GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	1 

HOUSE BILL 1123

Short Title:  State Personnel Grievance Procedure.	(Public)

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Sponsors: Representatives Sherrill; and Thompson.

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Referred to:  State Government, if favorable, Judiciary I.

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April 21, 1997

A BILL TO BE ENTITLED
AN ACT TO STREAMLINE THE REVIEW OF GRIEVANCES FILED BY STATE EMPLOYEES AND APPLICANTS FOR STATE EMPLOYMENT.
The General Assembly of North Carolina enacts:
Section 1.  The title to Article 8 of Chapter 126 of the General Statutes reads as rewritten:
"ARTICLE 8.
Resolution of Employment Grievances."
Section 2.  Article 8 of Chapter 126 of the General Statutes is amended by adding two new sections to read:
"§ 126-32.  Short title.
This Article shall be known and may be cited as the State Personnel Act.
"§ 126-33.  Definitions; time.
(a)	Unless a different meaning is required by the context, as used in this Article:
(1)	'Agency' means all authorities, boards, bureaus, commissions, councils, departments, divisions, and offices of the State government; constituent institutions of The University of North Carolina; University of North Carolina Hospitals; and units of local government, but only insofar as the unit of local government employs persons in a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds.  ‘Agency' does not include a consolidated county human services agency created under G.S. 143B-139.7.
(2)	'Applicant' means a person who does not hold a probationary or permanent position appointment as a State employee at the time the person makes application for State employment.
(3)	'Commission' means the State Personnel Commission.
(4)	'File', when used in connection with a grievance, means the delivery of a written complaint regarding a personnel action or issue to the personnel officer of an agency.
(5)	'Final agency decision' has the same meaning as in G.S. 150B-36.
(6)	'Personnel officer' means the person within an agency who is designated by the chief executive officer of the agency as the personnel officer with whom a grievance is to be filed or, if no person is so designated, the chief executive officer of the agency.
(b)	Time shall be computed as provided by Rule 6 of the Rules of Civil Procedure, G.S. 1A-1."
Section 3.  G.S. 126-34 is repealed.
Section 4.  G.S. 126-34.1 reads as rewritten:
"§ 126-34.1.  Issues that may be raised in a grievance defined.
(a)	A State employee or former State employee may file a grievance only as to the following personnel actions or issues and those listed in subsections (c) and (d) of this section:
(1)	Dismissal based upon an alleged violation of G.S. 126-35, if the employee is a career State employee.
(2)	An alleged unlawful State employment practice constituting discrimination, as proscribed by G.S. 126-36, including:
a.	Denial of promotion, transfer, or training, on account of the employee's age, sex, race, color, national origin, religion, creed, political affiliation, disability, or handicapping condition as defined by Chapter 168A of the General Statutes.
b.	Demotion, reduction in force, or termination of an employee in retaliation for the employee's opposition to alleged discrimination on account of the employee's age, sex, race, color, national origin, religion, creed, political affiliation, disability, or handicapping condition as defined by Chapter 168A of the General Statutes.
(3)	Retaliation against an employee, as proscribed by G.S 126-17, for protesting an alleged violation of G.S. 126-16.
	(5)	Denial of promotion as a result of a failure to post or failure to give priority consideration for promotion to a career State employee as required by G.S. 126-7.1(c) by an agency other than the agency that employs the career State employee.
	(7)	Denial of reemployment priority as required by  G.S. 126-5(e)(1), 126-5(e)(2), 126-7.1(c1), or 126-7.1(c2) to a former career State employee by an agency other than the agency that separated the career State employee as a result of a reduction in force.
(b)	An applicant for State employment may file a grievance only as to the following personnel actions or issues and those listed in subsection (b1) of this section:
(1)	Alleged denial of employment in violation of G.S. 126-16.
	(3)	Denial of equal opportunity for employment and compensation on account of the employee's age, sex, race, color, national origin, religion, creed, disability, or handicapping condition as defined by Chapter 168A of the General Statutes. This subsection with respect to equal opportunity as to age shall be limited to persons who are at least 40 years of age.
	(5)	A false accusation regarding, or disciplinary action relating to, a State employee's alleged violation of G.S. 126-14 or G.S. 126-14.1.
(b1)	An applicant for initial State employment may file a grievance as to the denial of the veteran's preference provided in Article 13 of this Chapter.
(c)	A State employee or former State employee may file a grievance as to whether a State employee's position is properly exempted as a policy-making position, as defined in G.S. 126-5(b), from the State Personnel Act under G.S. 126-5(d).
