Raleigh, N.C. — Recent changes to the State Personnel Act have given North Carolina governors more power to shape their cabinet departments and the policies that come with them.
After Gov. Pat McCrory signed House Bill 834 on Aug. 21, he now has about 1,500 "exempt positions" to designate throughout departments like Transportation and Health and Human Services. That's about 1,000 more than any governor has had in a quarter-century.
Although McCrory contends the changes are needed to increase state government flexibility and reduce bureaucracy, some worry the move could mean more ideology driving crucial decisions governing health, the environment and other areas.
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It defines the broad set of laws related to employment for state workers in North Carolina and creates an appointed commission to make other personnel rules as needed. The State Personnel Act has been in place in one form or another since 1965, although it's seen many changes since then.
Workers can be exempted from the act, and different types of exemptions – policy-making versus managerial, for example – specify which parts of the law apply.
Q. How is working for the state, in particular North Carolina, different from working in the private sector?
Many provisions of the State Personnel Act would look familiar to private sector employees scanning through their corporate human resources policies.
There are portions of the law that govern vacation time, sick leave and equal opportunity employment. In fact, the whole system was established with the idea that state government should apply accepted principles of personnel management "as evolved in government and industry."
Other less recognizable measures are an attempt to balance these best practices with the state's unique position as a government employer.
State employees, for example, still have a level of freedom of speech, but they can't campaign while on duty or use state funds to support or oppose a candidate. They also can't be coerced into supporting someone or retaliated against for their views.
Other pieces of the act are aimed at protecting tax dollars and keeping employees accountable to their ultimate employer – the tax-paying public. Certain information about each employee – salary, age, last disciplinary action and the like – is public record (other information, like emails they send from work accounts or work-related memos, is also public record, but not enumerated in the State Personnel Act).
The State Personnel Act also lays out rules for how jobs must be posted and requires minimum qualifications to keep the competition for jobs open and fair.
But the biggest difference between the public and private sector may be the extended grievance process, which employees can use to appeal an unlawful disciplinary action. Any time state employees are demoted, suspended or fired, they must be told why – and the burden of demonstrating that "just cause" lies with the state. Employees can appeal that decision through a special Office of Administrative Hearings and take it all the way to Superior Court, a process that can take months.
The "just cause" for these dismissals is also public record and is ostensibly an effort to protect state employees from discrimination, whether it's political, gender-based or otherwise.
Few private-sector companies would grant their employees such extensive protections. But because the top executives in the public sector can change after every election, the measures are intended to create stability in what are often highly professional state jobs.
North Carolina is a right-to-work state, meaning potential employees can't be required to join a union in the private sector as a condition of employment. In the public sector, unions are banned altogether, meaning no public worker strikes for increased wages or better benefits.
That hasn't stopped union-affiliated groups from organizing in the state. The State Employees Association of North Carolina, a local division of the Service Employees International Union, has about 55,000 members and can lobby the legislature through its political action committee. The North Carolina Association of Educators, an affiliate of the National Education Association, advocates for teachers and offers free legal representation to appeal disciplinary actions.
But without collective bargaining, the groups are little more than well-funded interest groups with lobbyists.
As for the State Personnel Act protections themselves, it's true that some of them wouldn't be out of place in a union contract. State Personnel Director Neal Alexander pointed to one such provision – "career status" – which grants longtime state workers the benefit of being relocated if their division is reorganized or downsized.
"The thing around state government is that they have this career status and it's, kindly, an entitlement to the job," Alexander said. "It's a protective right. It's almost like they're a union, in essence."
House Bill 834, signed into law by the governor Aug. 21, does away with this provision for designated exempt employees hired after June 30.
Historically, these positions were political appointees concentrated in areas close to the state's chief executive. Cabinet secretaries, for example, are exempt positions.
Employees who fill exempt positions within state government are not subject to certain provisions of the personnel act, key among them the right to contest their termination through a formal grievance process. Exempt employees also won’t have the same protections from arbitrary firings, and some of these positions are subject to fewer rules for the hiring process, among other things.
Elections have consequences, and as such, a new leader might want to put some friends, close aides and supporters in positions to carry out his or her agenda.
That's the reasoning behind a U.S. Supreme Court decision that created a "policy-making" exemption in the mid-1970s. In these exceptions, the court said, political loyalty outweighs "the loss of constitutionally protected rights."
"The concept is that this is the governor's opportunity to see if the people who are in these positions are the kind of people who will help get his initiatives going – or if he needs to get someone else," said Drake Maynard, a human resources consultant who retired from the Office of State Personnel in 2010.
For that reason, these positions were historically political appointees concentrated in areas close to the state's chief executive.
"They serve at the pleasure of the governor, and if their performance level is not there, he has the flexibility to remove them from the positions," Alexander said.
