Personal Service Contracts: Everything You Need to Know
Personal service contracts are legal contracts that cover actions being performed instead of goods or services being provided. 3 min read
What is a Personal Service Contract?
A personal service contract can be written in several ways, but the important thing to remember is that it will always cover actions. Individual contractors are frequently hired by small businesses. Similarly, the government can hire contracting companies, which creates a relationship between the government and the employees of the company.
Generally, there will be limits placed on personal service contracts, including:
- Length of time.
Personal services are typically defined in two parts. Primarily, a personal service contract is used to define the legal relationship between a person providing a service and the person receiving the service. When offering a unique service, this service cannot be substituted. It is for this reason that the entertainment and sports industries frequently use personal service contracts.
When an employed contract is continuously controlled and supervised while fulfilling their contractual duties, a personal service contract exists under U.S. Code Title 10. This means that when a contractor is a de facto government employee, their non-personal service contract will be legally considered a personal service contract.
If a person provides work for your business, or does work for you personally, but are not your employee, they are considered contractors.
Professionals that provide non-business personal services can include:
Personal services that are business related might include an artist that illustrates a magazine cover or a voice actor that records a commercial. When someone signs a personal services contract, they are required to do the work described in the contract. For instance, if you hire someone to design an addition for your home and they sign a personal service contract, they must complete the work themselves, as you are paying them for their unique style.
Government agencies frequently use personal service contracts when they need work completed but don't require a full-time employee. Typically, the government agency would sign a contract with a business, and then the employees of that business would complete the work.
Service contracts result in an employee/employer relationship when the government agency directs and supervises the person completing the work. It's possible for the personal service contract to result in an unlawful relationship depending on how the contracted employees are being used.
To determine whether the contract you intend to use is considered personal, you can keep in mind the following factors:
- On-site performance.
- Equipment and tools provided by the government agency.
- If the services are being used directly by the agency.
- Comparing the services being provided to those performed by civil servants.
- If the service provided will be needed for more than when year.
- If the service requires direct supervision from the government agency.
The Classifications Act limits personal service contracts that will be used for consultants or experts. There are also requirements for obtaining services from consultants and experts that are maintained by the Office of Personnel Management. A good example of a government agency using a personal service contract is a private security firm hired by the military for the purpose of protecting U.S. contractors that are working for the government overseas. For these contracts to be valid, they must meet strict requirements, including those for civil service employment.
A contractor would be considered an employee if the government agency dictates issues such as:
- Where the contractor works.
- How they should complete their responsibilities.
- The equipment they must use.
- What hours they will work.
Authorized Personal Service Contracts
Under 10 U.S.C. 1091, it is possible to use a personal service contract to hire a health care provider.
Before a personal service contract can be used for an expert or consultant, determinations and findings must authorize the contract by deciding:
- The services will be temporary.
- The services are beneficial to national defense.
- There are no Department of Defense employees that could fill the role.
- Excepted appointment is not possible.
- Using a non-personal contract is not suitable.
Impact and Consequences
When a personal service contract is unlawful, there can be very serious consequences. For example, unlawful contracts will generally violate the Anti-Deficiency Act, particularly if the services in the contract are not legally authorized. Using an unlawful contract may also result in an investigation by the Inspector General and disciplinary/administrative action.
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