(d)	A State employee or former State employee may file a grievance as to the following personnel actions or issues:
(1)	Demotion or suspension without pay based on an alleged violation of G.S. 126-35, if the employee is a career State employee.
(2)	Denial of the veteran's preference provided in Article 13 of this Chapter in connection with a reduction in force, if the employee is a career State employee.
(3)	Denial of promotion as a result of a failure to post or failure to give priority consideration for promotion to a career State employee as required by G.S. 126-7.1(c) by the agency that employs the career State employee.
(4)	Denial of reemployment priority as required by G.S. 126-7.1(c1) or G.S. 126-7.1(c2) to a career State employee by the agency that separated the career State employee as a result of a reduction in force.
(5)	Denial of an employee's request for removal of allegedly inaccurate or misleading information from the employee's personnel file as provided by G.S. 126-25.
(6)	Separation of a career State employee resulting from a reduction in force where the employee alleges that the separation was arbitrary or capricious because the agency failed to follow a plan for reduction in force approved by the Office of State Personnel.
	."
Section 5.  G.S. 126-34.2 reads as rewritten:
"§ 126-34.2.  Applicability; procedure for certain employees of units of local government.
(a)	Only the following provisions of this Article, as modified by this section, apply to employees of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds:  G.S. 126-33, 126-34.1, 126-34.2, 126-34.6(a), 126-34.6(b), 126-34.6(c), 126-34.6(d), 126-34.7, 126-35, and 126-37.  An employee of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds may raise only the personnel actions or issues set out in the following provisions of G.S. 126-34.1 as a grievance:  subdivisions (1), (2), and (3) of subsection (a); subdivisions (1) and (2) of subsection (b); and subdivisions (1) and (5) of subsection (d).  An employee of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds may raise a grievance as to the personnel actions and issues listed in this section by filing a petition for a contested case under Article 3 of Chapter 150B of the General Statutes.  An employee of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds shall file a grievance within 30 days after notice of the decision or action giving rise to the grievance or, in the case of a grievance arising under G.S. 126-34.1(d)(5), within 30 days after the employee discovers the allegedly inaccurate or misleading information.
(b)	As used in this section and in G.S. 126-37(b1), the phrase ‘employee of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds' includes, with respect to a grievance that may by raised by an employee, a former employee of any of the listed departments and authorities, and, with respect to a grievance that may be raised by an applicant, an applicant for employment with any of the listed departments or authorities.
	."
Section 6.  Article 8 of Chapter 126 of the General Statutes is amended by adding six new sections to read:
"§ 126-34.3.  Initiation of a grievance; procedure for resolution of a grievance within an agency.
(a)	An applicant, State employee, or former State employee may initiate a grievance as to any of the personnel actions or issues set out in G.S. 126-34.1 by filing a written complaint with the personnel officer of the appropriate agency.  An applicant, State employee, or former State employee shall file a grievance within 30 days after notice of the decision or action giving rise to the grievance or, in the case of a grievance arising under G.S. 126-34.1(d)(5), within 30 days after the State employee or former State employee discovers the allegedly inaccurate or misleading information.  The appropriate agency for a grievance by an applicant is the agency with which the grievant sought employment.  The appropriate agency for a grievance by a State employee is the agency with which the grievant is employed except that, if the grievance concerns an application for employment by another agency, the appropriate agency is the agency with which the grievant sought employment.  The appropriate agency for a grievance by a former State employee is the agency with which the grievant was formerly employed except that, if the grievance concerns reemployment by another agency, the appropriate agency is the agency with which the grievant sought reemployment.  This subsection does not alter the right of an applicant, State employee, or former State employee to file a grievance alleging discrimination directly with the Commission as provided in G.S. 126-36.
(b)	The agency shall have 60 days from the date the grievance was filed to resolve the grievance within the agency.  The Commission shall adopt rules specifying minimum procedures for agency informal internal resolution of grievances.  Each agency shall adopt written procedures for the informal internal resolution of grievances that are consistent with rules adopted by the Commission.  No agency procedure for the informal internal resolution of grievances shall be applicable to any grievant until the Commission has approved the procedure.  Neither the agency nor the grievant shall be represented by an attorney or third party during any meeting between any representative of the agency and the grievant held in connection with the agency internal informal grievance resolution procedure.  The Commission shall not award and an agency shall not pay attorneys' fees in connection with the agency internal informal grievance resolution procedure.