After McCrory signed House Bill 834, he now has 1,500 "exempt positions" to designate throughout state agencies. That's about 1,000 more than any governor has had in a quarter-century.
In the waning days of Gov. Bev Perdue's administration in 2012, the Democrat had exempted 328 positions across eight cabinet departments. The number fell short of her legislative allowance of about 400.
Following a law passed by the Republican-controlled General Assembly in the summer of 2012, McCrory had designated 974 exempt positions as of July 1. House Bill 834 granted him 500 additional exempt designations.
No. At least not all of them.
Exempt positions the governor may designate fall into one of two categories: policy-making or managerial. The loyalty of policy-making employees to the governor is "reasonably necessary" to get the job done, so they're exempted from posting requirements and don't have to be selected from a "pool of the most qualified persons."
Managerial exempt positions, on the other hand, are primarily exempt from the rules governing the appeal process.
For both designations though, the requirement that the state show just cause for termination is effectively erased.
Q. How much leeway do individual departments and managers have in setting salaries for state employees? Does that change for exempt positions?
The Office of State Human Resources is charged with setting the pay range and leave for all employees subject to the personnel act. Departments have the ability to set salaries for individual employees within those ranges based on experience and qualifications, although some are set in stone by state statute.
Exempt positions – whether policy-making or managerial – are subject to these same rules. Alexander said the staff of the state personnel office makes recommendations after considering a range of factors.
"We have the accountability in state personnel to look at the background skills of the people and determine the classification and the pay range for them," Alexander said. "We make a recommendation in a lot of cases on compensation based on the qualifications."
The General Assembly didn't place a cap on the number of exempt positions a governor could designate until 1985. Six months into the administration of Republican Gov. Jim Martin, the Democratic legislature overhauled the State Personnel Act, limiting the number of "policy-making positions" Martin could designate to about 325.
"On the whole, it was better not to have an unlimited number of policy-making exempt designations," said Maynard, who worked at the personnel office at the time and specialized in these designations before his retirement.
Put simply, designating positions exempt gives supervisors the ability to fire an employee without cause and clear them out without waiting on an appeal process.
In the case of policy-making employees, hiring managers don't need to post the position publicly, meaning they can hire people immediately. Although policy-making employees must still meet "reasonable qualifications" for the job, they do not have to be chosen from a "pool of the most qualified persons" like managerial exemptions do.
One technical caveat, passed in the 2012 session, gives governors additional flexibility. There's no longer a limit to the number of policy-making designations they're able to make as a proportion of the total cap. Before 2012, governors had 100 policy-making positions, with the remaining 300 or so exempt managerial.
The distinction still exists, but without a limit. Governors have the unfettered ability to allocate policy-making exemptions as they please.
McCrory and Republican leaders say this is a good move toward streamlining a government hampered by bureaucracy.
"We think the State Personnel Act revisions are the first steps toward reform to give myself and my cabinet more flexibility in improving the efficiency and effectiveness of state government," McCrory said of House Bill 834 at a July 26 news conference.
But there are others who worry that expanding the number of exempt positions makes government more partisan.
More exempt positions, the theory goes, means more ideology in what would otherwise be professional positions within state government. Without protections from political reprisal, exempt employees several levels down the food chain might feel pressure to toe the party line.
The absence of qualification and posting requirements has others worried about the impacts of a less experienced state government.
"It's hard to know all the details, but any time the number of political positions is expanding, the possibility of people being appointed who lack the proper credentials increases," said Rep. Paul Luebke, D-Durham, who was one of only 10 lawmakers to vote against House Bill 834.
But personnel officials contend they have the authority to look critically at the backgrounds of policy-making employees. McCrory spokesperson Rick Martinez said the governor has no interest in micromanaging his cabinet staffers.
"The governor's not going to go around checking up on 1,500 employees," Martinez said.
All indications point to no. Luebke, Alexander and Martinez all said there are no plans in the works to increase the cap on exempt positions further. But that doesn't mean the State Personnel Act won't see more changes under McCrory's watch.
"There's more to come with regard to the State Personnel Act that I know we must implement, but this is a good first step," McCrory told reporters in July.
EDITOR'S NOTE: The piece was updated on Aug. 22 to reflect changes in the personnel act that went into effect with the passing of House Bill 834 into law.
CORRECTION: A previous version of this piece incorrectly reported that exempt employees are not subject to rules governing compensation, qualifications and leave. In fact, exempt employees – both policy-making and managerial – are subject to rules governing compensation, qualifications and leave per G.S. 126-4(2) 4(3) and 4(5).
CLARIFICATION: A previous version stated salary ranges were set by the appointed State Personnel Commission. Salary ranges are set by the State oOfice of Human Resources through the authority granted by the commission.