Public Workforce Modernization Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025

SESSION LAW 2026-40
SENATE BILL 1041

*S1041-v-6*
AN ACT TO MODERNIZE AND SIMPLIFY THE STATE HUMAN RESOURCES SYSTEM.

The General Assembly of North Carolina enacts:

PART I. MODERNIZED STATE HUMAN RESOURCES
SECTION 1. The General Statutes are amended by adding a new Chapter to read:
"Chapter 126A.
"North Carolina Human Resources Act.
"Article 1.
"State Human Resources System.
"Part 1. Goals, Definitions.
"§ 126A-1. Purpose of Chapter.
(a) It is the intent and purpose of this Chapter to establish a decentralized human
resources system, where appropriate, without additional cost to the State, under the direction of
the Governor, based on modern principles of personnel administration, that app lies the best
methods evolved through government and industry. It is also the purpose of this Chapter to apply
the human resource s system to the employees of the executive branch and to local employees
paid entirely or in part from federal funds, except to the extent that local governing boards are
authorized by this Chapter to establish local rules, local pay plans, and local personnel systems.
Agency heads shall be responsible and accountable for execution of Commission policies and
rules for their employees.
(b) To ensure that State government continuously serves the best interests of the people
of North Carolina, the human resources system established by this Chapter shall be governed by
the following core principles:
(1) Public service employment should be based on equal opportunity and free of
discrimination on any basis prohibited by federal or State law.
(2) The value of public service should be bolstered by fair compensation and
benefits, stable career paths, employmen t protections, opportunities for
engagement and development, and an ability to make a positive impact for the
people of North Carolina.
(3) Accountability to the public and within agencies should be maintained by
establishing clear roles, measurable goals, and transparent reporting to ensure
compliance with law and policy.
"§ 126A-2. Definitions.
(1) Agency. – An executive branch agency or a local agency.
(2) Agency head. – The head of an agency, such as a member of the Council of
State, a cabinet Secretary, the President of The University of North Carolina,
or an executive director of a commission.
(3) Cabinet agency. – An executive branch agency that is under the control of the
Governor.
(4) Career employee. – An employee in a career appointment as provided in Part
2 of this Article.

Page 2 Session Law 2026-40 Senate Bill 1041
(5) Commission. – The State Human Resources Commission.
(6) Council of State agency. – An executive branch agency under the control of a
member of the Council of State.
(7) Director. – The Director of the Office of State Human Resources.
(8) Employee. – An individual hired to carry out assigned tasks in return for
payment operating under the guidance and supervision of an employ ing
agency. This term does not include independent contractors.
(9) Employing agency. – The agency that hired an employee and has the power
to separate the employee from a position.
(10) Executive branch agenc y. – Any department, commission, division, board,
bureau, council , or institution of the State within the executive branch of
government, including The University of North Carolina.
(11) Exempt managerial employee. – An employee designated as an exempt
managerial position as provided in Part 3 of this Article.
(12) Exempt policymaking employee. – An employee designated as an exempt
policymaking position as provided in Part 3 of this Article.
(13) Experiential program. – A program for both employment and educational or
training purposes, such as a registered apprenticeship, informal
apprenticeship, fellowship, or other work-based learning program.
(14) Local agency. – One of the following:
a. Area mental health, developmental disabilities, and substance abuse
authorities, except as otherwise provided in Chapter 122C of the
General Statutes. A consoli dated county human services agency
created pursuant to G.S. 153A-77(b) is not considered a local agency
under this subdivision.
b. Local social services departments.
c. County health departments and district health departments.
d. Local emergency managemen t agencies that receive federal
grant-in-aid funds.
(15) Local employee. – An employee of a local agency and any other county
employee as designated by a board of county commissioners.
(16) OSHR. – The Office of State Human Resources.
(17) Personnel professional. – Any employee whose primary job duties involve
administrative personnel and human resources functions.
(18) Policy. – A policy, rule, standard, practice, procedure, criteria, or regulation
established by the Commission, subject to the approval of the Governor.
(19) Qualifications. – Training, education, years of experience, or other skills,
knowledge, and abilities that bear a reasonable functional relationship to the
abilities and skills required in the position.
(20) State employee. – An employee of an executive branch agency, including The
University of North Carolina.
(21) Supervisor. – A position that has other employees directly report to it.
(22) Temporary employee. – An employee classified as a temporary employee as
provided in Part 2 of this Article.
(23) The University of North Carolina. – As defined in G.S. 116-1. A constituent
institution of The University of North Carolina has only the authority
delegated to it by the Board of Governors or the University of North Carolina
System Office.
"Part 2. Appointment Types.
"§ 126A-10. Appointment types.
(a) All employees are assigned a position with a designated appointment type.

Senate Bill 1041 Session Law 2026-40 Page 3
(1) A position is the unique duties and responsibilities of a job to which a person
is assigned.
(2) An appointment type defines the terms and expected duration of employment,
benefits eligibility, and the applicability of this Chapter to the position.
(b) Appointment types are as follows:
(1) Permanent. – An appointment to a permanent position established and
expected to continue indefinitely. All permanent employees are designated as
one of the following subcategories:
a. Career appointment. – Assigned to a n employee who has been
continuously employed for the time period provided in
G.S. 126A-10.1.
b. Probationary appointment. – Assigned to a n employee who has not
been continuously employed long enough to become a career
employee under G.S. 126A-10.1.
c. Permanent experiential appointment. – Assigned to an employee in an
experiential program who has not been continuously employed long
enough to become a career employee under G.S. 126A-10.1.
(2) Non-permanent. – An appointment to a position for a finite period of time. All
non-permanent employees are designated as one of the following
subcategories:
a. Temporary appointment. – Assigned to a n employee employed for a
period typically not to exceed 11 months.
b. Time-limited appointment. – Assigned to an employee employed in a
position that has a limited period not to exceed three years.
c. Non-permanent experiential appointment. – Assigned to an employee
in an experiential program for a limited period of time.
(3) Exempt. – An appointment to a position designated by statute as exempt as
defined in G.S. 126A-15. An exempt appointment may be made to a
permanent or time-limited position.
(c) An employee who moves from a non -permanent or exempt appointment to a
permanent appointment shall have a probationary appointment for at least 12 months.
(d) The following exceptions apply:
(1) When a time-limited appointment exceeds three years, the employee shall be
designated as having a permanent appointment and, notwithstanding
subsection (c) of this section, shall not be required to have a probationary
appointment.
(2) A time-limited appointment may be made to a permanent position only when
that position is vacant due to the incumbent 's leave of absence and the
replacement employee's services will be needed for a period of one year or
less.
(3) A career employee who is assigned a position that i s designated as exempt
under G.S. 126A-15(1)a., 126A -15(2), and 126A -15(3) may, once that
employee is no longer in the designated exempt position, be reassigned as a
career employee with no probationary period if the employee remains
continuously employed by the State.
(e) Except for career and probationary appointments, t he appointment types in this
section do not apply to local employees.
"§ 126A-10.1. Qualification as career employee.
(a) An employee in a probationary appointment shall be assigned a career appointment
as follows:

Page 4 Session Law 2026-40 Senate Bill 1041
(1) An employee who successfully completes 12 months of employment in a
probationary appointment shall be assigned a career appointment except as
provided in subdivisions (2) and (3) of this subsection. The employee shall be
assigned a career appointment unless there is a supervisory extension of the
probationary period or separation based on performance or conduct prior to
the completion of the 12 months of employment.
(2) If the employee 's supervisor determines an additional six -month period is
needed to assess whether the employee's performance in the probationary
appointment is successful or needs improvement , t he employee who
successfully completes a total of 18 months of probationary appointment shall
be assigned a career appointment.
(3) An employee hired in a sworn law enforcement position or forensic scientist
position who is required to complete a formal training program prior to
assuming law enforcement or forensic scientist duties with the employing
agency shall be assigned a career appointment only after being employed by
the agency for 24 continuous months in a probationary appointment. An
employee who has a career appointment retains that appointment if the
employee transfers from a position that does not require completion of a
formal training program into a position under this subdivision that does
require a formal training program, even if the employee has worked for the
agency for fewer than 24 continuous months.
(b) An employee in a p ermanent experiential appointment shall be assigned a career
appointment as follows:
(1) For experientia l programs of 12 months or longer, an employee who
successfully completes an experiential program in a permanent experiential
appointment shall be assigned a career appointment . The employee shall be
assigned a career appointment unless there is a separation based on
performance or conduct prior to the completion of the experiential program.
(2) For experiential programs of less than 12 months, an employee who
successfully completes the experiential program shall be assigned a
probationary appointment and shall receive a career appointment as provided
in subsection (a) of this section.
(c) When an employee transfers employment between two local agencies, or between an
executive branch agency and a local agency, that employee resets the period of consecutive
service required in subsection (a) of this section.
(d) Employees of The University of North Carolina who are exempt from the minimum
wage and overtime compensation provisions of the Fair Labor Standards Act and who attained
career status before September 1, 2023, have the option of either (i) continuing employment with
a career employee appointment if the employee remains in the position the employee occupied
on August 31, 2023, or (ii) waiving the career employee appointment and continuing employment
as a statutorily exempt employee, as defined in Part 3 of this Article. The University shall provide
each affected employee with a written explanation of the impact of an election to waive the career
employee appointment. An employee's election to waive the career employee appointment must
be acknowledged either through the employee's written or electronic signature within 60 days of
receiving the written explanation.
"Part 3. Application of the North Carolina Human Resources Act.
"§ 126A-15. Definitions.
For the purposes of this Part , the terms used in Part 2 of this Arti cle and the following
definitions apply:
(1) Designated employees of policymak ers. – Any of the following who have
been designated as exempt by the agency head and provided written notice:

Senate Bill 1041 Session Law 2026-40 Page 5
a. For each agency, three confidential assistants for each agency head
and one confidential assistant for each chief deputy or chief
administrative assistant.
b. The chief deputy or chief administrative assistant to the head of each
agency.
(2) Exempt managerial employee. – A position designated under G.S. 126A-15.4.
(3) Exempt policymaking employee. – A position designated under
G.S. 126A-15.4.
(4) Exempt wardens. – Wardens of State adult correctional facilities that have
been designated as exempt by the agency head and provided written notice.
Exempt wardens shall be public servants under G.S. 138A-3(70) and shall file
Statements of Economic Interest under G.S. 138A-22.
(5) Limited exemption employees. – Any of the following:
a. The Office of the Commissioner of Banks and its employees.
b. The following employees of the Department of Natural and Cultural
Resources:
1. Director and Associate Directors of the North Carolina
Museum of History.
2. Program Chiefs and Curators.
3. Regional History Museum Administrators and Curators.
4. Employees assigned to assist the North Carolina Symphony
Society, Incorporated.
5. Director, Associate Directors, and Curators of Tryon Palace.
6. Director, Associate Directors, and Curators of the
Transportation Museum.
7. Director and Associate Directors of the North Carolina Arts
Council.
8. Director, Assistant Directors, and Curators of the Division of
State Historic Sites.
c. Employees of the Department of Information Technology (DIT), and
employees in all agencies, departments, and institutions with similar
classifications as DIT employees, who voluntarily relinquish annual
longevity payments, relinquish any claim to long evity pay, or
voluntarily relinquish any claim to career status or eligibility for career
status as approved by the State Chief Information Officer and the
Director of OSHR.
d. Employees of the Utilities Commission and the Commission 's Public
Staff.
(6) Specialized Treasurer's Office employees. – All of the following:
a. Employees of the Department of State Treasurer possessing
specialized skills or knowledge necessary for the proper
administration of investment programs and compensated pursuant to
G.S. 147-65.2(b).
b. Employees of the Department of State Treasurer possessing
specialized skills or knowledge necessary for the proper
administration of the Supplemental Retirement Plans and
compensated pursuant to G.S. 135-91(c2).
(7) State employees compensated as teachers. – Teaching and related educational
classes of employees of the Division of Juvenile Justice of the Department of
Public Safety, the Department of Health and Human Services, and any other

Page 6 Session Law 2026-40 Senate Bill 1041
agency whose salaries are set in the same manner as for corresponding public
school employees in accordance with Chapter 115C of the General Statutes.
(8) Statutorily exempt employees. – Any of the following:
a. Constitutional officers of the executive branch of the State.
b. Deputy commissioners appointed pursuant to G.S. 97-79.
c. Members of executive branch boards, committees, commissions,
councils, and advisory councils compensated on a per diem basis.
d. Officials or employees whose salaries are fixed by the General
Assembly, except for those employees on a legislatively established
salary schedule not otherwise exempted by this Chapter, or by the
Governor, or by the Governor and Council of State, or by the Governor
subject to the approval of the Council of State.
e. Employees of the Office of the Governor that the Governor, at any
time, in the Governor's discretion, exempts from the application of this
Chapter by means of a letter to the Director designating these
employees.
f. Employees of the Office of the Lieutenant Governor, that the
Lieutenant Governor, at any time, in the Lieutenant Governor 's
discretion, exempts from the application of this Chapter by means of
a letter to the Director designating these employees.
g. Employees of The University of North Carolina who are exempt from
the minimum wage and overtime compensation provisions of the Fair
Labor Standards Act, instructional and research staff, student-oriented
professionals, finance professionals, business office professionals,
auditor professionals, information technology profession als,
physicians, dentists, pilots, and the faculty of the North Carolina
School of Science and Mathematics, and all temporary employees.
The Board of Governors of The University of North Carolina shall
have the authority to establish positions under this s ubdivision to be
exempt from this Chapter without further review or approval by any
other agency.
h. Employees of a regional school established pursuant to Part 10 of
Article 16 of Chapter 115C of the General Statutes.
i. Employees of a school for the deaf or blind governed by Article 9C of
Chapter 115C of the General Statutes hired on or after July 1, 2024.
j. Employees whose salaries are fixed under the authority vested in the
Board of Governors of The University of North Carolina by the
provisions of G.S. 116-11(4), 116-11(5), and 116-14.
k. Employees of the North Carolina Cooperative Extension Service of
North Carolina State University and North Carolina Agricultural and
Technical State University who are employed in county operations and
who are not exe mpt pursuant to sub -subdivision g. or j. of this
subdivision.
l. Employees of the North Carolina State Ports Authority.
m. Employees of the North Carolina Global TransPark Authority.
n. The executive director and one associate director of the North Carolina
Center for Nursing established under Article 9F of Chapter 90 of the
General Statutes.
o. Employees of the Tobacco Trust Fund Commission established in
Article 75 of Chapter 143 of the General Statutes.
p. Employees of the North Carolina Turnpike Authority.

Senate Bill 1041 Session Law 2026-40 Page 7
q. The Executive Administrator of the State Health Plan for Teachers and
State Employees and employees of the State Health Plan for Teachers
and State Employees as designated by law or by the Executive
Administrator of the Plan.
r. The North Carolina State Lottery Director and employees of the North
Carolina State Lottery.
s. The Chief Administrative Law Judge of the Office of Administrative
Hearings and five employees of the Office of Administrative Hearings
as designated by the Chief Administrative Law Judge.
t. The Executive Director and the Assistant Director of the U.S.S. North
Carolina Battleship Commission.
u. The Executive Director, Deputy Director, all other directors, assistant
and associate directors, and Center fellows of the North Car olina
Center for the Advancement of Teaching.
v. Employees of the Department of Commerce employed in the Rural
Economic Development Division.
w. Employees of the North Carolina Health Information Exchange
Authority.
x. Employees of the Division of Health Benefits of the Department of
Health and Human Services.
y. The Associate Superintendent of Early Education of the Department
of Public Instructi on who serves as chief academic officer of early
education.
z. Employees of the North Carolina Youth Outdoor En gagement
Commission.
aa. Employees of the Division of State Operated Healthcare Facilities of
the Department of Health and Human Services who are (i) health care
professionals licensed under Chapter 90 or Chapter 90B of the General
Statutes or (ii) engineers responsible for mainte nance or buildings
operations at one of the health care facilities operated by the Secretary
of the Department of Health and Human Services under
G.S. 122C-181.
bb. The Executive Director of the North Carolina Boxing and Combat
Sports Commission created pursuant to G.S. 143-652.2.
cc. No more than 10 employees of the State Bureau of Investigation
designated by the Director of the State Bureau of Investigation.
dd. No more than 17 employees of the State Highway Patrol as designated
by the Commander of the State Highway Patrol.
ee. The Chief Investment Officer of the North Carolina Investment
Authority and employees of the North Carolina Investment Authority
who possess specialized skills or knowledge necessary for the proper
administration of investment pro grams and who are employed in a
position designated by the Chief Investment Officer as exempt in
accordance with G.S. 147-72.1.
ff. Liaisons to the Collaboration for Prosperity Zones set out in
G.S. 143B-28.1 for the Departments of Commerce, Environmental
Quality, and Transportation.
(9) University health employees. – Any of the following:
a. Employees of the University of North Carolina Health Care System.
b. Employees of the University of North Carolina Hospitals at Chapel
Hill.

Page 8 Session Law 2026-40 Senate Bill 1041
c. Employees of the clinic al patient care programs of the School of
Medicine of the University of North Carolina at Chapel Hill.
d. Employees of the Medical Faculty Practice Plan, a division of the
School of Medicine of East Carolina University.
e. Employees of UNC-CH Dental School Clinical Operations, a division
of the Adams School of Dentistry at the University of North Carolina
at Chapel Hill.
f. Employees of ECU Dental School Clinical Operations, a division of
the School of Dental Medicine at East Carolina University.
(10) University police officers. – Commissioned police officer positions of The
University of North Carolina. Employees in these positions are eligible for all
employment and retirement benefits provided to State law enforcement
officers subject to this Chapter.
"§ 126A-15.1. Application of this Chapter.
(a) Except as otherwise provided, this Chapter applies to all executive branch employees
and local employees.
(b) This Chapter does not apply to the following:
(1) Public school superintendents, principals, teachers, and other public school
employees, except for G.S. 126A-71 and Article 14 of this Chapter.
(2) Employees of community colleges whose salaries are fixed in accordance with
G.S. 115D-6.1 and G.S. 115D-20 and employees of the Community Colleges
System Office whose salaries are fixed by the State Board of Community
Colleges in accordance with G.S. 115D-3, except for G.S. 126A-71,
126A-103, and 126A-104 and Article 14 of this Chapter.
(3) Employees of the Office of Proprietary Schools whose salaries are fixed by
the State Board of Proprietary Schools in accordance with G.S. 115D-89.2.
(4) Officers, employees, and members of the governing board of a North Carolina
nonprofit corporation with which the Department of Commerce has contracted
pursuant to the authority granted in G.S. 143B-431.01.
(5) Constitutional officers, officials, and employees of the Judicial Department.
(6) Constitutional officers, officials, and employees of the General Assembly.
"§ 126A-15.2. Exemptions from this Chapter.
(a) Probationary employees are exempt from the following:
(1) All of Article 8 of this Chapter, except for G.S. 126A-84(c)(1) and (2).
(2) G.S. 126A-91.
(b) Permanent experiential employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) All of Article 8 of this Chapter, except for G.S. 126A-84(c)(1) and (2).
(4) G.S. 126A-91.
(c) Non-permanent experiential employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) All of Article 8 of this Chapter, except for G.S. 126A-84(c)(1) and (2).
(4) Article 9 of this Chapter.
(d) Temporary employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) Article 5 of this Chapter, except for G.S. 126A-52.
(4) Part 2 of Article 6 of this Chapter.
(5) Article 7 of this Chapter.