(c)	If the agency and the grievant resolve the grievance within 60 days of the date on which the grievance was filed, the agency shall reduce the resolution of the grievance to writing in a memorandum of agreement.  The memorandum of agreement shall set out all the terms and conditions of the resolution of the grievance and shall specify when the terms and conditions become effective.  The agency head or personnel officer and the grievant shall sign the memorandum of agreement, and the agency shall submit the memorandum to the Office of State Personnel for approval in accordance with rules adopted by the Commission.
(d)	If the agency and the grievant do not resolve the grievance within 60 days, the grievant may proceed as provided in G.S. 126-34.4.
"§ 126-34.4.  Procedure for resolution of a grievance when the grievance is not resolved within an agency.
(a)	If the agency and the grievant do not resolve the grievance within the 60-day period provided for the informal internal resolution of the grievance by the agency under G.S. 126-34.3, a grievant who is:
(1)	An applicant for State employment whose grievance arises under G.S. 126-34.1(b) or G.S. 126-34.1(b1) may file a petition for a contested case with the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes.
(2)	A State employee or former State employee whose grievance arises under G.S. 126-34.1(a) or G.S. 126-34.1(c) may file a petition for a contested case with the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes.
(3)	A State employee or former State employee whose grievance involves personnel actions or issues arising under G.S. 126-34.1(d) may proceed only as provided in G.S. 126-34.5.
(4)	A State employee or former State employee whose grievance involves personnel actions or issues included under both subdivisions (2) and (3) of this section may proceed only by filing a petition for a contested case with the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes.
(b)	A grievant must file a petition for a contested case under subdivision (1), (2), or (4) of subsection (a) of this section with the Office of Administrative Hearings as provided in G.S. 150B-23(a) no later than 30 days after the last day of the 60-day period provided for the informal internal resolution of the grievance by the agency under G.S. 126-34.3.  If the grievant fails to file a petition for a contested case within 30 days after the last day of the 60-day period provided for the informal internal resolution of the grievance by the agency, the agency shall dismiss the grievance.
(c)	A grievant must notify the personnel officer in writing if the grievant wishes to proceed under G.S. 126-34.4(a)(3) and G.S. 126-34.5 no later than 15 days after the last day of the 60-day period provided for the informal internal resolution of the grievance by the agency under G.S. 126-34.3.  If the grievant fails to notify the personnel officer that the grievant wished to proceed under G.S. 126-34.4(a)(3) and G.S. 126-34.5 within 15 days after the last day of the 60-day period provided for the informal internal resolution of the grievance by the agency, the agency shall dismiss the grievance.
"§ 126-34.5.  Expedited resolution of a grievance by a qualified neutral party.
(a)	If the agency and the grievant do not resolve a grievance arising under G.S. 126-34.1(d) within the 60-day period provided for the informal internal resolution of the grievance by the agency under G.S. 126-34.3 and the grievant has notified the agency that the grievant wishes to proceed with the grievance, the agency and the grievant shall have five days in which to select a qualified neutral party by mutual agreement.  Within five days after the agency and the grievant mutually agree on a qualified neutral party, the agency shall notify the Office of State Personnel of the grievance.  The agency shall include the name of the qualified neutral party in the notice.  If the agency and the grievant are unable to agree on a qualified neutral party, the agency shall notify the Office of State Personnel of the grievance and shall include in the notice a request that the Office of State Personnel select a qualified neutral party.  The Office of State Personnel shall select a qualified neutral party within five days after it receives the request from the agency.
(b)	The Office of State Personnel shall maintain a list of all persons who currently meet the requirements for service as a qualified neutral party, as set out in subsection (c) of this section.  An agency and a grievant may select by mutual agreement any qualified neutral party.  In selecting a qualified neutral party by mutual agreement, the agency and the grievant may choose any person who currently meets the requirements for service as a qualified neutral party except that the agency and the grievant may mutually agree to waive the requirements of subdivisions (1) and (2) of subsection (c) of this section.  In selecting a qualified neutral party when the agency and the grievant cannot agree on a qualified neutral party, the Office of State Personnel shall choose a person who currently meets the requirements for service as a qualified neutral party.
(c)	In order to serve as a qualified neutral party in the grievance resolution process, a person shall:
(1)	Not be a State employee or an agent of any State agency.
(2)	Not have been a State employee or an agent of any State agency within the preceding 12 months.
(3)	Other than service as a qualified neutral party for the resolution of another grievance, have no personal, financial, or business interest in, or relationship with, the agency, the grievant, any other State agency, State employee, or other person involved with the grievance; or any aspect of the grievance.
(4)	Not have prior knowledge of the grievance or of any fact that bears on the merits of the grievance.
(5)	Not serve as a qualified neutral party for the resolution of a grievance involving the same agency more than four times in any calendar year.
