GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 307

Short Title:  GPAC/State Performance Pay.	(Public)
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Sponsors: Senator Martin of Guilford.
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Referred to:  Government Performance Audit.
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February 22, 1993

A BILL TO BE ENTITLED
AN ACT TO IMPLEMENT RECOMMENDATIONS OF THE GOVERNMENT PERFORMANCE AUDIT COMMITTEE REGARDING STATE EMPLOYEE PERFORMANCE PAY AND THE APPRAISAL OF STATE EMPLOYEE PERFORMANCE.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 126-7(c) reads as rewritten:
"(c)	Performance increases shall be based on performance appraisals of all employees conducted by each department, agency, and institution.  The State Personnel Commission, under the authority of G.S.126-4(8), shall adopt policy and regulations for performance appraisal.  The policy and regulations shall include the following:
(1)	The performance appraisal system of each department, agency, or institution shall be designed and administered to ensure that performance increases are distributed fairly and to reward performance that meets or exceeds performance requirements.  Employee performance exceeding requirements will receive greater rewards than performance that only meets performance requirements.
(1a)	Employees shall progress through salary grades based upon performance and an employee's location in the salary grade in accordance with guideline charts that identify an employee's current performance rating and location in the pay grade.  Guideline charts shall determine the amount of an employee pay increase.
(2)	To be eligible to distribute its share of the performance increase allocation, a department, agency, or institution shall have an operative performance appraisal system which has been approved by the State Personnel Director.  The performance appraisal system adopted shall use a rating scale of:
a.	Five levels, with the top three levels qualifying for performance increases; or
b.	Other than five levels, with the levels qualifying for performance increases to be designated by the State Personnel Commission, for those job classifications in those employing units where a department, agency, or institution demonstrates to the State Personnel Commission that some number of levels other than five would be appropriate, and the State Personnel Commission, after conducting a public hearing, determines that a rating scale of other than five levels is more appropriate than five levels for a particular job classification within a particular employing unit.
	There shall be a presumption that a five-level system is the most appropriate system, and the department, agency, or institution must demonstrate with clear and convincing evidence that a different system is more appropriate.  The performance appraisal system adopted shall adhere to modern personnel management techniques and practices in common use in the public and private sectors.  
(3)	The State Personnel Director shall coordinate the efforts of departments, agencies, and institutions to establish and administer their performance appraisal systems and shall provide initial and ongoing training in performance appraisal and performance system administration.  Training sessions for supervisory personnel on the performance appraisal system, effective methods of employee appraisal, and assessment of individual employee training and development needs shall be held on a regular basis.
(3a)	Each department, agency, and institution shall determine the individual training needs of each of its employees in order to provide effective employee training calculated to foster enhanced employee performance and to afford each employee the training needed to achieve performance levels that will result in the award of performance pay. Individual employee training needs shall be identified as part of an employee's performance appraisal.
(4)	An employee whose performance meets or exceeds performance requirements shall receive a performance increase unless the employee's supervisor justifies in writing to the employee the decision not to award the performance increase.  An employee whose performance does not meet or exceed performance requirements shall not receive a performance increase.  Standards for performance and standards for performance pay increases may be established for each department, agency, or institution.  These standards may not set limits so as to preclude an employee whose performance meets or exceeds performance requirements from consideration for an increase.
(5)	The State Personnel Director shall set the performance increase ranges allowable for levels of performance that exceed performance requirements.  An employee whose performance exceeds expectations shall receive a percentage increase equal to the midrange value for his rating, unless the supervisor can justify an increase above or below the midrange value within the allowable range.  The supervisor shall give an employee written justification of his decision to award an increase above or below the midrange value when the employee requests written justification.  A supervisor's performance appraisal plan, evaluation standards for each employee, and individual employee ratings and recommended performance increase amounts, with justification, shall be reviewed and approved by that supervisor's next higher level supervisor.