Senate Bill 1041 Session Law 2026-40 Page 9
(6) Article 8 of this Chapter.
(7) Article 9 of this Chapter.
(e) Time-limited appointments are exempt from the following:
(1) All of Article 8 of this Chapter, except for G.S. 126A-84(c)(1) and (2).
(2) Article 9 of this Chapter.
(f) Employees in a position with an experience -based salary schedule established in the
Current Operations Appropriations Act, as defined in G.S. 143C-1-1, are exempt from Article 4
of this Chapter.
(g) Limited exception employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) G.S. 126A-50(a)(4) and policies adopted pursuant to that subdivision.
(4) G.S. 126A-72(a)(1), covering hours and days of work, vacation, and sick
leave.
(5) Part 3 of Article 7 of this Chapter.
(h) Specialized Treasurer's Office employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter.
(3) Article 5 of this Chapter, except for G.S. 126A-57.3.
(4) Part 2 of Article 6 of this Chapter.
(5) Parts 2 and 3 of Article 7 of this Chapter.
(6) Article 8 of this Chapter.
(i) Exempt policymaking employees and d esignated employees of policymak ers are
exempt from the following:
(1) Article 5 of this Chapter, except for G.S. 126A-52 and G.S. 126A-57.2.
(2) Part 2 of Article 6 of this Chapter.
(3) Article 8 of this Chapter.
(4) G.S. 126A-92(b).
(5) G.S. 126A-93.
(6) Article 10 of this Chapter.
(j) Exempt managerial employees and exempt wardens are exempt from the following:
(1) Part 2 of Article 5 of this Chapter.
(2) All of Article 8 of this Chapter, except for G.S. 126A-84(c)(1) and (2).
(3) G.S. 126A-92(b).
(4) G.S. 126A-93.
(5) Article 10 of this Chapter.
(k) Statutorily exempt employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) Article 5 of this Chapter, except for G.S. 126A-52.
(4) Part 2 of Article 6 of this Chapter.
(5) Parts 2 and 3 of Article 7 of this Chapter.
(6) Article 8 of this Chapter.
(7) Article 9 of this Chapter, except for G.S. 126A-94.
(8) Article 10 of this Chapter.
(l) State employees compensated as teachers are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) Article 5 of this Chapter, except for G.S. 126A-52.
(4) Part 2 of Article 6 of this Chapter.
(5) Part 1 of Article 7 of this Chapter, except as to G.S. 126A-71.

Page 10 Session Law 2026-40 Senate Bill 1041
(6) Article 8 of this Chapter.
(7) Article 9 of this Chapter, except for G.S. 126A-94.
(8) Article 10 of this Chapter.
(m) University health employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) Article 5 of this Chapter, except for G.S. 126A-52 and G.S. 126A-57.3.
(4) Part 2 of Article 6 of this Chapter.
(5) Parts 2, 3, and 4 of Article 7 of this Chapter.
(6) Article 8 of this Chapter.
(7) Article 9 of this Chapter, except for G.S. 126A-94.
(n) University police employees are exempt from the following:
(1) Article 3 of this Chapter.
(2) Article 4 of this Chapter, except for G.S. 126A-42.
(3) Article 5 of this Chapter, except for G.S. 126A-52 and G.S. 126A-57.3.
(4) Part 2 of Article 6 of this Chapter.
(5) Parts 2, 3, and 4 of Article 7 of this Chapter.
(7) Article 9 of this Chapter, except for G.S. 126A-94.
(8) Article 10 of this Chapter.
(o) Local employees are exempt from the following:
(1) G.S. 126A-57.3.
(2) Parts 1, 2, and 3 of Article 7 of this Chapter.
(3) G.S. 126A-94.
(4) Article 13 of this Chapter.
"§ 126A-15.3. Additional exemptions for experiential programs.
Notwithstanding G.S. 126A-15.2, for good cause or based on requirements of an experiential
program set by the federal government or an external funding source, the Director may make an
experiential program exempt from additional Articles or sections of this Chapter.
"§ 126A-15.4. Process for designating exempt managerial and policy positions.
(a) Exempt Managerial Position. – An exempt managerial position is a position delegated
with significant managerial or programmatic responsibility that is essential to the successful
operation of an agency, so that the application of G.S. 126A-81 to an employee in the position
would cause undue disruption to the operations of the agency.
(b) Exempt Policymaking Position. – An exempt policymaking position is a position
delegated with the authority to impose the final decision as to a settled course of action to be
followed within an agency, so that loyalty to the Governor or member of the Council of State in
their respective offices is reasonably necessary to implement the policies of their offices. The
term does not include personnel professionals.
(c) Exempt Policymaking and Exempt Managerial Positions in Cabinet Departments. –
Subject to this Chapter, the Governor may designate a total of 425 exempt policymaking and
exempt managerial positions throughout the following departments and offices:
(1) Department of Administration.
(2) Department of Commerce.
(3) Department of Public Safety.
(4) Department of Natural and Cultural Resources.
(5) Department of Health and Human Services.
(6) Department of Environmental Quality.
(7) Department of Revenue.
(8) Department of Transportation.
(9) Department of Information Technology.
(10) Department of Military and Veterans Affairs.

Senate Bill 1041 Session Law 2026-40 Page 11
(11) Department of Adult Correction.
(12) Office of State Human Resources.
(13) Office of State Budget and Management.
(d) Exempt Policymaking and Exempt Managerial Positions in Council of State
Departments and Offices. – The following officials may designate up to 25 exempt policymaking
positions or two percent (2%) of the total number of full -time positions in the department,
whichever is greater, and 25 exempt managerial positions or two percent (2%) of the total number
of full-time positions in the department, whichever is greater, except as described below:
(1) The Secretary of State.
(2) The Auditor.
(3) The Treasurer.
(4) The Attorney General.
(5) The Commissioner of Agriculture.
(6) The Commissioner of Insurance.
(7) The Commissioner of Labor. – Notwithstanding the designation limits of this
subsection, the Commissioner shall designate three additional full-time
equivalent attorney positions as exempt policymaking positions.
(8) The Superintendent of Public Instruction . – Notwithstanding the designation
limits of this subsection, the Superintendent may designate up to 70 exempt
policymaking positions or two percent (2%) of the total number of full -time
positions in the department, whichever is greater , and up to 70 exempt
managerial positions or two percent (2%) of the total number of full -time
positions in the department, whichever is greater.
(e) Exempt Policymaking and Exempt Managerial Positions in the Office of the State
Controller and the State Board of Elections. –
(1) The State Controller. – The total number of exempt positions, policymaking
and managerial, is limited to 10.
(2) The Executive Director of the State Board of Elections. – The total number of
exempt positions is limited to the follow ing seven positions: Agency Human
Relations Director II, Agency General Counsel II, Assistant General Counsel
II, Public Information Manager, Legislative Affairs Manager, Internal
Auditor, and Administrative Officer III.
(f) Designation of Additional Posit ions. – The Governor or member of the Council of
State may request that additional positions be designated as exempt. The request shall be made
by sending a list of exempt policymaking and exempt managerial positions that exceed the limit
imposed by this s ubsection to the Speaker of the North Carolina House of Representatives and
the President Pro Tempore of the North Carolina Senate. A copy of the list also shall be sent to
the Director. The General Assembly may authorize all, or part of, the additional po sitions to be
designated as exempt policymaking and exempt managerial positions.
(1) If the General Assembly is in session when the list is submitted and does not
act within 30 days after the list is submitted, the list is deemed approved by
the General As sembly, and the positions shall be designated as exempt
positions.
(2) If the General Assembly is not in session , the list shall be submitted to the
Joint Legislative Commission on Governmental Operations , and if the
Commission does not meet within 90 days of submission , the list is deemed
approved pursuant to G.S. 120-76.1(b), and the positions shall be designated
as exempt.
(g) Letter. – Exempt policymaking and exempt managerial positions shall be designated
in a letter to the Directo r, the Speaker of the House of Representatives, and the President Pro

Page 12 Session Law 2026-40 Senate Bill 1041
Tempore of the Senate by July 1 of the year in which the oath of office is administered to each
Governor unless subsection (h) of this section applies.
(h) Vacancies. – In the event of a vacancy in the Office of the Governor, the office of a
member of the Council of State, the Office of the State Controller, or the Executive Director of
the State Board of Elections, the person who succeeds to or is appointed or elected to fill the
unexpired term shall make designations in a letter to the Director, the Speaker of the House of
Representatives, and the President Pro Tempore of the Senate within 180 days after the oath of
office is administered to that person.
(i) Creation, Transfer, or Reorganization. – The Governor or member of the Council of
State may designate as exempt a position that is created or transferred to a different department,
or is located in a department in which reorganization has occurred, after July 1 of the year in
which the oath of office is administered to the Governor. The designation shall be made in a letter
to the Director, the Speaker of the North Carolina House of Representatives, and the President
Pro Tempore of the North Carolina Senat e within 180 days after the position is created,
transferred, or in which reorganization has occurred.
(j) Reversal. – Subsequent to the designation of a position as an exempt policymaking or
exempt managerial position, the status of the position may be re versed and made subject to this
Chapter by the Governor or by a member of the Council of State in a letter to the Director, the
Speaker of the North Carolina House of Representatives, and the President Pro Tempore of the
North Carolina Senate.
(k) No Designation for Certain Positions. – Except for deputy commissioners appointed
pursuant to G.S. 97-79 and as otherwise specifically provided by this section, no employee, by
whatever title, whose primary duties include the power to conduct hearings, tak e evidence, and
enter a decision based on findings of fact and conclusions of law based on statutes and legal
precedents, shall be designated as exempt.
"§ 126A-15.5. Notice of being exempt from this Chapter; disputes about whether employees
are subject to this Chapter.
(a) No employee shall be placed in an exempt policymaking or exempt managerial
position without 10 working days ' prior written notification of the position's designation. A
person applying for a position that is designated as exempt policymaking or exempt managerial
shall be notified in writing at the time the person makes the application that the position is
designated as exempt.
(b) Where a statute specifies a process for a position that is inconsistent with the process
established in this Chapter, the position is exempt from this Chapter to that extent.
(c) In case of a dispute as to whether an employee is subject to this Chapter, the dispute
shall be resolved as provided in Article 3 of Chapter 150B of the General Statutes.
"§ 126A-15.6. Agencies to adopt policies for exempt employees.
When a statute makes a position exempt from this Chapter regarding any subject, an agency
shall address that subject by either adopting its own policy or the Commission policy.
"Article 2.
"Oversight of the State Human Resources System.
"§ 126A-20. State Human Resources Commission.
(a) There is established the State Human Resources Commission.
(b) The Commission shall consist of nine members, appointed as follows:
(1) One member appointed by the Gene ral Assembly upon the recommendation
of the Speaker of the House of Representatives who shall be an attorney
licensed to practice law in North Carolina.
(2) One member appointed by the General Assembly upon the recommendation
of the President Pro Tempore of the Senate who shall be an attorney licensed
to practice law in North Carolina.