(6)	Successfully complete 40 hours of training in basic mediation or other alternative dispute resolution methods.
(7)	Successfully complete a training course provided by the Office of State Personnel on policy and procedure under this Chapter and rules adopted under this Chapter as they relate to the discipline and dismissal of State employees and the resolution of grievances.
(8)	Meet any other qualifications that the Commission shall establish by rule.
(d)	The Commission shall adopt rules specifying minimum procedures for the expedited resolution of a grievance by a qualified neutral party.  In the conduct of the grievance resolution process, the qualified neutral party shall:
(1)	Control the grievance resolution process.
(2)	Maintain impartiality.
(3)	Schedule meetings with  designated agency representatives and the grievant to mediate the grievance.
(4)	Explain the procedures to be followed in, and the requirements of, the grievance resolution process.
(5)	Maintain the confidentiality of all communications that occur as a part of the grievance resolution process.
(e)	Any costs associated with the use of a qualified neutral party in the resolution of a grievance shall be borne by the agency.  The Commission shall establish a schedule of rates to be paid to neutral parties in the resolution of grievances.
(f)	Neither the agency nor the grievant shall be represented by an attorney or third party during any proceeding conducted by the qualified neutral party.  The Commission shall not award and an agency shall not pay attorneys' fees in connection with proceedings conducted by a qualified neutral party.
(g)	If the agency and the grievant are able to resolve the grievance within 45 days of the date on which the qualified neutral party is selected, the qualified neutral party shall reduce the resolution of the grievance to writing in a memorandum of agreement.  The memorandum of agreement shall set out all the terms and conditions of the resolution of the grievance and shall specify when the terms and conditions become effective.  The agency head or personnel officer and the grievant shall sign the memorandum of agreement, and the agency shall submit the memorandum to the Office of State Personnel for approval in accordance with rules adopted by the Commission.  Upon approval by the Office of State Personnel or the Commission, the agreement becomes a final order of the Commission binding upon both the agency and the grievant.
(h)	If the agency and the grievant are unable to resolve the grievance within 45 days of the date on which the qualified neutral party is selected, the agency and the grievant may mutually agree to extend the time during which the qualified neutral party may attempt to resolve the grievance.
(i)	If the agency and the grievant are unable to resolve the grievance within 45 days of the date on which the qualified neutral party is selected or within the mutually agreed extension period, the qualified neutral party shall prepare a written report on the status of the grievance.  The report shall include a statement of the facts involved in the grievance as determined by the qualified neutral party; identify any law, rule, or policy that the qualified neutral party determines to be relevant to the resolution of the grievance; and state the qualified neutral party's recommended resolution of the grievance.  The qualified neutral party shall provide the agency and the grievant with a copy of the report within five days after the date on which the 45-day expedited grievance resolution period ends.  The agency and the grievant shall have 10 days to review the report and decide whether to accept the recommended resolution of the grievance.  If the agency and the grievant accept the recommended resolution of the grievance, the qualified neutral party shall reduce the resolution of the grievance to writing in a memorandum of agreement.  The memorandum of agreement shall set out all the terms and conditions of the resolution of the grievance and shall specify when the terms and conditions become effective.  The agency head or personnel officer and the grievant shall sign the memorandum of agreement, and the agency shall submit the memorandum to the Office of State Personnel for approval in accordance with rules adopted by the Commission.  Upon approval by the Office of State Personnel or the Commission, the agreement becomes a final order of the Commission binding upon both the agency and the grievant.
(j)	Any dispute between the agency and the grievant regarding implementation of a final order of the Commission resolving a grievance under this section shall be referred to the Commission.  The Commission shall attempt to resolve any dispute regarding implementation of the order, shall determine whether the agency and the grievant have substantially complied with the terms of the final order, and shall issue any supplemental order it determines to be necessary to the implementation of the final order.  In the event that either the agency or the grievant  fails to comply with a supplemental order of the Commission, the agency or the grievant may file an action in the Superior Court of Wake County to enforce the order.
(k)	If the agency and the grievant do not accept the recommended resolution of the grievance as provided in subsection (i) of this section, the grievant may file a petition for a contested case under Article 3 of Chapter 150B of the General Statutes within 30 days after the date on which the 45-day expedited grievance resolution period ends.
(l)	If the Office of State Personnel and the Commission disapprove a memorandum of agreement submitted for approval under this section or under G.S. 126-34.3(d), the Office of State Personnel shall return the memorandum of agreement to the agency with a written statement of objections.  The agency and the grievant may amend the memorandum of agreement and resubmit it to the Office of State Personnel for approval.  If the agency and the grievant do not agree on amendments to the memorandum of agreement, the memorandum of agreement is void and the agency and the grievant my proceed as provided in this Article.