(5a)	If an employee is otherwise eligible for a performance increase and is at the top of (but does not exceed) a pay scale, the employee shall receive a performance increase in the form of a performance bonus.  This performance bonus shall be a one-time, lump-sum award paid separately from any other payment to the employee for the year.  Such award shall not serve to increase the base pay of such employee.  An award of this bonus pursuant to this subdivision does not affect:
a.	The value of the top of any pay scale; and
b.	The employee's current salary, which will remain at the top of the pay scale.
	Except as provided in this subdivision, all other provisions of this subsection shall apply to an employee at the top of a pay scale.
(6)	The State Personnel Director may suspend any performance increase that does not appear to meet the intent of the provisions of the performance pay system and require the originating department, agency, or institution to reconsider or justify the increase.
(7)	An employee who disputes the fairness of his performance evaluation or the sufficiency of the increase awarded or who believes that he was unfairly denied a performance increase shall first discuss the problem with his supervisor.  Appeals of the supervisor's decision shall be made only to the grievance committee or internal performance review board of the department, agency, or institution which shall make a recommendation to the head of the department, agency, or institution for final decision.  The State Personnel Director shall help a department, agency, or institution establish an internal performance review board or, if it includes employee members, to use its existing grievance committee to hear performance pay disputes.  Notwithstanding G.S. 150B-2(2) and G.S. 126-22, 126-25, and 126-34, performance pay disputes, including disputes about individual performance appraisals, shall not be considered contested case issues.
(7a)	Each department, agency, and institution shall establish a performance management and pay advisory committee as part of the performance appraisal system.  The purpose of the committee is to ensure that performance pay increases are made in an equitable manner and in compliance with the performance appraisal system coordinated by the Office of State Personnel.  The committee shall be responsible for reviewing:
a.	Agency performance pay policies and performance pay plan to determine whether this section and any guidelines promulgated by the Office of State Personnel have been adhered to;
b.	Agency training and education programs to determine whether all employees receive appropriate information; and
c.	Performance ratings within the department, agency, or institution to determine whether an equitable distribution has been made.
		The committee must have a minimum of five members.  The head of each department, agency, and institution shall appoint the members of the committee with equal representation of nonsupervisory, supervisory, and management employees.  The committee shall elect its own chair.
		The performance management and pay advisory committee shall meet at least two times each year.  The committee shall submit a written report following each meeting to the head of the department, agency, or institution.  The report shall include recommendations for changes and corrections in the administration of the performance management system.  The recommendations of the committee shall be advisory only.  The head of the department, agency, or institution shall respond to the committee within three months.  Copies of the report shall be included in the report to the Office of State Personnel that is required of that agency, department, or institution.  Summaries of the report shall be included in the annual reports that are mandated by this subsection.
 (8)	The State Personnel Director shall monitor the performance appraisal system and performance increase distribution of each employing unit within each department, agency, and institution.  Each department, agency, and institution shall submit to the Director annual reports which shall include data on the demographics of performance ratings, the frequency of evaluations, the performance pay increases awarded, and the implementation schedule for performance pay increases.  The Director shall analyze the data to ensure that performance increases are distributed fairly within each department, agency, and institution and across all departments, agencies, and institutions of State government and shall report back to each department, agency, and institution on its appraisal and distribution performance.
(9)	The State Personnel Director shall report annually on the performance pay program to the Commission.  The report shall evaluate the performance of each department, agency, and institution in the administration of its appraisal system and the distribution of performance increases within each department, agency, and institution and across State government.  The report shall include recommendations for improving the performance appraisal system and alleviating inequities.  Copies of the report shall be sent to the State Auditor.
(10)	The Commission shall report annually to the Governor, the Lieutenant Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, and the Standing Personnel Committees of the House and the Senate.  The Commission report shall include an evaluation of the administration of the appraisal system and distribution of performance increases by each department, agency, and institution.  The State Personnel Director shall recommend to the General Assembly for its approval sanctions to be levied against departments, agencies, and institutions that have deficient appraisal systems or that do not link performance increases to performance.  These sanctions may include withholding performance increases from the managers and supervisors of individual employing units of departments, agencies, and institutions in which discrepancies exist."
Sec. 2.  This act is effective upon ratification.