Senate Bill 1041 Session Law 2026-40 Page 13
(3) One member appointed by the General Assembly upon the recommendation
of the Speaker of the House of Representatives who shall be from private
business or industry and who shall have a working knowledge of, or practical
experience in, human resources management.
(4) One member appointed by the General Assembly upon the recommendation
of the President Pro Tempore of the Senate who shall be from private business
or industry a nd who shall have a working knowledge of, or practical
experience in, human resources management.
(5) One member who is a veteran of the Armed Forces of the United States
appointed by the Governor upon the nomination of the Veterans ' Affairs
Commission and who is a State employee subject to this Chapter serving in a
nonexempt supervisory position. The member may not be a human resources
professional.
(6) One member appointed by the Governor who is a State employee subject to
this Chapter serving in a nonexe mpt nonsupervisory position. The member
may not be a human resources professional. The Governor shall consider
nominations submitted by the State Employees Association of North Carolina.
(7) One member appointed by the Governor upon the recommendation of t he
North Carolina Association of County Commissioners who is a local
government employee subject to this Chapter serving in a supervisory
position. The member may not be a human resources professional.
(8) One member appointed by the Governor upon the reco mmendation of the
North Carolina Association of County Commissioners who is a local
government employee subject to this Chapter serving in a nonsupervisory
position. The member may not be a human resources professional.
(9) One member of the public at large appointed by the Governor.
(c) Each member of the Commission shall be appointed for a term of four years. Members
of the Commission may serve no more than two consecutive terms. Appointments by the General
Assembly shall be made in accordance with G.S. 120-121, and vacancies in those appointments
shall be filled in accordance with G.S. 120-122. Vacancies in appointments made by the
Governor occurring prior to the expiration of a term shall be filled by appointment for the
unexpired term.
(d) No member of the Commission may vote on a matter where there would be a conflict
of interest. The appointing authority may at any time remove any Commission member for cause.
(e) Members of the Commission who are State or local government employees subject
to this Chapter shall be entitled to administrative leave without loss of pay for all periods of time
required to conduct the business of the Commission.
(f) Five members of the Commission shall constitute a quorum.
(g) The Governor shall designate one member of the Commission as chair.
(h) The Commission shall meet quarterly and at other times at the call of the chair.
"§ 126A-21. Office of State Human Resources.
(a) There is established the Office of State Human R esources which shall be placed for
organizational purposes within the Office of the Governor. Notwithstanding Chapter 143A of the
General Statutes, OSHR shall exercise all of its statutory powers in this Ch apter under the
administration and supervision of a Director appointed by and serving at the pleasure of the
Governor. The Governor shall fix the salary of the Director.
(b) OSHR has the following duties, in addition to any other duties specified in this
Chapter:
(1) Providing policy development for the Commission and implementing and
administering all policies established by the Commission.

Page 14 Session Law 2026-40 Senate Bill 1041
(2) Providing training in personnel management to agencies, including
train-the-trainer programs upon agency request when sufficient staff and
expertise exist to provide the training within the agency.
(3) Providing technical assistance to agencies in the management of personnel
programs and activities.
(4) Negotiating decentralization agreements with agencies where it is cost
effective to include delegation of authority for certain classification and
corresponding sa lary administration actions and other personnel programs
specified in the agreements.
(5) Administering centralized programs and pr oviding services as approved by
the Commission that have not been transferred to agencies, or whe n an
agency's authority has been rescinded for noncompliance.
(6) Approving personnel actions involving classification and compensation
where the approval authority has not been transferred to agencies, or when an
agency's authority has been rescinded for noncompliance.
(7) Maintaining a database of all relevant and necessary information on
employees and positions within agencies in the State 's human resources
system. OSHR shall ensure compliance with all applicable laws in developing
the technology that supports the human resources system. The Director may
authorize an agency to operate its own human resources system technology in
accordance with policies on human resources systems technology established
by OSHR.
(8) Developing policies to measure the level of agency compliance with
established Commission policies when authority has been delegated to an
agency for classification, salary administration, performance management,
development, evaluation, and other decentralized programs.
(9) Determining through routine monitoring and periodic review whether
agencies are in compliance with established Commission policies.
(10) Implementing corrective actions in cases of agency noncompliance.
(11) Providing services requested by the legislative branch under
G.S. 120-36.31(6) and judicial branch under G.S. 7A-339(b).
(c) OSHR may charge fees for any of the following:
(1) Costs for participation in services OSHR is statutorily required to provide that
are receipt-supported, including training.
(2) Administrative cos ts associated with administering the JoinNC Program in
accordance with Article 11 of this Chapter.
(3) Costs of training and consultation services requested by a unit of local
government.
"§ 126A-22. Commission policies.
(a) Subject to the approval of the Governor, the Commission shall establish policies ,
including adopting rules as provided in Chapter 150B of the General Statutes, as necessary to
effectuate the authority granted under this Chapter in order to administer an effective modern
human resources system, including policies related to the following:
(1) Classification, in accordance with Article 3 of this Chapter.
(2) Compensation, in accordance with Article 4 of this Chapter.
(3) Hiring, in accordance with Article 5 of this Chapter.
(4) Onboarding, in accordance with Article 6 of this Chapter.
(5) Benefits and terms of employment , in accordance with Article 7 of this
Chapter.
(6) Grievances and just cause, in accordance with Article 8 of this Chapter.
(7) Separation, in accordance with Article 9 of this Chapter.

Senate Bill 1041 Session Law 2026-40 Page 15
(8) Political activity, in accordance with Article 10 of this Chapter.
(9) Temporary employment, in accordance with Article 11 of this Chapter.
(10) Local governments, in accordance with Article 12 of this Chapter.
(11) Workers' compensation, in accordance with Article 13 of this Chapter.
(12) Whistleblower protections, in accordance with Article 14 of this Chapter.
(13) Equal employment opportunity, in accordance with Article 15 of this Chapter.
(14) Privacy of personnel records, in accordance with Article 16 of this Chapter.
(b) Policies established by the Commission shall not limit the power of any Council of
State or Cabinet agency head, in the agency head 's discretion when he or she has determined it
is in the agency's best interests, to transfer, demote, or separate an employee who is not a career
employee.
(c) The Director may in his or her discretion grant exceptions or variances from
Commission policies.
"§ 126A-23. Decentralization agreements.
(a) Decentralization agreements with executive branch agencies shall require a person
designated by the agency to be accountable to the Director for the compliance of all personnel
actions taken pursuant to the delegated authority of the agency. The agreement shall specify the
required policies for agency personnel administration.
(b) The Director shall take appropriate corrective actions, including adjusting employee
salaries and changing classification s that are not in compliance with policy, and suspend
decentralization agreements when agencies are not in compliance with personnel administration
policies.
"§ 126A-24. State of the State workforce report and survey.
(a) OSHR shall annually report by January 15 on the state of the State employee
workforce and statewide human resources p rograms to the Joint Legislative Commission on
Governmental Operations, the Joint Legislative Oversight Committee on General Government,
the Fiscal Research Division, and the Appropriations Committees of the House of
Representatives and the Senate. The report shall include the following:
(1) A comparison of employee compens ation rates and benefits compared to
national trends, including at least the following:
a. An overview of economic conditions and labor market trends.
b. An analysis of the competitiveness of State salaries and benefits.
c. A review of recruitment and retention efforts and results.
d. The results of the annual compensation surveys conducted pursuant to
subsection (b) of this section.
(2) The safety, health, and workers' compensation activities of agencies in
compliance with Article 13 of this Chapter and the fines levied against
agencies pursuant to Article 16 of Chapter 95 of the General Statutes.
(3) The costs associated with the defense or settlement of admini strative
grievances and lawsuits filed by current or former emp loyees and applicants
for employment with an executive branch agency.
(4) Agency compliance with JoinNC policies, including the following:
a. The number and type of exceptions made by the Director.
b. A list of agencies with invoices more than 60 days overdue.
c. A list of agencies with temporary employees who exceeded 11 months
of consecutive employment, including the number of employees who
exceeded 11 months of consecutive employment and the average
number of days employees exceeded this limit.
(b) OSHR shall c onduct annual compensation surveys to guide the Governor and the
General Assembly in making decisions regarding the compensation of employees.
"Article 3.