"§ 126-34.6.  Administrative hearings.
(a)	No issue other than those specifically set out in G.S. 126-34.1 shall be grounds under this Chapter for a contested case under Article 3 of Chapter 150B of the General Statutes.  No person may file a petition for a contested case with the Office of Administrative Hearings unless the person has complied with the procedure set out in this Article.
(b)	In assigning an administrative law judge to preside over contested cases under this Article, the Chief Administrative Law Judge shall give priority to contested cases that involve a grievance under G.S 126-34.1(a)(1) and G.S. 126-34.1(c).  G.S. 150B-23.1 shall not apply to a contested case filed under this Article.
(c)	The administrative law judge shall file a recommended decision in a contested case under this Article within 165 days from the date on which the petition for a contested case is filed.  The Office of Administrative Hearings shall forward a copy of the official record to the Commission and shall forward a copy of the recommended decision to the agency and the grievant within 30 days of the date the administrative law judge files the recommended decision.
(d)	Notwithstanding G.S. 150B-44, the Commission has 90 days from the day it receives the official record in a contested case from the Office of Administrative Hearings or 90 days after its next regularly scheduled meeting that occurs at least 30 days after the day it receives the official record, whichever is longer, to make a final decision in the case.  This time limit may be extended by agreement between the parties or, for good cause shown, by the Commission for an additional period of up to 90 days.
(e)	The report of the qualified neutral party is not admissible in any contested case or subsequent judicial proceeding regarding the grievance, and the qualified neutral party shall not be a witness in any contested case or subsequent judicial proceeding regarding the grievance.
"§ 126-34.7.  Judicial review.
Article 4 of Chapter 150B of the General Statutes governs judicial review of final agency decisions under this Article.  Notwithstanding G.S. 150B-43, an agency may not seek judicial review of a final order of the Commission unless the administrative law judge makes a recommended decision that is favorable to the agency and the final agency decision of the Commission is unfavorable to the agency.  In that case the agency may seek judicial review under Article 4 of Chapter 15B of the General Statutes except that the scope of review is limited to subdivisions (1) through (4) of G.S. 150B-51(b).  This section shall not be construed to limit the right of an agency to raise any issue within the scope of review set out in G.S. 150B-51 in a response to a petition for judicial review, as provided in G.S. 150B-46.
"§ 126-34.8.  Reports.
On or before 1 December of each year, the Office of State Personnel shall report to the Joint Legislative Commission on Governmental Operations on the administration of the grievance resolution procedure under this Article during the previous fiscal year.  The report shall include statistical information on the number of grievances filed, the nature of the grievances, the disposition of the grievances, the time required to dispose of grievances, the costs associated with the disposition of grievances, and the cost associated with each grievance that is resolved by settlement.  Every agency shall furnish to the Office of State Personnel the information required to complete this report not later than 1 September of each year.  The Office of Administrative Hearings shall furnish the Office of State Personnel with statistical information to be included in the report on the number of contested cases filed, the nature of the contested cases, the disposition of the contested cases, and the time required to dispose of contested cases by 1 September of each year.
"§ 126-34.9.  Notice.
Every State agency shall notify each employee of the State agency of any change to the grievance procedure no later than 30 days prior to the effective date of the change.  In addition, each agency shall furnish a copy of the current grievance procedure:
(1)	To each new employee.
(2)	As an attachment to the written documentation of any grievable personnel action."
Section 7.  G.S. 126-1.1 reads as rewritten:
"§ 126-1.1.  Career State employee defined.
For the purposes of this Chapter, unless the context clearly indicates otherwise, ‘career State employee' means a State employee who:
(1)	Is in a permanent position appointment; and
(2)	Has been continuously employed by the State of North Carolina in a position subject to the State Personnel Act for the immediate 12 preceding months."
Section 8.  G.S. 126-4(9) reads as rewritten:
"(9)	The issuance of final orders and supplemental orders concerning employment, promotion, demotion, transfer, discharge, reinstatement, and any other personnel action or issue set out in G.S. 126-34.1."
Section 9.  G.S. 126-4(11) reads as rewritten:
"(11)	The award of costs, witness fees, and attorneys' fees under Article 8 of this Chapter.  Article 3 of Chapter 6 of the General Statutes shall not apply to the award of costs, witness fees, or attorneys' fees under Article 8 of this Chapter."
