Automation, AI, and cloud delivery significantly disrupt the legal frameworks of outsourcing, particularly regarding TUPE regulations, designed to protect employees during service transfers. A McKinsey report indicates that while 92% of companies plan to enhance AI and tech investment, only 1% are AI-mature, exposing legal uncertainties during supplier transitions. TUPE applies when services are deemed "fundamentally the same;" however, if roles are replaced by automation, TUPE may not apply, leaving employee protections in question and creating operational risks.
When outsourcing, the key legal test under TUPE is whether the new service is "fundamentally the same" as the old one; if not, TUPE doesn't apply.
According to a McKinsey report, 92 percent of companies plan to increase AI and tech investment, yet only 1 percent consider themselves to be AI-mature.
As AI and automation increase, legal gray areas are being created, particularly in supplier transitions, highlighting an operational risk for companies.
TUPE was designed to protect employees during service transfers, but shifts to AI and cloud models introduce complex considerations regarding employee protections.
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