Page 16 Session Law 2026-40 Senate Bill 1041
"Classification and Minimum Qualifications.
"§ 126A-30. Classification system and minimum qualifications.
(a) The Commission shall establish policies on classification and minimum qualifications
of positions subject to this Article and Part 2 of Article 1 of this Chapter, including the following:
(1) Position classification plans that provide for the classification and
reclassification or other grouping of positions subject to this Article and Part
2 of Article 1 of this Chapter according to the duties and responsibilities of
the positions.
(2) For each group of positions, reasonable minimum qualifications related to the
work to be performed.
(3) The process of position classification and reclassification.
(4) Procedures for hiring employees on the basis of specific demonstr ated
competencies rather than years of experience or education.
(b) The Commission shall prepare a classification system that organizes agency positions
into a classification based on the position duties and responsibilities. Classifications may be
grouped, subdivided, ranked, or otherwise organized in a manner the Commission deems
appropriate. The system shall set minimum qualifications for classifications or other groupings
of positions.
(c) The Commission shall develop a procedure for the periodic review of the
classification system and policies, including revisions to classifications and establishment of new
classifications.
"§ 126A-31. Reducing barriers to State employment.
The Commission shall do all of the following:
(1) Regularly assess the minim um qualifications for each position in an agency.
The Commission shall review the necessary educational, experimental, and
training requirements for each position.
(2) Determine when practical experience and training, such as military service, an
apprenticeship, or a trade school education instead of a bachelor's degree is
the appropriate qualification for a position.
(3) Identify jobs for which the minimum qualification s could be reduced from
their present level.
(4) To the extent practicable, r emove requirements for a bachelor's degree from
position descriptions when the degree is not necessary for the position.
"§ 126A-32. Agency flexibility for classification.
(a) When a job classification exists solely within one agency, the agency may modify the
classification after consultation with OSHR. The agency shall report any modification made to a
classification to OSHR.
(b) Agencies may classify or reclassify positions i n accordance with the Commission
classification system established by G.S. 126A-30 when employees in the position meet the
minimum qualifications for the classification.
(c) Nothing in this section limits the Commission or Director 's ability to enforce
corrective actions against an agency modifying classifications beyond the scope of the flexibility
provided in this section.
"Article 4.
"Compensation.
"§ 126A-40. Compensation system.
(a) The Commission shall establish policies on compensation for positions subject to this
Article, including the following:
(1) The setting of compensation, including salary ranges, salaries, longevity pay,
performance pay, and bonuses. These policies shall address temporary and

Senate Bill 1041 Session Law 2026-40 Page 17
permanent pay adjustments and one -time bonuses, awards, and other
compensation.
(2) A compensation system.
(b) The Commission shall establish compensation policies under subsection (a) of this
section that (i) make State government a competitive and attractive employment option for
recruitment and retention, (ii) provide substantially si milar compensation levels for positions
with substantially similar work, and (iii) recognize and reward performance.
"§ 126A-41. Agency flexibility for compensation.
(a) Each agency shall set employee salaries for positions subject to this Article in
accordance with the compensation system establis hed by the Commission in accordance with
G.S. 126A-40. Each agency may set an employee's salary at any point within the salary range for
the position classification established by the Commission.
(b) Each agency with an exempt policymaking position or an exempt managerial position
may set the salary for that position within the salary range established by the Commission plus
ten percent (10%).
(c) Nothing in this section limits the Commission or Director 's ability to enforce
corrective actions against an agency setting compensation beyond the scope of the flexibility
provided in this section.
"§ 126A-42. Minimum salary.
The Commission shall set the minimum for all salary ranges in the compensation system
established in accordance with G.S. 126A-40 to at least thirty-one thousand two hundred dollars
($31,200). This minimum salary applies to full-time employees who are not place d on leave
without pay during the year . This minimum salary does not apply to State -funded local
employees.
"Article 5.
"Recruitment and Hiring.
"Part 1. General Provisions.
"§ 126A-50. Recruitment and hiring.
(a) The Commission shall establish policies on recruitment and hiring for positions
subject to this Article, including the following:
(1) The posting of positions.
(2) Job applications.
(3) Recruitment programs designed to promote public employment, communicate
current hiring activities within agenc ies, and attract a sufficient flow of
internal and external applicants.
(4) How to determine the relative fitness of applicants for the respective positions.
(5) The appointment, promotion, transfer, redeployment, demotion , and
suspension of employees.
(6) The implementation of the redeployment requirements for employee s hired
before August 21, 2013, as required by G.S. 126A-57.2.
(b) The Commission shall establish recruitment and hiring policies under subsection (a)
of this section that (i) assure recruitment, selection, and hiring procedures are similar across
agencies, (ii) encourage open and fair comp etition for positions and the hiring of a diverse
workforce, and (iii) otherwise implement the State 's policy of nonpolitical hiring practic es in
accordance with this Chapter. The Commission shall ensure that the polices address the training
necessary for supervisors, management personnel, and personnel professionals to implement the
policies.
"§ 126A-51. Posting positions.
(a) Each agency shall publicly post and accept applications in a fair and open competition
to hire for any permanent or time-limited positions subject to this Article, unless the agency head
determines, based on business needs and in accordance with Commission policy, that the agency

Page 18 Session Law 2026-40 Senate Bill 1041
will not openly recruit for the vacancy. Any vacancy for which an agency is openly recruiting
shall be posted on a website maintained by OSHR.
(b) Each State agency may determine whether a vacancy is open only to applicants within
the agency or currently employed by another State agency. Each local agency may determine
whether a vacancy is open only to applicants within the agency. These vacancies shall be marked
as internal when posted to the website maintained by OSHR.
(c) Each position post shall include a closing date unless the agency approves a
continuous position.
"§ 126A-52. Private personnel service.
(a) An agency may retain a private personnel service to assist in finding candidates for a
position, subject to the limitations of this section.
(b) No person, firm, or corporation shall collect, accept, or receive any compensation,
consideration, or thing of value for obtaining on behalf of any other person, or aiding or assisting
any other person in obtaining, employment with an agency, except as provided in subsection (c)
of this section.
(c) Any business that has been licensed for more than one year by the Department of
Labor as a private personnel service may collect regular and customary fees for services rendered
pursuant to a written contract when the fees are paid by someone other than the agency. Any
private personnel service collecting fees under this section shall make a monthly report to th e
Department of Labor listing the name of the private personnel service collecting fees and the
person for whom a job was found, the nature and purpose of the job obtained, and the amount of
the fee collected.
(d) A violation of this section shall constitute a Class 1 misdemeanor.
"§ 126A-53. Increasing efficiency of application process.
(a) OSHR shall streamline the application process for agency positions by enabling
applicants to upload resumes or website profiles. An applicant is responsible for ensuring that all
information required for initial screening appears correctly in the completed application after
importing his or her resume or profile.
(b) Any additional information not typically found on resumes and not needed for initial
screening, such as references or answers to supplemental questions, may be collected by agencies
later in the selection process, including during an interview.
"§ 126A-54. Hiring from pool of most qualified candidates.
(a) Agencies shall select an applicant to h ire for a position from the pool of the most
qualified candidates using fair and valid selection criteria. A qualified candidate is a person who
timely applied for the position and mee ts the minimum qualifi cations for the position
classification. Any additional knowledge, skills, and abilities listed in the posting for the position
beyond the minimum qualifications are management preferences.
(b) When selecting qualified candidates pursuant to subsection (a) of this section , an
agency ma y use s kills-based hiring to determine whether a person meets the minimum
qualifications based on demonstrated competencies, instead of solely based on education,
experience, or credentials. An agency may use an assessment process that tests whether the
applicant demonstrates sufficient competency or skill level in a te chnical discipline, behavioral
skills, or other relevant competencies necessary to perform the work for the position
classification. Agencies using an assessment process shall ensure that it is fair and reasona bly
related to predicting success in the position.
(c) Notwithstanding subsection (a) of this section, a gencies may offer experiential
programs to candidates not meeting the minimum qualifications for the position classification .
An agency may identify positions appropriate for a permanent or non -permanent experiential
appointment and hire an applicant who is expected to meet the minimum qualifications for the
position classification following a fixed time period of employment and edu cation or training
that occurs while employed, not to exceed four years. Employees hired into experiential

Senate Bill 1041 Session Law 2026-40 Page 19
appointments may be selected for the position regardless of whether there are qualif ied
candidates in the applicant pool. A n experiential appointment hiring is exempt from the hiring
priorities identified in G.S. 126A-57.
"§ 126A-55. Political hiring limited.
(a) Each agency shall select from the pool of the most qualified candidates as required
by G.S. 126A-54, without regard to political affiliation or political influence.
(b) It is a violation of this section if all of the following are met:
(1) The complaining applicant timely applied for the position.
(2) The complaining applicant was not hired into the position.
(3) The complaining applicant was among the most qualified candidates applying
for the position as compared to other applicants for the position using fair and
valid selection criteria.
(4) The successful applicant for the position was not among the most quali fied
candidates for the position.
(5) The hiring decision was based upon political affiliation or political influence.
"§ 126A-56. Hiring candidate from most qualified pool in previous posting.
(a) An agency may directly h ire into a vacant position without posting if all of the
following are met:
(1) The agency has previously posted for recruitment, in accordance with
G.S. 126A-51, a position that has the same classification or a comparable
classification to the vacant position.
(2) The person to be hired applied to the previous vacancy.
(3) The agency determined the person to be among the most qualified candidates
for the previous vacancy in accordance with G.S. 126A-54, but did not hire
the person.
(4) The person to be hired meets the minimum qualif ications for the position
classification of the vacancy and will have a salary set within the vac ant
position's salary range.
(b) A hiring under this section is not subject to the other requirements of this Article.
"§ 126A-56.1. Non-permanent to permanent hiring.
(a) An agency may directly hire an employee serving in a non-permanent position into a
vacant permanent position if all of the following are met:
(1) The employee was employed directly by the agency or through JoinNC in the
non-permanent appointment.
(2) The employee has worked for a minimum of three months in a substantially
similar role, excluding any mandatory breaks required under G.S. 126A-111,
with satisfactory performance.
(3) The employee meets the minimum qualifications for the position
classification and the employee 's salary is set within the vacant position 's
salary range.
(4) The hiring manager and the hiring manager's supervisor approve the hiring.
(b) The Director may waive the requirements of subdivisions (3) and (4) of su bsection
(a) of this section in his or her discretion.
(c) A hiring under this section is not subject to the other requirements of this Article.
"§ 126A-56.2. Lateral transfers.
Notwithstanding the posting requirements of G.S. 126A-51, b ased on its business or
operational needs, an agency may transfer an existing employee into a vacant position with the
same classification at an equal or higher salary at the agency with the consent of the employee .
Employees in supervisor y positions may be transferred pursuant to this section only if the
employee is not a career employee or the transfer is to another supervisory position.
"§ 126A-56.3. Consider applications for vacancies in the same or similar classification.