Section 10.  G.S. 126-5(h) reads as rewritten:
"(h)	In case of dispute as to whether an employee is subject to the provisions of this Chapter, the dispute shall be resolved as provided in G.S. 126-34.1(c) and G.S. 126-34.3."
Section 11  G.S. 126-7(c) reads as rewritten:
"(c)	Career growth recognition awards, cost-of-living adjustments, and performance bonuses shall be based on annual 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 rules for performance appraisal.  The rules shall include the following:
(1)	The performance appraisal system of each department, agency, or institution shall be designed and administered to ensure that career growth recognition awards, cost-of-living adjustments, and performance bonuses are distributed fairly.
(2)	To be eligible to distribute career growth recognition awards, cost-of-living adjustments, and performance bonuses, a department, agency, or institution shall have an operative performance appraisal system that has been approved by the Commission.  The performance appraisal system adopted shall use a rating scale of five levels, with level four or better qualifying for performance bonuses, level three or better qualifying for career growth recognition awards, and level two or better qualifying for cost-of-living adjustments.  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 help 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.
(4)	An employee whose performance is rated at or above level four of the rating scale shall be eligible to receive, subject to the rules of the Commission, a performance bonus unless the employee's supervisor justifies in writing to the employee the decision not to award the performance bonus.  Other than the Commission, no department, agency, or institution shall set limits so as to preclude an employee whose performance exceeds management's expectations and performance requirements from consideration for a performance bonus.
(4a)	An employee whose performance is rated at or above level three of the rating scale shall receive a career growth recognition award unless the employee's supervisor justifies in writing to the employee the decision not to give the career growth recognition award.  The career growth recognition award shall represent a two percent (2%) increase within the employee's assigned pay grade.  In no event shall any award increase an employee's compensation above the maximum of the range.  Other than the Commission, no agency, department, or institution shall set limits so as to preclude an employee whose performance meets or exceeds management's expectations and performance requirements from receiving a career growth recognition award.
(4b)	An employee whose performance is rated at or above level two of the rating scale and who is not involved in the final written stage of the disciplinary procedure shall receive a cost-of-living increase.  Other than the Commission, no agency, department, or institution shall set limits or initiate written disciplinary procedures for the purpose of precluding an eligible employee from receiving a cost-of-living adjustment.
(5)	Repealed by Session Laws 1993, c. 388, s. 1.
(5a)	Repealed by Session Laws 1993, c. 388, s. 1.
(6)	The State Personnel Director may rescind any career growth recognition award or performance bonus that does not appear to meet the intent of the provisions of the performance appraisal system and require the originating department, agency, or institution to reconsider or justify the increase.
(7)	An employee who disputes the fairness of his or her performance appraisal or the amount of a performance bonus awarded or who believes that he or she was unfairly denied a career growth recognition award or performance bonus shall first discuss the problem with his or her supervisor. A grievance as to the supervisor's decision may be initiated only by filing a written complaint with the personnel officer of the agency with which the grievant is employed.  The personnel officer shall refer the grievance to the internal performance review board or referee.  The internal performance review board or referee shall make a recommendation to the head of the agency for a final decision.  A grievance as to a performance appraisal or the amount awarded as a performance bonus is not a grievance under G.S 126-34.1 and may not be raised in a petition for a contested case under Chapter 150B of the General Statutes.  The State Personnel Commission shall adopt rules specifying minimum procedures for the resolution within an agency of a grievance as to a performance appraisal or the amount awarded as a performance bonus.
(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 salary increases and awards are made in an equitable manner.  The committee shall be responsible for reviewing:
a.	Agency salary increase and award policies to determine whether this section and any guidelines promulgated by the State Personnel Commission have been adhered to;
b.	Agency training and education programs to determine whether all employees receive appropriate information; and
c.	Performance appraisal 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 the distribution of salary increases and awards within each department, agency, and institution.  Each department, agency, and institution shall submit to the Director annual reports that shall include data on the demographics of performance ratings, the frequency of evaluations, the distribution of salary increases and awards, and the implementation schedule for salary increases and awards.  The Director shall analyze the data to ensure that salary increases and awards 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 Comprehensive Compensation System 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 salary increases and awards 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, as adopted by the State Personnel Commission, shall be sent to the Governor, Lieutenant Governor, President Pro Tempore of the Senate, Speaker of the House of Representatives, the standing personnel committees of the House of Representatives and the Senate, and the State Auditor.  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 performance appraisal systems or that do not link salary increases and awards to employee job performance.  These sanctions may include withholding salary increases and awards from the managers and supervisors of individual employing units of departments, agencies, and institutions in which discrepancies exist.
