A BILL TO BE ENTITLED
AN ACT making various amendments to state personnel laws.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  G.S. 126‑4(10) reads as rewritten:
"(10)	Programs of employee assistance, productivity incentives, equal opportunity, safety and health as required by Part 1 of Article 63 of Chapter 143 of the General Statutes, and such other programs and procedures, including demonstration projects, as may be necessary to promote efficiency of administration and provide for a fair and modern system of personnel administration. This subdivision may not be construed to authorize the establishment of an incentive pay program."
SECTION 1.(b)  G.S. 126‑4 is amended by adding a new subdivision to read:
"(19)	The Office of State Personnel, subject to the approval of the Commission, shall adopt policies and procedures concerning the conduct of demonstration projects."
SECTION 1.(c)  Article 1 of Chapter 126 of the General Statutes is amended by adding a new section to read:
"§ 126‑4.2.  Funding for demonstration projects.
State agencies, departments, and institutions, and The University of North Carolina shall have, with the concurrence of the Office of State Budget and Management, the flexibility to use any allowable and available funds to operate demonstration projects."
SECTION 2.  G.S. 126‑7.1 reads as rewritten:
"§ 126‑7.1.  Posting requirement; State employees receive priority consideration; reduction‑in‑force rights; Work First hiring.
(a)	All vacancies for which any State agency, department, or institution openly recruit shall be posted within at least the following:
(1)	The personnel office of the agency, department, or institution having the vacancy; and
(2)	The particular work unit of the agency, department, or institution having the vacancy
in a location readily accessible to employees. If the decision is made, initially or at any time while the vacancy remains open, to receive applicants from outside the recruiting agency, department, or institution, the vacancy shall be listed with the Office of State Personnel for the purpose of informing current State employees of such vacancy. The State agency, department, or institution may not receive approval from the Office of State Personnel to fill a job vacancy if the agency, department, or institution cannot prove to the satisfaction of the Office of State Personnel that it complied with these posting requirements. The agency, department, or institution which hires any person in violation of these posting requirements shall pay such person when employment is discontinued as a result of such violation for the work performed during the period of time between his initial employment and separation.
(a1)	State employees to be affected by a reduction in force shall be notified of the reduction in force as soon as practicable, and in any event, no less than 30 days prior to the effective date of the reduction in force.
			
(b)	Subsection (a) of this section does not apply to vacancies which must be filled immediately to prevent work stoppage or the protection of the public health, safety, or security.
(c)	If a State employee subject to this section:
(1)	Applies for another position of State employment that would constitute a promotion and;
(2)	Has substantially equal qualifications as an applicant who is not a State employee
then the State employee shall receive priority consideration over the applicant who is not a State employee. This priority consideration shall not apply when the only applicants considered for the vacancy are current State employees.
			
(c2)	If the applicants for reemployment for a position include current State employees, a State employee with more than 10 years of service shall receive priority consideration over a State employee having less than 10 years of service in the same or related position classification. This reemployment priority shall be given by all State departments, agencies, and institutions with regard to positions subject to this Chapter.
(d)	"Qualifications" within the meaning of subsection (c) of this section shall consist of:
(1)	Training or education;
(2)	Years of experience; and
(3)	Other skills, knowledge, and abilities that bear a reasonable functional relationship to the abilities and skills required in the job vacancy applied for.
(e)	Each State agency, department, and institution is encouraged to hire into State government employment qualified applicants who are current or former Work First Program participants.
(f)	Employees with career status as defined by this Chapter who are separated through a reduction in force shall be eligible for severance pay based on rules adopted by the State Personnel Commission."
SECTION 3.  Article 2 of Chapter 126 of the General Statutes is amended by adding a new section to read:
"§ 126‑7.3.  Flexible benefits program centralized under  Office of State Personnel.
(a)	Consistent with G.S. 143‑34.1 and G.S. 116‑17.2, the Office of State Personnel shall provide eligible officers and employees of State agencies, departments, and institutions, and The University of North Carolina with a program of dependent care assistance, as available under section 129 and related sections of the Internal Revenue Code of 1986, as amended. The Office of State Personnel shall coordinate the annual agreements entered into between State agencies, departments, and institutions, and The University of North Carolina, and the employees who elect to participate in the program to provide for a reduction in salary. With the approval of the Director of the Budget, savings in the employer's share of contributions under the Federal Insurance Contributions Act on account of the reduction in salary may be used to pay some or all of the administrative expenses of the program. The Office of State Personnel may contract with a third party to administer the terms and conditions of a program of dependent care assistance. If the Office of State Personnel selects a contractor, it may do so only after a thorough and competitive procurement process.
