CHAPTER 17
Key Personnel

A key personnel clause requires that seller use specific individuals in the fulfillment of a contract. The clause will typically specify a key personnel’s level of education and years of experience on the job. The qualifications identify the minimum requirements that a replacement for a key individual identified in the contract must possess. Often a key personnel clause will specify the percentage of time an individual will dedicate to the project covered by the contract, which can be up to 100 percent. Buyer must approve substitutions to key personnel. A standard personnel provision is exemplified in the following paragraph:

The Contractor shall identify key personnel for each of the positions identified below:

Program Manager – Tricia Morgan

Principal Engineer – Frank Baleno

Senior Scientist – Rebecca Kimball

During the entire agreement, seller shall make no substitutions of key personnel unless the substitution is necessitated by illness, death, or termination of employment. Seller shall immediately notify buyer after the occurrence of any of these events and provide the information required below. Seller must provide a detailed explanation of the circumstances necessitating the proposed substitutions, provide complete resumes for the proposed substitutes, and provide any additional information requested by buyer. Proposed substitutes will have qualifications that are equal to or better than those of the persons being replaced. Seller will notify the contractor within fifteen calendar days after a suitable replacement is found. The contract will be modified to reflect any approved changes of key personnel.

RISK

Agreeing to a key personnel clause ties up a particular individual for a specified period of time, thereby limiting seller’s ability to utilize their services on other projects. This can be detrimental to a company with limited resources, particularly when a specific employee offers expertise that others may not possess; this becomes a problem when the employee’s expertise is required for the success of other programs.

The employee who is categorized as a key personnel for a specific program also faces potential consequences, for example, the ability to advance might be limited because the employee’s current salary, inclusive of annual average escalation factors, is tied into the contract. This may limit the employer’s ability to offer promotions beyond the negotiated value in the contract. Occasionally, key employees may be hindered from taking training courses because their time is required to fulfill contract obligations.

RESPONSE

The first line of defense is attempting to negotiate out a key personnel provision, or to negotiate key labor categories rather than individual persons. If this fails, try mitigating the impact by incorporating language allowing seller some flexibility to (1) reassign the key personnel for career development and promotions, (2) allow for training, (3) allow key personnel to conduct other administrative duties, and (4) to allow key personnel to carry out temporary assignments with other buyers. Consider proposing the following clause or one similar when attempting the mitigation techniques described above:

1) Seller’s key personnel will be dedicated to the buyer’s account on a ___________% basis, provided however:

a) Each seller key personnel may (i) participate in ongoing training consistent with seller’s general training programs for up to approximately _______ hours per calendar year and (ii) discharge their normal administrative responsibilities as an employee of seller, provided that, in each case, such activities do not adversely impact buyer’s receipt of services; and

b) Seller’s key personnel may be temporarily deployed by seller on matters for other clients or potential clients of seller, provided that such redeployment does not adversely impact buyer’s receipt of services.

2) Before assigning an individual to any seller key personnel provision, whether as an initial assignment or as a replacement, seller shall a) notify buyer of the proposed assignment, b) introduce the individual to the buyer, c) provide the buyer with a resume and any other information regarding the individual who may be reasonably requested by the buyer, and d) obtain buyer’s approval for such assignment. Seller shall only assign an individual who is approved by buyer to any seller key personnel position.

3) Seller shall not replace or reassign more than ________% of seller’s key personnel for two years from the effective date, unless buyer consents to such reassignment or replacement or such seller key personnel (i) voluntarily resigns from seller, (ii) is dismissed by seller, (iii) fails to perform their duties and responsibilities pursuant to the agreement, (iv) dies or is unable to work due to their disability.

4) If buyer decides that any seller key personnel should not continue in that position for any reason other than a basis prohibited by applicable laws, rules, or regulations, then buyer may in its sole discretion and upon notice to seller require removal of such seller key personnel. Seller shall, as soon as reasonably practicable, replace such seller key personnel.

5) Seller shall maintain backup procedures and conduct the replacement procedures for seller’s key personnel in such a manner as to assure an orderly succession for any seller key personnel who is replaced. Upon request, after a determination that any seller key personnel will be replaced, seller shall make such procedures available to buyer.

6) Conduct of Key Personnel: While at buyer’s service locations, seller and seller’s agents shall a) comply with the requests, standard rules and regulations of the buyer regarding safety and health, personal and professional conduct generally applicable to such service locations of the buyer, and b) otherwise conduct themselves in a businesslike manner. Seller shall cause the project staff to maintain and enforce the confidentiality provisions of this agreement. In the event that buyer determines that a particular member of the project staff is not conducting themselves in accordance with the agreement, buyer shall promptly a) investigate the matter and the appropriate action, which may include (i) removing the applicable person from the project staff and providing seller with prompt notice of such removal and (ii) replacing the applicable person with a similarly qualified individual or b) take other appropriate disciplinary action to prevent a recurrence. In the event there are repeat violations of the agreement by a particular member of the project staff, seller shall promptly remove the individual from the project staff as set forth above.

7) Non-competition: Seller shall not assign any seller key personnel to the account of any competitor of buyer without buyer’s prior consent: a) while such seller key personnel or member of the project staff, as the case may be, is assigned to the buyer account, and b) for a period of two years following the date that such seller key personnel, as the case may be, is removed from or ceases to provide services in connection with the buyer account.