(10)	Repealed by Session Laws 1993, c. 388, s. 1."
Section 12.  G.S. 126-7.2 is repealed.
Section 13.  G.S. 126-14(c) reads as rewritten:
"(c)	A State employee subject to the Personnel Act, probationary State employee, or temporary State employee who without probable cause falsely accuses a State employee or a person appointed to State office of violating this section shall be subject to discipline or change in employment status in accordance with the provisions of G.S. 126-35 and G.S. 126-37 and may, as otherwise provided by law, be subject to criminal penalties for perjury or civil liability for libel, slander, or malicious prosecution."
Section 14.  G.S. 126-14.1(c) reads as rewritten:
"(c)	A State employee subject to the Personnel Act, probationary State employee, or temporary State employee, who without probable cause falsely accuses a person of violating this section shall be subject to discipline or change in employment status in accordance with the provisions of G.S. 126-35 and G.S. 126-37 and may, as otherwise provided by law, be subject to criminal penalties for perjury or civil liability for libel, slander, or malicious prosecution."
Section 15.  G.S. 126-25 reads as rewritten:
"§ 126-25.  Remedies of employee objecting to material in file.
An employee or former employee who objects to material in the employee's file may place in the file a statement relating to the material the employee considers to be inaccurate or misleading.  An employee or former employee who objects to material in the employee's file because the employee or former employee considers it inaccurate or misleading may seek the removal of the material from the file by filing a grievance as provided in G.S. 126-34.1(d)(5) and G.S. 126-34.3.  When an agency agrees or is ordered by the State Personnel Commission or by the General Court of Justice to remove inaccurate or misleading material from an employee's file, it shall destroy the original and all copies of the material removed and may not retain any inaccurate or misleading information derived from the material removed."
Section 16.  G.S. 126-35 reads as rewritten:
"§ 126-35.  Just cause; disciplinary actions for State employees.
(a)	No career State employee subject to the State Personnel Act shall be discharged, suspended, or demoted for disciplinary reasons, except for just cause.  In cases of disciplinary action, the employee shall, before the action is taken, be furnished with a statement in writing setting forth the specific acts or omissions that are the reasons for the disciplinary action and the employee's grievance rights under this Article.  However, an employee may be suspended without warning for causes relating to personal conduct detrimental to State service, pending the giving of written reasons, in order to avoid undue disruption of work or to protect the safety of persons or property or for other serious reasons.  The Commission may adopt, subject to the approval of the Governor, rules that define just cause.
(b)	Notwithstanding any other provision of this Chapter, a reduction in pay or position that is not imposed for disciplinary reasons shall not be considered a disciplinary action within the meaning of this Article.  Disciplinary actions, for the purpose of this Article, are those actions taken in accordance with the disciplinary procedures adopted by the Commission and specifically based on unsatisfactory job performance, unacceptable personal conduct or a combination of the two.
	."
Section 17.  G.S. 126-36 reads as rewritten:
"§ 126-36.  Appeal of unlawful State employment practice.
Any State employee or former State employee who has reason to believe that employment, promotion, training, or transfer was denied him or her, or that demotion, layoff, or termination of employment was forced upon him or her in retaliation for opposition to alleged discrimination or because of his or her age, sex, race, color, national origin, religion, creed, political affiliation, disability, or handicapping condition as defined by G.S. 168A-3, except where specific age, sex, or physical requirements constitute a bona fide occupational qualification necessary to proper and efficient administration, may file a grievance as provided in G.S. 126-34.3 or may file a grievance directly with the Commission."
Section 18.  G.S. 126-36.1 is repealed.
Section 19.  G.S. 126-36.2 is repealed.
Section 20.  G.S. 126-37 reads as rewritten:
"§ 126-37.  Commission to review recommended decision of administrative law judge and make final agency decision.
(a)	The Commission shall make the final agency decision in a contested case brought under subdivisions (1), (2), and (4) of G.S. 126-34.4(a) and G.S. 126-34.5(k), as provided in G.S. 150B-36, except as provided in subsection (b1) of this section.  The Commission may reinstate any employee to the position from which the employee has been removed, order the employment, promotion, transfer, or salary adjustment of any individual to whom it has been wrongfully denied, or direct other suitable action to remedy the grievance, which may include the requirement of payment for any loss of salary that has resulted from the improper action of the appointing authority.
(b)	Repealed by Session Laws 1993 (Reg. Sess., 1994), c. 572, s. 1.