(b)	Consistent with G.S. 143‑34.1 and G.S. 116‑17.2, and notwithstanding any other provisions of law relating to the salaries of officers and employees of State agencies, departments, and institutions, and The University of North Carolina, the Office of State Personnel shall provide a plan of flexible compensation to eligible officers and employees for benefits available under section 125 and related sections of the Internal Revenue Code of 1986, as amended. In providing a plan of flexible compensation, the Office of State Personnel shall coordinate the annual agreements entered into between employees and State agencies, departments, and institutions, and The University of North Carolina. With the approval of the Director of the Budget, savings in the employer's share of contributions under the Federal Insurance Contributions Act on account of the reduction in salary may be used to pay some or all of the administrative expenses of the program. The Office of State Personnel may contract with a third party to administer the terms and conditions of a plan of flexible compensation as provided by this section. If the Office of State Personnel selects a contractor, it may do so only after a thorough and competitive procurement process.
(c)	The Office of State Personnel shall coordinate the establishment of a centralized supplemental benefits committee to offer benefit options on a statewide basis to State agencies, departments, and institutions, and The University of North Carolina. The committee shall review plan options, prepare requests for proposals, and select plan providers only upon a thorough and completely competitive procurement process. Terms of contracts shall follow Purchase and Contract guidelines in Article 23 of Chapter 143 of the General Statutes. State agencies, departments, and institutions and The University of North Carolina may elect to offer certain benefit options as provided under G.S. 58‑31‑60.
The Centralized Supplemental Benefits Committee shall be composed of representatives from State agencies, departments, and institutions, and The University of North Carolina. The Director of the Office of State Personnel shall appoint committee members. Members shall serve three‑year terms on a rotating basis as established by the initial appointment."
SECTION 4.(a)  Article 36A of the General Statutes is repealed.
SECTION 4.(b)  Article 2 of Chapter 126 of the General Statutes is amended by adding a new section to read:
"§ 126‑7.3. State Employee Incentive Bonus Program.
(a)	It is the policy of the State to promote employee suggestion programs through the State Employee Incentive Bonus Program (SEIBP) so that employees and groups of employees may be recognized and rewarded for adopted ideas, suggestions, innovations, and the achievement of individual or group goals that improve their agencies and State governmental operations. The Office of State Personnel shall administer the State's program and is authorized, with the approval of the State Personnel Commission (Commission), to adopt and implement policies in order to administer a State Employee Incentive Bonus Program.
(b)	All State agencies, departments, and institutions and The University of North Carolina shall implement a State Employee Incentive Bonus Program that is not inconsistent with the policy approved by the Commission.
(c)	A State Review Committee to evaluate suggestions and innovations shall consist of 11 members as follows:
(1)	The State SEIBP Coordinator.
(2)	A representative of the Office of State Budget and Management.
(3)	A representative of the Department of Administration.
(4)	A representative of the Department of Information and Technology Services.
(5)	A representative of the Office of State Personnel.
(6)	A representative of The University of North Carolina appointed by the Office of the President.
(7)	A representative of the Department of Justice.
(8)	A representative of the Department of Labor.
(9)	One current State employee appointed by the Speaker of the House of Representatives.
(10)	One current State employee appointed by the President Pro Tempore of the Senate.
(11)	One current State employee appointed by the Governor.
(d)	The State Review Committee shall have the final authority to approve and recommend any bonus consistent with the State Employee Incentive Bonus Program policy. First‑year suggestion savings from the General Fund appropriations shall be distributed as follows:
(1)	Twenty percent (20%) to the suggester or group or both, with an individual limit of twenty thousand dollars ($20,000), and an aggregate team limit of one hundred thousand dollars ($100,000).
(2)	Thirty percent (30%) to the General Fund.
(3)	Thirty percent (30%) to the implementing agency.
(4)	Ten percent (10%) to the State Employee Incentive Bonus Program for administrative and operation expenses.
(5)	Ten percent (10%) to the Office of State Personnel to be used for employee training.