Page 20 Session Law 2026-40 Senate Bill 1041
(a) Each agency may offer qualified candidates the option to have their applications
considered for future positions at other agencies within the same classification or comparable
classification.
(b) OSHR may maintain a pool of qualified applicants for vacancies in particular
classifications that are accessible for agencies to use for recruitment and hiring.
"§ 126A-57. Order of hiring priority.
The following is the order of hiring priority for any position subject to this Article:
(1) The career employee promotional priority under G.S. 126A-57.1.
(2) At equal priority, the following:
a. The reduction-in-force priority under G.S. 126A-93.
b. The reemployment rights for certain exempt policymaking or exempt
managerial employees under G.S. 126A-57.2.
(3) The preference for veterans, National Guard members, and spouses of
active-duty troops under G.S. 126A-57.3.
"§ 126A-57.1. Career employee promotional priority.
If a career employee in a position subject to this Article meets all of the following, the
employee shall receive priority consideration over an applicant who is not a career employee:
(1) The career employee applies for a position at an agency that would constitute
a promotion.
(2) The career employee has substantially equal qual ifications to any applicant
who is not a career employee.
"§ 126A-57.2. Reemployment rights for employees hired before August 21, 2013.
(a) An exempt policymaking or exempt managerial employee may be transferred,
demoted, or separated from his or her posi tion by the agency head authorized to designate the
exempt position except as follows:
(1) When an employee who has the minimum service requirements to be a career
employee but less than 10 years of cumulative service in subject positions
prior to placement in an exempt policymaking or exempt managerial position
is removed from an exempt policymaking or exempt managerial position, for
reasons other than just cause, the employee shall have priority to any position
that becomes available for which the employe e is qualified, according to
policies regulating and defining priority established by the Commission.
(2) When an employee who has 10 years or more cumulative service, including
the immediately preceding 12 months, in subject positions prior to placement
in an exempt policymaking or exempt managerial position is removed from
an exempt policymaking or exempt managerial position, for reasons other than
just cause, the employee shall be reassigned to a subject position within the
same agency, or if necessary within another agency, at the same grade and
salary, including all across-the-board increases since placement in the position
designated as exempt, as his or her most recent subject position.
(3) When a career employee who has more than two but less than 1 0 years of
cumulative service in a subject position moves from one exempt policymaking
or exempt managerial position covered by this subsection to another exempt
policymaking or exempt managerial position covered by this subsection
without a break in servi ce and that employee is later removed from the last
exempt policymaking or exempt managerial position, for reasons other than
just cause, the employee shall have priority to any position that becomes
available for which the employee is qualified, according to the policies
regulating and defining priority as established by the Commission.
(4) When a career employee who has 10 years or more of cumulative service
moves from one exempt policymaking or exempt managerial position covered

Senate Bill 1041 Session Law 2026-40 Page 21
by this subsection to ano ther exempt policymaking or exempt managerial
covered by this subsection without a break in service and that employee is
later removed from the last exempt policymaking or exempt managerial
position, for reasons other than just cause, the employee shall be reassigned
to a subject position within the same agency, or if necessary, within another
agency. The employee shall be paid at the same grade and salary as the
employee's most recent subject position, including all across -the-board
legislative increases awarded since the employee 's placement in the position
that was designated as exempt.
(b) An agency head is authorized to use existing budgeted positions within his or her
agency to carry out the provisions of subsection (a) of this section. If it is necess ary to meet the
requirements of subsection (a) of this section, a n agency head may use salary reserve funds
authorized for his or her agency.
"§ 126A -57.3. Preference for veterans, National Guard members, and spouses of
active-duty troops.
(a) It shall be the policy of the State of North Carolina that, in appreciation for their
service to this State and this country, and in recognition of the time and advantage lost toward
the pursuit of a civilian career, veterans, eligible members of the Natio nal Guard, and other
eligible persons under this section shall be granted preference in employment for positions
subject to the provisions of G.S. 126A-51 with every agency.
(b) Definitions. – The following definitions apply in this section:
(1) Eligible member of the National Guard. – Any of the following:
a. A resident of North Carolina who is a current member in good standing
of either the North Carolina Army National Guard or the North
Carolina Air National Guard.
b. A resident of North Carolina who is a former member of either the
North Carolina Army National Guard or the North Carolina Air
National Guard, whose discharge is under honorable conditions with
a minimum of six years of creditable service.
c. The surviving spouse or dependent of a member of the North Carolina
Army National Guard or the North Carolina Air National Guard.
(2) Eligible person. – Any of the following:
a. A veteran.
b. The spouse of a disabled veteran.
c. The surviving spouse or dependent of a deceased veteran.
d. An eligible member of the National Guard.
e. The spouse of a service member who is serving in the Armed Forces
of the United States on active duty.
(3) Veteran. – A person who served in the Armed Forces of the United States on
active duty, for reasons other than train ing, and has been discharged under
other than dishonorable conditions.
(c) The Commission shall establish a policy to provide for a veteran and National Guard
preference. The policy shall include a provision that any eligible person who has reason to believe
that he or she did not receive a veteran 's preference in accordance with the provisions of this
section or policies adopted under it may appeal that denial as provided by G.S. 126A-83 and
G.S. 126A-84.
(d) G.S. 128-15 shall apply to those persons exempted from coverage of this section but
shall not apply to any person covered by this section.
"Part 2. Interchange of Governmental Employees.
"§ 126A-58. Interchange of governmental employees.

Page 22 Session Law 2026-40 Senate Bill 1041
(a) Short Title. – This section shall be known and may be cited as the "North Carolina
Interchange of Governmental Employees Act."
(b) Definitions. – The following definitions apply in this section:
(1) Assigned employee. – An employee of a sending agency who is assigned or
detailed to a receiving agency as part of the employee's regular duties with the
sending agency.
(2) Employee on leave. – An employee on leave of absence without pay from a
sending agency who becomes an employee of a receiving agency while o n
leave from the sending agency.
(3) Receiving agency. – Any division, department, agency, instrumentality,
authority, or political subdivision of the federal government or of a state or
local government which, under this section, receives an employee of a nother
governmental division, department, agency, instrumentality, authority, or
political subdivision of the federal government or of a state or local
government.
(4) Sending agency. – Any division, department, agency, instrumentality,
authority, or polit ical subdivision of the federal government or of a state or
local government which, under this section, sends any employee thereof to
another governmental division, department, agency, instrumentality,
authority, or political subdivision of the federal gov ernment or of a state or
local government.
(c) Authority to Interchange Employees. – The authority for the interchange of
employees is as follows:
(1) Any division, department, agency, instrumentality, authority, or political
subdivision of the State of No rth Carolina may participate in a program of
interchange of employees with divisions, departments, agencies,
instrumentalities, authorities, or political subdivisions of the federal
government, of another state, or of this State, as a sending agency or a
receiving agency.
(2) The period of individual assignment, detail, or leave of absence under an
interchange program shall not exceed two years.
(3) The temporary assignment of the employee may be terminated by mutual
agreement between the sending agency and the receiving agency.
(4) Elected officials may not participate in a program of interchange.
(d) Status of Employees of Sending Agency. – The status of employees of a sending
agency is governed as follows:
(1) Employees of a sending agency participating in an exchange of personnel
authorized by subsection (c) of this section may be considered during such
participation to be either assigned employees or employees on leave.
(2) Assigned employees shall be entitled to the same salary and employment
benefits to which they would be entitled as employees of the sending agency
and shall remain employees of the sending agency for all purposes unless
otherwise provided in this section or in a written agreement between the
sending agency and the receiving agency.
(3) Employees on leave shall have the same rights, benefits and obligations as
other State or local employees subject to this Chapter who are granted leaves
of absence, unless otherwise provided in this section, or in a written agreement
between the sending agency and the receiving agency.
(4) Employees of a sending agency of this State participating in an exchange of
personnel authorized by subsection (c) of this section , whether considered
assigned employees or em ployees on leave, shall have the same rights,

