail outsourcing. Between the years 2003 and 2004, the number of bills seeking to reduce outsourcing rose tremendously from 4 to over 200 bills. Additionally, over 20 states were already seeking approval to pass the bills into law (“Thomson Reuters,” 2015). All the bills were meant to curtail in different ways outsourcing.

Most states have already passed legislation curtailing HR outsourcing. Possible consequences passed by these states include class action litigation and legislative initiatives that curtail outsourcing. For instance New Jersey’s S.494 law curtails the performance of service contracts outside of the U.S. (“Thomson Reuters,” 2015). The law only provides certain exemptions to outsourcing for example, in a situation where the service cannot be rendered within the U.S.  Other states such as North Carolina, Illinois and Tennessee have also introduced outsourcing legislation. For instance, Tennessee has introduced outsourcing legislation that requires companies to give preference to U.S. citizens when awarding call centre or data entry jobs (“Thomson Reuters,” 2015). Such state legislations have reduced human resource outsourcing. In Kansas, outsourcing legislations were also introduced with curtailing effects. The Kansas Incentive Protection Act for instance discourages companies from outsourcing jobs by declining financial incentives to companies that outsource (Jamieson, 2012). This has led to a decline in outsourcing as the state may decline financial aid to companies.

Read also : MGT 460 Leadership Priorities & Practice

Local legislation has also reduced human resource outsourcing. In some states, enactment of bills to regulating outsourcing is carried out at the municipal or local level. In New York, the city council yields power to decide whether to outsource a particular service or not. For instance, the council has already formulated the Outsourcing Accountability Act (“Thomson Reuters,” 2015). This act documents that the city council must at all times prove beyond doubt that outsourcing will save the council money. This act amended the previous law which allowed outsourcing without any cost-benefit analysis being performed by the council. Such local legislation has gone a long way in reducing human resource outsourcing. Other states such as Tennessee have given the Finance Commissioner the power to decide on issues relating to outsourcing (“Thomson Reuters,” 2015).

Federal legislation on HR outsourcing is yet to take root in the U.S. Federal law applies to all states in the U.S. Although there have been active attempts to introduce federal laws that regulate outsourcing, none of these bills have passed into law (“Thomson Reuters,” 2015). In 2004, the federal government introduced a ban on outsourcing of a number of federal agency contracts. Nonetheless, the legislation was temporal. In 2010 and 2011, attempts were made at introducing a federal law that would regulate outsourcing. The act, S.B. 3816 was defeated and thus did not take effect. The Outsourcing Accountability Act introduced in 2012 was also defeated. This act would curtail outsourcing activities of companies with a net worth of over US $1 billion (“Thomson Reuters,” 2015). The federal legislation on human resource outsourcing therefore does not have any effect on human resource outsourcing.


Jamieson, D. (2012, March 21). Anti-outsourcing bills would punish companies that send jobs     overseas. Huffington Post. Retrieved from        http://www.huffingtonpost.com/2012/03/21/anti-outsourcing-offshore-call-center-      jobs_n_1371162.html

‘Thomson Reuters’, (2015). Practical Law. Retrieved from http://us.practicallaw.com/3-501-        5071