Background
Twenty-eight former USAID personal-services contractors sued the United States after USAID terminated their contracts in February 2025. They alleged that the administration ended their relationships without cause because it distrusted their perceived political affiliations and viewed their work as indirectly supporting the Democratic Party.
The plaintiffs asserted First Amendment, breach-of-contract, implied-covenant, and Administrative Procedure Act claims. They sought damages, back pay, fees, costs, and reinstatement, contending that they should be treated as federal employees rather than contractors. The government moved to dismiss, arguing in part that the plaintiffs were contractors subject to the Contract Disputes Act and had not first presented claims to their contracting officers.
The Court’s Holding
The court granted the government’s motion to dismiss. It held that the plaintiffs were contractors, not federal employees. Their agreements were expressly titled contracts for personal services, repeatedly described each plaintiff as a contractor, distinguished contractors from USAID direct-hire employees, and were executed by contracting officers.
The court rejected the plaintiffs’ argument that Section 636(a)(3) of the Foreign Assistance Act made them federal employees for all laws not administered by the Office of Personnel Management. It concluded that the statute provides only limited employee treatment for specified non-OPM purposes and does not convert personal-services contractors into federal employees.
Because the plaintiffs were contractors, the Contract Disputes Act required them to submit their claims to a contracting officer before suing. None had done so, creating a jurisdictional bar to the contract claims. Without a viable money-mandating claim, the Court of Federal Claims also lacked jurisdiction over the collateral First Amendment and APA claims.
Key Takeaways
- USAID personal-services contractors do not become federal employees merely because federal law treats them as employees for certain limited purposes.
- A contractor must present a contract-related claim to the contracting officer before pursuing it in the Court of Federal Claims under the Contract Disputes Act.
- Failure to exhaust that administrative process deprived the court of jurisdiction over the plaintiffs’ contract claims and left no valid monetary claim supporting their remaining constitutional or APA theories.
Why It Matters
The decision underscores that contractual language and the governing statutory framework control whether USAID personnel are contractors or federal employees. Limited statutory treatment as an employee does not necessarily confer the broader protections or procedures available to federal civil-service employees.
For federal personal-services contractors challenging termination, the ruling emphasizes that submitting a claim to the appropriate contracting officer is a jurisdictional prerequisite. The court noted that the plaintiffs might still be able to pursue that administrative route and later seek relief.