Senate Bill 1041 Session Law 2026-40 Page 23
benefits and obligations to participate in and receive benefits, including death
benefits, from any retirement system of which they are members as employees
of the sending agency if t he receiving agency agree s to and makes the
employer contributions and deduct s from the salary of the employee the
employee contributions for continued membership in that retirement system,
whether they are members of the Teachers ' and State Employees' Retirement
System, the North Carolina Local Governmental Employees ' Retirement
System, the Law Enforcement Officers' Benefit and Retirement Fund, or any
other Retirement System established by the State for public employees. If the
employee remains entitled to death benefits resulting from his or her death
during the period of the exchange , where duplicate benefits would otherwise
be payable on account of disability or death, the employee or his or her estate
shall elect, within one year of the date of disability or death, which benefits to
receive.
(e) Travel Expenses of Employees from this State. – A sending agency in this State shall
not pay the travel expenses of its assigned or on leave employees and shall not pay the travel
expenses of such employees incurred in the course of performing work for the receiving agency.
expenses shall be borne by the receiving agency.
(f) Status of Employees of Other Governments. – The status of employees of other
governments is governed as follows:
(1) When a division, department, agency, instrumentality, authority , or political
subdivision of the State of North Carolina acts as a receiving agency, assigned
employees of the sending agency remain the employees of the sending agency
and continue to receive the employment benefits of the sending agency unless
otherwise specified in a written agreement between the sending agency and
the receiving agency.
(2) When a division, department, agency, instrumentality, authority , or political
subdivision of this State acts as a receiving agency, employees on leave from
the sending agency will receive appointments as employees with the receiving
agency and will be entitled to the same employment benefits as other
employees of the receiving agency unless otherwise specified in a written
agreement between the sending agency and the receiving agency. Such
appointments may be made without regard to any rules or regulations of the
receiving agency regarding the selection of employees; but applicable rules of
the North Carolina Human Resource s Act shall apply to the assigned
employees.
(g) Travel Expenses of Employees of Other Governments. – A receiving agency in the
State of North Carolina may, in accordance with its travel regulations and travel regulations by
law, pay the travel expenses incurred in the course of an assigned employee's duties or incurred
in the course of the duties of an employee on leave with the receiving agency on the same basis
as the travel expenses of regular employees are paid.
(h) Administration. – The Commission and any State division, department, agency,
instrumentality, authority, or political subdivision participating in an interchange of employees
program may promulgate rules or regulations necessary for the administration of such program,
so long as such rules or regulations do not conflict with the provisions of this section or any other
provision of law.
"Article 6.
"Verification and Onboarding.
"Part 1. Verification of Eligibility to Work and Application Materials.
"§ 126A-60. Onboarding of all positions.
The Commission shall establish policies on onboarding, including the following:

Page 24 Session Law 2026-40 Senate Bill 1041
(1) Confirmation of a person's eligibility to work in the United States.
(2) Verification of a person's credentials and employment history.
"§ 126A-61. E-Verify.
(a) Each agency, community college, and public school unit as defined in G.S. 115C-5
shall verif y, in accordance with the E -Verify Program administered by the United States
Department of Homeland Security pursuant to 8 U.S.C. § 1101, et seq. , each individual's legal
status or authorization to work in the United States after hiring the individual as an employee to
work in the United States.
(b) OSHR may operate a centralized program to electronically offer E -Verify access to
executive branch agencies.
"§ 126A-62. Fraudulent disclosure or concealment on application.
(a) Any employee who knowingly and willfully (i) discloses false or misleading
information, (ii) conceals dishonorable military service, or (ii i) conceals prior employment
history or other requested info rmation significantly related to job responsibilities on an
application or any document supplementing an application may be subject to disciplinary action,
including immediate dismissal from employment. An employing agency shall dismiss an
employee who discloses false or misleading information to meet the minimum qualifications for
the position classification . Applications and any screen allowing an applicant to attach
supplemental materials shall include a statement informing applicants of the consequen ces of
fraudulent disclosure or concealment.
(b) Each agency shall verify the credentials and the accuracy of application materials of
each new employee within 90 days of employment. Failure to verify the application does not bar
disciplinary action taken under subsection (a) of this section.
"Part 2. Verification and Onboarding Procedures.
"§ 126A-63. Onboarding.
The Commission shall adopt policies on onboarding for positions subject to this Part,
including the following:
(1) Employee onboarding.
(2) Reference checks.
"Article 7.
"Benefits, Terms, and Conditions of Employment.
"Part 1. Paid Parental Leave and Bereavement Leave.
"§ 126A-70. Benefits for all positions, not including temporary positions.
The Commission shall establish policies on paid parental leave and bereavement leave.
"§ 126A-71. Paid parental leave.
(a) Definitions. – The following definitions apply in this section:
(1) Child. – A newborn biological child or a newly placed adopted, foster, or
otherwise legally placed child under the age of 18 whose parent is a n
employee eligible for leave under subsection (b) of this section.
(2) Reserved for future codification purposes.
(3) Parent. – Includes a parent by adoption, foster care, or another legal
placement.
(4) Qualifying event. – When an employee becomes a parent to a child.
(b) Any eligible full-time employee subject to this section may take up to 12 weeks of
paid leave after a qualifying event.
(c) The Commission shall establish policies that provide for the following:
(1) A part-time employee subject to this section shall be able to take a prorated
amount of paid leave, not to exceed 12 weeks, after a qualifying event.
(2) A period of minimum service before a n employee becomes eligible for paid
leave under this section that credi ts employees for aggregate service in an
executive branch agency, public school, or community college.

Senate Bill 1041 Session Law 2026-40 Page 25
(3) A maximum number of uses of paid parental leave within a 12-month period.
(4) Available leave amounts following a miscarriage or death of a child during
birth.
(d) The paid parental leave authorized by this section is available witho ut exhaustion of
the employee's sick and vacation leave and is awarded in addition to shared leave under
G.S. 126A-75 or other leave authorized by federal or State law. Paid parental leave has no cash
value upon separation from employment and shall not be used in the calculation of an employee's
retirement benefits.
(e) Local boards of education and boards of trustees of community colleges shall adopt
policies substantially equivalent to those adopted by the Commission.
"Part 2. Benefits, Terms, and Conditions.
"§ 126A-72. Benefits, terms, and conditions of employment.
(a) The Commission shall establish policies on benefits, terms, and conditions of
employment for positions subject to this Article, including the following:
(1) Establishing hours and days of work, vacation leave, sick leave, and other
types of leave, and holidays, in accordance with G.S. 126A-73 and
G.S. 126A-74.
(2) Cooperating with the State Board of Education, the Department of Public
Instruction, The University of North Carolina, the Community Colleges
System Office , and other appropriate resources in develo ping programs in
management and supervisory skills, performance evalu ation, specialized
employee skills, accident prevention, equal employment opportunity
awareness, and customer service.
(3) Maintaining an accredited Certified Public Manager program.
(4) Maintaining a progr am of meritorious service awards and recognition of
employees, public personnel management, and management excellence and
authorizing agencies to provi de bonuses to employees who receive these
awards.
(5) Establishing programs of employee assistance, productivity incentives, and
equal opportunity.
(6) Maintaining safety and health programs required by Article 13 of this Chapter.
(7) Providing financial assistance for employee development and employee
discounts for services.
(8) Allowing flexible work options for employees , including programs of
telework o r remote work, job -sharing, alternate work schedules, and
permanent part-time positions.
(9) Promoting efficiency of administration and providing a fair and modern
human resources system.
"§ 126A-73. Paid State holidays.
(a) The legal public holidays established by the Commission as paid holidays for
employees shall include Martin Luther King Jr. 's Birthday and Veterans Day. The Commission
shall not establish more than 13 paid holidays per year. Three paid holidays shall be given for
Christmas.
(b) The University of North Carolina and its constituent institutions may adopt alternative
dates to recognize the legal public holidays.
"§ 126A-74. Minimum leave granted to employees.
The Commission shall establish a graduated scale for the amount of vacation leave granted
to each full-time employee subject to this Article. The scale shall allow the equivalent rate of at
least 120 hours of vacation leave per calendar year, prorated monthly, cumulative to at least 240
hours. On December 31 of each year, any employee who has vacation leave in excess of the

Page 26 Session Law 2026-40 Senate Bill 1041
allowed accumulation shall have that leave converted to sick leave. The rate of sick leave for
employees shall be at least 80 hours per calendar year, cumulative from year to year.
"§ 126A-74.1. Transferred leave from legislative and judicial branch employment.
When an individual transfers employment from a legislative or judicial branch position to an
executive branch position, the individual shall receive credit for the vacation and sick leave
accrued with the legislative or judicial branch if the employee is entitled to vacation and sick
leave in the executive branch position.
"Part 3. Voluntary Shared Leave.
"§ 126A-75. Voluntary shared leave.
(a) The Commission shall adopt policies to allow any employee to share leave voluntarily
with another employee who is an immediate family member or a coworker's immediate family
member, whether or not the employees are employed by the same agency.
(b) The Commissi on shall adopt policies in cooperation with the State Board of
Community Colleges and the State Board of Education to allow for employees to share leave
voluntarily with an immediate family member or coworker's immediate family member who is
employed by a community college or local board of education.
(c) The Commission shall adopt policies to allow an employee to donate sick leave to a
non-family member employee.
"Part 4. Flexible Compensation Plan.
"§ 126A-76. Flexible compensation plan.
(a) The Director may provide eligible officers and employees a program of dependent
care assistance as available under section 129 and related sections of the Internal Revenue Code
of 1986, as amended. The Director may authorize agencies employing eligible officers and
employees to enter into annual agreements with employees who elect to participate in the
program to provide for a reduction in salary. With the approval of the Director, savings in the
employer's share of contributions under the Federal Insurance Contributio ns Act on account of
the reduction in salary may be used to pay some or all of the administrative expenses of the
program. If the Director decide s to contract with a third party to administer the terms and
conditions of a program of dependent care assistance, the Director may select a contractor only
upon a thorough and completely competitive procurement process.
(b) Notwithstanding any other provisions of law relating to the salaries of eligible officers
and employees, the Director may 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. This plan shall not replace, substitute for, or duplicate any benefits
provided to employees and officers under Article 1A of Chapter 120 of the General Statutes or
Articles 1, 3B, 4, and 6 of Chapter 135 of the General Statutes. The plan may, however, include
offerings for products and benefits that are supplemental or additional to these statutory benefits.
If a plan of flexible compensation is offered, then a TRICARE supplement shall be offered.
(c) In providing a plan of flexible co mpensation, the Director may authorize agencies
employing eligible officers and employees to enter into agreements with their employees for
reductions in the salaries of employees electing to participate in the plan of flexible compensation
provided by this Part.
(d) With the approval of the Director, 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 . Should the Director decide to
contract with a third party to administer the terms and conditions of a plan of flexible
compensation as provided by this section, it may select such a contractor only upon a thorough
and completely advertised competitive procurement process.
(e) As used in this section, the term "eligible officers and employees" means any officer
or employee authorized to participate in the Teachers' and State Employees' Retirement System,

