USA Law and Practice Contributed by: Jeffrey Harvey, Randall Parks, Andrew Geyer and Cecilia Oh, Hunton Andrews Kurth LLP
the confidentiality and security of personal informa - tion. Furthermore, the New York State Department of Financial Services’ cybersecurity regulations require that covered entities develop and implement a third- party service provider policy that addresses minimum cybersecurity practices of vendors, the due diligence processes used to evaluate vendors, and any contrac - tual provisions required in agreements with vendors. Even where there is no legal requirement to do so, it is common practice for companies in the USA to include privacy and data security terms in vendor contracts that establish use limitations and the vendor’s respon - sibility to protect the data it receives, and that assign liability as appropriate in the event of a data breach or other privacy or security violation. 4.6 Performance Measurement and Management There are myriad ways to manage and measure the supplier’s performance in outsourcing transactions, the most common being through service levels (SLAs). Approaches to SLAs can vary but generally the suppli - er will have a certain amount of its monthly fees at risk (typically between 10% and 20%) in the event one or more SLAs are missed. Experience level agreements (XLAs) are another approach, where the focus is more on the customer experience and business impact rather than on more traditional SLAs like availability and response time. Another form of performance measurement and management is a robust govern - ance model, which typically consists of an executive steering committee together with other service deliv - ery and operational committees. Unlike SLAs, which provide a remedy in the event of a service failure, gov - ernance models help mitigate a service failure from even occurring by ensuring the parties are in regular communication. 4.7 Digital Transformation Although several of the contract terms mentioned throughout 4. Contract Terms are relevant in cloud- based offerings, the customer’s ability to obtain con - cessions from a cloud provider on such contract terms is more challenging, owing to the commodity nature of such offerings. Cloud-based deals are also gen - erally for a shorter term than traditional outsourcing agreements and narrower in scope, which reduces the
need for certain terms (eg, market currency, sweeps clauses, etc).
5. Employment Matters 5.1 Employee Transfers
In the USA, employees are not transferred to the pro - vider as a matter of law. If the parties wish to accom - plish such a transfer, they must agree to that as part of the transaction documents. They must also put in place an offer and acceptance process to effectuate the transition. If the employees are not transferred as part of the transaction, the employees will remain employed by the original employer who can in turn redeploy the employees on other matters or terminate their employ - ment. In the absence of an employment contract stat - ing otherwise, the employees are employed “at will” and – in the absence of a WARN Act qualifying event (see 5.2 Role of Trade Unions or Workers’ Councils ) – can be terminated at any time for any reason, with - out notice and without severance or redundancy pay. Notification to any labour unions will be governed by the terms of any applicable collective bargaining agreements. 5.2 Role of Trade Unions or Workers’ Councils The Worker Adjustment and Retraining Notification Act (the “WARN Act”) is implicated if the outsourc - ing transaction involves a “mass lay-off” or a “plant closing” as defined in the WARN Act. In the event of a mass lay-off or plant closing, the employer must provide 60 days’ advance notice prior to termination. Many states in the USA have their own “Mini-WARN Acts”, which must also be accounted for before imple - menting a termination programme as part of an out - sourcing transaction. 5.3 Offshore, Nearshore and Onshore One of the principal drivers for customers in all out - sourcing transactions is reduced costs. Providers are generally more capable of achieving these cost- reduction goals when they employ their offshore resources. Accordingly, a significant portion of the
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