(b1)	The decision of the Commission in a contested case involving a grievance filed by an employee of a county or area social services; public health; mental health, developmental disabilities, or substance abuse department or authority; or a local emergency management agency that receives federal grant-in-aid funds shall be advisory to the board of county commissioners or other local or area authority except that a decision in a contested case involving discrimination in violation of Article 6 of this Chapter or involving an issue where a binding decision is required by applicable federal standards shall be the final agency decision.  The Commission shall comply with all requirements of G.S. 150B-44 in making an advisory decision.  The local or area appointing authority shall, within 90 days of receipt of the advisory decision of the Commission, issue a written final agency decision either accepting, rejecting, or modifying the decision of the Commission.  If the local or area appointing authority rejects or modifies the advisory decision, the local or area appointing authority must state in writing the specific reasons why it did not adopt the advisory decision.  A copy of the final agency decision of the local or area appointing authority shall be served on each party personally or by certified mail, and on each party's attorney of record.
(b2)	The decision of the Commission in a contested case involving discrimination prohibited by Article 6 of this Chapter or in any case where a binding decision is required by applicable federal standards shall be the final agency decision.
(b3)	A final agency decision by the Commission or a local or area appointing authority is subject to judicial review pursuant to Article 4 of Chapter 150B of the General Statutes.
(c)	If the local or area appointing authority is other than a board of county commissioners, the local or area appointing authority shall notify the board of county commissioners that a petition for a contested case involving a grievance has been filed by mailing a copy of the petition to the clerk of the board of county commissioners within 15 days of the date the petition is served on the local or area appointing authority.  The county may intervene in the contested case as provided in G.S. 150B-23(d) within 30 days of receipt of the notice.  If the final agency decision is appealed to superior court, the county may intervene in the superior court proceeding as provided in G.S. 150B-46 even if it did not intervene in the administrative proceeding.  The decision of the superior court shall bind the county even if the county does not intervene."
Section 21.  G.S. 126-38 is repealed.
Section 22.  G.S. 126-39 is repealed.
Section 23.  G.S. 126-41 reads as rewritten:
"§ 126-41.  Costs, witness fees, and attorneys' fees.
The decision of the Commission assessing or refusing to assess costs, reasonable witness fees, or reasonable attorneys' fees as provided in G.S. 126-4(11) is a final agency decision appealable under Article 4 of Chapter 150B of the General Statutes. The reviewing court may reverse or modify the decision of the Commission if the decision is unreasonable or the award is inadequate.  The reviewing court shall award costs and reasonable attorneys' fees to a grievant who obtains a reversal or modification of an award of costs, witness fees, or attorneys' fees by the Commission under this section."
Section 24.  G.S. 126-82(d) reads as rewritten:
"(d)	Any eligible veteran who has reason to believe that he or she did not receive a veteran's preference in accordance with the provisions of this Article or rules adopted under this Article may file a grievance as provided in G.S. 126-34.1 and G.S. 126-34.3."
Section 25.  Upon application to the Office of State Personnel, persons who are certified as mediators by the Administrative Office of the Courts under G.S. 7A-38.2 and who successfully complete the training course required by G.S. 126-34.5(c)(6), as enacted by Section 6 of this act, may serve as qualified neutral parties without meeting other requirements of G.S. 126-34.5(c) from 1 July 1998 until 1 July 1999.
Section 26.  The State Personnel Commission shall adopt rules to implement the provisions of this act as provided in G.S. 126-34.3(b), 126-34.5(c)(7), 126-34.5(d), and 126-34.5(e), as enacted in Section 6 of this act.  Rules adopted pursuant to this section shall become effective 1 July 1998.  This act constitutes a recent act of the General Assembly within the meaning of G.S. 150B-21.1.  The State Personnel Commission and every State agency to which this act applies may adopt temporary rules to implement the provisions of this act.  The State Personnel Commission shall prepare a list of persons who may serve as qualified neutral parties as provided by this act by 1 July 1998.
Section 27.  This act shall not be construed to obligate the General Assembly to make any appropriation to implement the provisions of this act.  Each State agency to which this act applies shall implement the provisions of this act from funds otherwise appropriated to that State agency.
Section 28.  Sections 1 through 6 and Sections 8 through 24 of this act become effective 1 July 1998, and apply to grievances filed on or after that date, except that G.S. 126-34.7, as enacted by Section 6 of this act, is effective when this act becomes law and applies to any final agency decision of the State Personnel Commission under G.S. 126-37 for which a petition for judicial review has not been filed as provided in G.S. 150B-45.  Section 7 of this act becomes effective 1 July 1997 and applies to all State employees hired on or after that date.  Sections 25 through 28 of this act are effective when this act becomes law.