(e)	The State Review Committee shall review and approve any alternative distribution formulas, consistent with SEIBP policy, for suggestions approved in programs that are not funded in part or whole through the General Fund.
(f)	All suggestions or innovations submitted by State employees pursuant to this section are the property of the State, and all related intellectual property rights shall be assigned to the State. By January 1, 2006, the Office of State Personnel shall establish a policy regarding intellectual property rights that arise from the SEIBP.
(g)	Decisions regarding the award of bonuses are final and are not subject to review under the contested case procedures of Chapter 150B of the General Statutes."
SECTION 5.(a)  G.S. 126‑34 reads as rewritten:
"§ 126‑34.  Grievance appeal for career State employees.
Unless otherwise provided in this Chapter, any career State employee having a grievance arising out of or due to the employee's employment and who does not allege unlawful harassment or discrimination because of the employee's age, sex, race, color, national origin, religion, creed, handicapping condition as defined by G.S. 168A‑3, or political affiliation shall follow the grievance procedure established by the employee's department or agency. The internal grievance procedure of each State agency, department, institution, and The University of North Carolina shall include mediation as the first step of the procedure. Any State employee having a grievance arising out of or due to the employee's employment who alleges unlawful harassment because of the employee's age, sex, race, color, national origin, religion, creed, or handicapping condition as defined by G.S. 168A‑3 shall submit a written complaint to the employee's department or agency. The department or agency shall have 60 days within which to take appropriate remedial action. If the employee is not satisfied with the department or agency's response to the complaint, the employee shall have the right to appeal directly to the State Personnel Commission."
SECTION 5.(b)  G.S. 126‑34.1 is amended by adding a new subsection to read:
"(f)	The Office of Administrative Hearings must conduct a contested case hearing and render a decision on cases filed under this section no later than 210 days from the date the case was filed with the Office of Administrative Hearings. If the Office of Administrative Hearings fails to complete the contested case hearing process in 210 days of the date filed, the petitioner who filed the case may petition the Superior Court of Wake County for a hearing de novo."
SECTION 6.  G.S. 138.4 reads as rewritten:
"§ 138‑4.  Governor to set salaries of administrative officers; exceptions; longevity pay.
(a)	The salaries of all State administrative officers not subject to the State Personnel Act shall be set by the Governor, unless a law provides otherwise.
Whenever by law it is provided that a salary shall be fixed or set by the General Assembly in the Current Operations Appropriations Act, and that office or position is filled by appointment of the Governor, or the appointment is subject to the approval of the Governor, or is made by a commission a majority of whose members are appointed by the Governor, then the Governor may, increase or decrease the salary of a new appointee by a maximum of ten percent (10%) over or under the salary of that position as provided in the Current Operations Appropriations Act, such increased or decreased salary to remain in effect until changed by the General Assembly or until the end of the fiscal year, whichever occurs first. The Governor under this paragraph may not increase the salary of any nonelected official above the level set in the Current Operations Appropriations Act for any member of the Council of State. This section does not apply to any office filled by election by the people, and does not apply to any office in the legislative or judicial branches.
Prior to taking any action under this section, the Governor may consult with the Advisory Budget Commission.
Except as provided in subsection (b) of this section, officials whose salaries are covered by the provisions of this section shall be eligible for longevity pay on the same basis as is provided to employees of the State who are subject to the State Personnel Act.
(b)	Any State employee who is on duty on December 31, 2005, shall be eligible to receive, or as they become eligible, shall begin to receive longevity pay according to longevity pay schedules in effect on that date. State employees on duty on December 31, 2005, will be eligible for any future increases in longevity pay according to the longevity pay schedules in effect on that date. Employees who are reduced‑in‑force and who are reemployed within 12 months remain eligible for the longevity program. Any State employee who is subject to the State Personnel Act and who is hired on or after January 1, 2006, shall not be eligible to participate in the State's longevity pay program. Any funds saved through the elimination of longevity pay for these employees shall be retained by State agencies, departments, and institutions, and The University of North Carolina to be used exclusively for pay improvements for State employees in those departments who are subject to the State Personnel Act, and these funds shall be in addition to funds available through the Salary Adjustment Fund allocation."
SECTION 7.  Sections 3, 4, and 6 of this act become effective July 1, 2005. The remainder of this act is effective when it becomes law, with Section 5 applying to State employee grievances that arise on or after that date.