Personnel experts: DHHS settlement may violate state constitution

Posted October 17, 2013

— Department of Health and Human Services officials may have violated the North Carolina Constitution when they cut a $37,000 check to an outgoing worker on the job for only a month, personnel experts say.

Raleigh attorney Michael Byrne, who regularly represents state employees challenging their terminations, says the settlement appears to violate a section of the state constitution that explicitly prohibits payments to state workers for anything other than "public services."

All told, DHHS paid Chief of Staff Thomas Adams $51,246 for a little more than four weeks of work. Aside from his regular salary, Adams took home $37,227 as part of a "settlement agreement" about four months after he left.

That settlement, signed by DHHS Secretary Aldona Wos and approved by State Budget Director Art Pope on July 30, said DHHS would pay the sum "in exchange for Mr. Adams' agreement to waive all appeal rights and release the Department and its officials and employees from any liability or responsibility."

In a written response to questions from WRAL News, a personnel office spokeswoman said this waiver means it was not a gift of public money, which Article I of the constitution forbids.

dhhs-settlement Settlement to departed DHHS employee raises questions

But Adams never contested his separation from the job or filed a grievance, so he sought no legal fees. Payment data provided by DHHS show he received his regular salary as well as vacation payouts, so he was owed no back pay. As an exempt employee who could be terminated at will, he had no employment contract.

"I am utterly baffled as to why they would approve a nearly $40,000 settlement under those circumstances," Byrne said. "State agencies simply can't pay people money for nothing."

Adams did not return a call to his office at the North Carolina Captive Insurance Association, where he works as president and chief executive.

In response to questions from both reporters and lawmakers, DHHS officials have refused to elaborate on the reasons for the settlement, citing confidential personnel matters.

"The settlement agreement was prepared using a template provided to DHHS by [the Office of State Human Resources]; complied with all rules, laws and procedures; had the necessary reviews and approvals and the settlement agreement lists some of the claims released," DHHS spokesman Kevin Howell said in a written response.

North Carolina Constitution

Article 1, Sec. 32

Exclusive emoluments
No person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services.

SOURCE: ncleg.net

Howell directed further questions to the Office of State Human Resources but did confirm that "a DHHS lawyer with knowledge of personnel laws" reviewed the agreement before it was approved.

But it appears the state did not follow its own rules before issuing the payout.

According to settlement guidelines from the Office of State Human Resources, Adams' payment would likely be subject not just to OSHR approval, but "additional review" as well.

A personnel office spokeswoman said in a written response that OSHR Director Neal Alexander did not see the actual agreement before it was submitted to the budget office.

DOCUMENT: Thomas Adams' settlement agreement

"[Alexander] has since reviewed the agreement and thinks that the terms of the agreement are appropriate," Margaret Jordan, OSHR public information officer, wrote in the statement.

As for why the agreement needed Pope's signature before Adams received payment, Jordan wrote that the governor can designate his ability to settle legal claims to the budget office.

"The State has the inherent authority to settle any legal matter, actual or threatened, against the State of North Carolina through the constitutional and statutory authority given to the Governor and the Council of State," Jordan wrote.

Regardless of the approval process, these types of payments weren't permitted when Drake Maynard retired from the personnel office in 2010. For almost a decade, Maynard managed approval of settlement agreements in collaboration with the attorney general's office.

One basic tenet, he said, was that there was "no way to give somebody a flat payment to shut up and go the hell away." He said the Adams payment was one he would not have approved.

"This is essentially violating the principle of the North Carolina constitution that you can't give state money away," Maynard said.

It's difficult to determine whether the McCrory administration or the cabinet departments under his Democratic predecessor, former Gov. Bev Perdue, have issued similar settlements in the past. OSHR bears the responsibility for reviewing many types of settlement agreements, but Jordan said the agency is not required to retain copies.

In response to a record request for all settlement agreements back to July 2012, the agency returned only about 40 documents, all of them agreements for legally allowable payments like back pay, benefits or attorney fees or retractions of disciplinary decisions.

The agreement for Adams was not included in OSHR's response.

"I'm not aware of any similar circumstance close to this in living memory," Byrne said.

But in 1995, Byrne pointed out, the North Carolina Supreme Court found that a $5,000 "retirement present" to a departing Warren County manager violated the constitution. Justice Robert Orr, ruling with the majority in Leete v. Warren County, said the constitution protects taxpayers from public officials who use their positions to "unduly secure added compensation."

"The wisdom of prohibiting such additional compensation for a public servant official upon his voluntary resignation, absent a contract stating otherwise, is grounded in the interest of good government and founded on sound reasons of public policy," Orr wrote.

If not under the same circumstances, there have been other high-dollar payments to departing employees.

Karen West, who was promoted to general counsel of the Department of Commerce under Perdue, left the agency in September with an $80,000 settlement. West, however, legally contested her firing from the department in administrative court and sought back pay and legal fees.

Although Adams' payment runs counter to the guidelines Maynard wrote for the office before his departure, he said it could be the result of a simple mistake.

"We've got a new administration and new people, and maybe they're just not familiar with how things work," Maynard said.


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  • SARCASTICLES Oct 22, 2013

    Rumor has it that Aldona Wos is secretly a DEMOCRAT who is trying to destroy the NCGOP........makes perfect sense. The democrats couldn't do a better job than this if they tried.

  • free2bme Oct 21, 2013

    What is going to be done about it, that is what I want to know. I am tired of hearing about all the underhanded things Wos is doing.

  • wildpig777 Oct 21, 2013

    [abuse] Report abuse


    The stuff taking place in State Government currently makes the Jim Black days look like child's play.

    ah -- no. jim black was taking bribes in the mens bathroom and gov mc has been renovating the bthrms and in fairness-- making exceedingly poor personel decisions......

  • crkeehn Oct 20, 2013

    @nighthunter - An exempt position under the NC State Government does include a terminate at will clause.

  • stormtrooper76 Oct 19, 2013

    The stuff taking place in State Government currently makes the Jim Black days look like child's play.

  • stormtrooper76 Oct 19, 2013

    "Looks to me like Byrne has an agenda towards discrediting DHHS."

    Hogwash. With your line of thinking, I guess the State Constitution is discrediting DHHS also. DHHS leadership is dismantling the public trust piece by piece. For anyone to say otherwise just shows that they are staunch partisans and refuse to look at all the facts.

  • bill0 Oct 18, 2013

    "Looks to me like Byrne has an agenda towards discrediting DHHS."

    Nobody needs an agenda like that. DHHS is doing a fine job of that on its own.

  • nighthunter Oct 18, 2013

    Just because your status is exempt- which means that you are being paid a salary not an hourly wage - and therefore do not need to account for working a 40 hour work week, or overtime, (some times you work more than a 40 hour week; sometimes less)does NOT mean that you do not have a contract with the state for the terms of your employment, which may or may not include a "terminate at will" clause.

  • nighthunter Oct 18, 2013

    So this story is about one attorney who "thinks" that DHHS might be in the wrong, even though the documents went through a standard OSHR procedure, and even had it reviewed by other lawyers and the Director of OSHR and the PIO at OSHR had reviewed the docs since then and found nothing wrong. Looks to me like Byrne has an agenda towards discrediting DHHS.

  • Sally1023 Oct 18, 2013

    Not surprised, Saw Lewis Black last night, he went to UNC and has a place in Chapel Hill. I wish I could repeat his very insightful observations on our crazies in Raleigh.