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State Employees: Have Your Appeal Rights Changed?

By Catherine E. Lee

On August 21, 2013, Governor McCrory signed into law House Bill (“HB”) 834, which revises major provisions of the North Carolina State Personnel Act, N.C.G.S. § 126.

The North Carolina State Personnel Act, passed approximately 50 years ago, provides a variety of protections to State employees and certain local government employees. Among the most valued protections are just cause dismissal rights for covered employees with 24 or more months of service, and priority consideration rights for employees who are laid off during a reduction-in-force.

The final version of House Bill 834 is reflective of significant compromises between the General Assembly and The State Employees Association of North Carolina. A summary of its major provisions is set forth below:

1. HB 834 Increases the Number of Employees Designated as Exempt
The passage of HB 834 increases the number of employees designated as exempt from 1,000 to 1,500, and provides that exempt employees now may be designated in the Office of Information Technology Services, the Office of State Budget and Management, and the Office of State Personnel. An “exempt” employee generally is a political appointee who may be hired or fired at will. N.C.G.S. § 126-5(d)(1).

2. HB 834 Changes the Composition of the State Personnel Commission
The State Personnel Commission (“SPC”) is the policy and rule-making body tasked with managing the system of personnel administration. The Office of State Personnel (“OSP”), among other things, makes recommendations for policies and rules to the SPC, develops and administers standards for good personnel management, and provides oversight over agency’s compliance with SPC rules and regulations.

a. The passage of HB 834 gives the General Assembly more control over the composition of the State Personnel Commission. Previously, the SPC was composed of nine members:

• One licensed attorney appointed by Speaker of the House of Representatives and one licensed attorney appointed by President Pro Tempore of the Senate;

• Two people from the business community with knowledge and experience in human resources management, appointed by the Governor;

• Two nonexempt State employees subject to the State Personnel Act, appointed by the Governor;

• Two local government employees subject to the State Personnel Act, appointed by the Governor; and

• One public member appointed by Governor.

N.C.G.S. § 126-2.

b. With the passage of HB 834, the SPC remains composed of nine members. However, the Speaker of the House of Representatives and the President Pro Tempore of the Senate now each appoint one member from the business community. Furthermore, the term of each member is now four years, instead of six years. Five members, instead of six members, constitute a quorum. N.C.G.S. § 126-2.

c. The passage of HB 834 also places the administration of OSP within the Office of the Governor, rather than Department of Administration. N.C.G.S. § 126-3(a)

3. HB 834 Repeals Priority Reinstatement Rights for Employees Hired After June 30, 2013
One of the most substantial changes made to the State Personnel Act is that employees hired after June 30, 2013 will not have priority reinstatement rights, which previously were set forth in N.C.G.S. § 126-5(e). However, employees hired before June 30, 2013 will continue to have priority reinstatement rights once they reach the requisite number of cumulative years of service.

Specifically, exempt employees hired before June 30, 2013 have priority re-employment rights to any available position for which they are qualified, if they are removed from employment for reasons other than just cause, and if they have between two and ten years of cumulative service. Exempt employees hired before June 30, 2013 must be reassigned to a position, with the same pay grade and salary and within a 35-mile radius of their previous position, if they are removed from employment for reasons other than just cause, and if they have ten or more years of cumulative service. N.C.G.S. § 126-7.1.

4. HB 834 Changes Procedures for Filing Grievance, OAH Appeals, and Petitions for Judicial Review
a. Other substantial changes to the State Personnel Act include changes in the employee grievance procedures, the Office of Administrative Hearings (“OAH”) appeals, and petitions for judicial review. These changes appear to bring more uniformity to the grievance process. First, all state employees are now required to follow grievance procedures promulgated by the SPC, whereas previously, those employees were required to follow the grievance procedures of the department or agency in which they worked. Second, the Office of State Personnel must approve all proposed Final Agency Decisions by a state employee’s department or agency before an employee may appeal to OAH, whereas previously, an employee who was dissatisfied with his employer department or agency’s handling of the grievance could proceed directly to OAH. N.C.G.S. § 126-34.01. Third, the employer/agency grievance procedure and Office of State Personnel review shall be completed within 90 days from the date the employee filed his/her grievance.

b. HB 834 alters the timeframe in which OAH must hear an employee’s contested case appeal, and issue a Final Decision. First, OAH shall hear and issue a Final Decision in personnel contested cases within 180 days after the employee files his/her petition with OAH, unless extraordinary cause exists. Second, the types of cases that OAH may hear are limited to the following categories:

• Discrimination or harassment on the basis of race, religion, color, national origin, sex, age, disability, political affiliation, or genetic information;

• Retaliation on the basis of race, religion, color, national origin, sex, age, disability, political affiliation, or genetic information;

• Failure to discharge/demote/suspend employee for just cause;

• Failure to provide veteran’s preference;

• Failure to post/give priority consideration; and
• Whistleblower discrimination/retaliation.

By so limiting the types of cases that OAH may hear, HB 834 removes employees’ rights to appeal the denial of a request to remove inaccurate information from their personnel files, and appeal of violations of the Fair Labor Standards Act and the Family Medical Leave Act. N.C.G.S. § 126-34.01, -34.02

c. Under HB 834, state employees continue to have the right to appeal adverse OAH decisions through a petition for judicial review. However, such petitions now must be filed with the Court of Appeals, rather than in superior court. N.C.G.S. § 7A-29(a).

d. HB 834 also authorizes OAH, as opposed to the SPC previously, to award attorneys’ fees to an employee where reinstatement or back pay is ordered, or additional, where an employee prevails in a whistleblower grievance. Remedies provided in the HB 834 in a whistleblower appeal shall be the same as in G.S. § 126-87. N.C.G.S. § 126-34.02(e).

e. This bill’s N.C.G.S. § 126-34.02(f) imposes a reporting requirement on OAH that was not statutorily required before. Now, OAH must file a semiannual report with OSP and the Joint Legislative Ad-ministrative Procedure Oversight Committee on the number of cases filed under that section, and on the number of days between the filing and closing of each of these contested cases.

While the passage of HB 834 provides some additional uniformity and consistency to the State Personnel Act, covered employees should be careful to review the new changes and to consult an attorney with any questions about their rights and obligations under the new

Catherine E. Lee is an associate with Allen, Pinnix & Nichols, P.A. in Raleigh, NC. Catherine’s legal practice focuses on employment law, administrative law, civil litigation, and contract disputes, with an emphasis on matters involving state occupational licensing boards and public employment. She may be reached at