Senate Bill 1041 Session Law 2026-40 Page 27
the Consolidated Judicial Retirement System, the Legislative Retirement System, and the State
Health Plan.
"Article 8.
"Just Cause, Disciplinary Actions, and Grievances.
"§ 126A-80. Just cause, disciplinary actions, and grievances.
The Commission shall establish policies on just cause, disciplinary actions, and grievances,
including the following:
(1) The definition of just cause.
(2) The investigation of complaints and the issuing of binding corrective orders
or other appropriate action concerning employment, promotion, demotion,
transfer, discharge, reinstatement, and any other issue defined as a contested
case issue under G.S. 126A-84(c).
(3) The assessment of reasonable attorneys ' fees and witnesses ' fees against the
agency involved in the grievance.
(4) An alternative dispute resolution procedure.
(5) The disciplinary demotion, suspension, or dismissal of employees and the
disciplinary process.
(6) The grievance process.
(7) Review and approval of settlements, including authorization for agencies to
enter into settlement agreements for remedies other than back pay, front pay,
other omitted benefits, and attorneys' fees.
"§ 126A-81. Disciplinary actions.
(a) No career employee subject to this Article shall be dismissed, suspended, or demoted
for disciplinary reasons, except for just cause.
(b) In determining whether just cause exists for dismissal , suspension, or demotion for
unacceptable personal conduct, an employing agency shall consider all of the following factors:
(1) The severity of the conduct.
(2) The subject matter of the conduct and whether it was job-related.
(3) The actual harm or risk of potential harm resulting from the conduct, including
harm to the agency 's operations, efficiency, mission, reputation, or public
trust.
(4) The employee's work history.
(5) Discipline imposed in past cases of similar violations. An agency may modify
its disciplinary standard when it determines that past precedent is no longer
appropriate and the modification is grounded in articulable reasoning and
applied fairly and consistently to current and prospective cases.
(c) The employing agency shall exercise reasonable discretion in identifying which of
the factors outlined in subsection (b) of this se ction are most relevant given the facts presented
and how to weigh the various factors to determine appropriate discipline. No discipline shall fail
solely for failing to consider one of the factors in subsection (b) of this section if just cause was
present.
(d) In determining whether just cause exists for dismissal , suspension, or dem otion for
issues of job performance, the employing agency shall employ the following standards:
(1) Unsatisfactory job performance. – The employing agency shall assess whether
the employee fails to satisfactorily perform job requirements as specified in
the job description, work plan, or as directed by management.
(2) Grossly inefficient job performance . – The employing agency shall assess
whether the employee 's failure to satisfactorily perform job requirements
results in harm or the potential for harm, including death, serious bodily
injury, or loss of or damage to State property or funds that result in a serious
impact on the State or work unit.

Page 28 Session Law 2026-40 Senate Bill 1041
(e) In cases where an e mploying agency has decided to take disciplinary action, the
employee shall be given written notice before the action is taken that explains the specific acts
or omissions that are the reasons for the disciplinary action. The written notice shall also explain
the employee's appeal rights. The employee may appeal to the agency head through the agency
grievance procedure for a final agency decision within 15 days of receiving the notice. If the
employee appeal involves an allegation of discrimination, retaliation, or harassment, the
employee shall file an equal employment opportunity i nquiry within 15 days of receiving the
notice before appealing through the agency grievance procedure. Th e employee will have 15
days following the closure of the equal employment opportunity i nquiry to appeal through the
agency grievance procedure for a final agency decision.
(f) Notwithstanding subsection (e) of this section, an employee may be suspended
without warning for causes relating to personal conduct detrimental to State service to avoid
undue disruption of work or to protect the safety of persons or property or for other serious
reasons.
(g) If the employee is not satisfied with the final agency de cision or is unable, within a
reasonable period of time, to obtain a final agency decision, the employee may appeal to the
Office of Administrative Hearings. This appeal shall be filed within 30 days of receiving of notice
of the final agency decision.
(h) In accordance with G.S. 150B-34(a), the administrative law judge shall decide the
case based upon the preponderance of the evidence, giving due regard to the demonstrated
knowledge and expertise of the agency with respect to facts and inferences within the specialized
knowledge of the agency.
"§ 126A-82. Temporary redeployment of employees after criminal charges filed.
If criminal charges are filed against an employee, the employing agency may redeploy that
employee, without just cause and without the agreement of the employee, to a different position
or different set of job duties. The employee 's salary shall not be decreased as a result of the
redeployment, and this redeployment shall end if the charges against the employee are dismissed
or the employee is acquitted of those charges. Nothing in this section prevents the employing
agency from taking disciplinary action against the employee if there is just cause.
"§ 126A-83. Grievance; resolution.
(a) Any employee having a grievance arising out of or due to his or her employment shall
first discuss the grievance with the employee 's supervisor, unless the grievance is with the
supervisor. Then the employee shall follow the agency grievance procedure. The proposed final
agency decision shall not be issued or become final until reviewed and approved by OSHR.
(b) Any applicant having a grievance arising out of or due to his or her hiring shall follow
the agency grievance procedure. The proposed final agency decision shall not be issued or
become final until reviewed and approved by OSHR.
(c) The agency grievance procedure and OSHR review shall be completed within 120
days from the date the grievance is filed. If a n employee or applicant files multiple grievances
within the same calendar month, the grievances shall be merged and the 120-day time line under
this section resets. The Office of Administrative Hearings may issue gatekeeping orders to
prevent abuse of the grievance process.
(d) Local agencies shall e stablish grievance procedures consistent with this Article that
do not require approval of a final agency decision by OSHR. Local employees shall follow local
agency grievance procedures.
"§ 126A-84. Grievance appeal process.
(a) Once a final agency decision has been issued in accordance with G.S. 126A-83, an
applicant, employee, or former employee may file a contested case in the Office of
Administrative Hearings under Article 3 of Chapter 150B of the General Statutes. The contested
case must be filed within 30 days of receipt of the final agency decision. Except for cases of
extraordinary cause shown, the Office of Administrative Hearings shall hear and issue a final

Senate Bill 1041 Session Law 2026-40 Page 29
decision in accordance with G.S. 150B-34 within 180 days from the commencement of the case.
In deciding cases under this section, the Office of Administrative Hearings may grant the
following relief:
(1) Reinstatement of the employee to the position from which the employee has
been removed.
(2) Ordering the employment, promotion, transfer, or salary adjustment of any
individual to whom it has been wrongfully denied.
(3) Directing other suitable action to correct the abuse which may include the
requirement of payment for any loss of salary that has resulted from the
improper action of the agency.
(b) An aggrieved party in a contested case under this section shall be entitled to judicial
review of a final decision by appeal to the Court of Appeals as provided in G.S. 7A-29(a). The
appeal shall be taken within 30 days of receipt of the written notice of final decision. A notice of
appeal shall be filed with the Office of Administrative Hearings and served on all parties to the
contested case hearing.
(c) The following issues may be heard as contested cases after completion of the agency
grievance procedure and the OSHR review:
(1) Discrimination or harassment. – An applicant for employment, an employee,
or former employee may allege discrimination or harassment based on race,
religion, color, national origin, sex, age, disa bility, genetic information, or
political affiliation if the employee believes that he or she has been
discriminated against in his or her application for employment or in the terms
and conditions of the employee's employment, or in the termination of his or
her employment.
(2) Retaliation. – An applicant for employment, an employee, or former employee
may allege retaliation for protesting discrimination based on race, religion,
color, national origin, sex, age, disability, political affiliation, or genetic
information if the employee believes that he or she has been retaliated against
in his or her application for employment , in the terms and conditions of the
employee's employment, or in the termination of the employee's employment.
(3) Just cause for dismissal, demotion, or suspension. – A career employee may
allege that he or she was dismissed, demoted, or suspended for disciplinary
reasons without just cause. A dismissal, demotion, or suspension not imposed
for disciplinary reasons shall not be considere d a disciplinary action within
the meaning of this section. However, in contested cases conducted pursuant
to this section, an employee may appeal an involuntary nondisciplinary
separation due to an employee's unavailability in the same fashion as if it were
a disciplinary action, but the agency shall only have the burden to prove that
the employee was unavailable.
(4) Veteran's and National Guard preference. – An applicant for employment or
an employee may allege that he or she was denied veteran 's preference or
National Guard preference in violation of the law.
(5) Failure to post or give priority consideration. – An applicant for employment
or a n employee may allege that he or she was denied hiring or promotion
because a position was not posted in accordance with this Chapter, or a career
State employee may allege that he or she was denied a promotion as a result
of a failure to give priority consideration for promotion as required by
G.S. 126A-57.1 or a career employee may allege that he or she was denied
hiring as a result of the failure to give him or her a reduction-in-force priority.
(6) Whistleblower. – A whistleblower grievance as provided in Article 14 of this
Chapter.

Page 30 Session Law 2026-40 Senate Bill 1041
(d) Any issue for which an appeal to the Office of Administrative Hearings has not been
specifically authorized by this section shall not be grounds for a contested case hearing.
(e) In contested cases conducted pursuant to this section, the burden of showing that a
career employee was discharged, demoted, or suspended for just cause rests with the employing
agency. In all other contested cases, the burden of proof rests with the employee or applicant.
(f) The Office of Administrative Hearings may award attorneys ' fees to an employee
where reinstatement or back pay is ordered or where an employee prevails in a whistleblower
grievance. The remedies provided in this subsection in a whistleblower appeal shall be the same
as those provided in G.S. 126A-143.
(g) The Office of Administrative Hearings shall report to OSHR and the Joint Legislative
Administrative Procedure Oversight Committee on the number of cases filed under this section
and on the number of days between filing and closing of each case. The report shall be submitted
on May 1 and November 1 of each year.
"§ 126A-85. Alternative dispute resolution.
(a) The Commission may adopt policies on alternative dispute resolution procedures for
the resolution of matters constituting grounds for a grievance under this Article.
(b) The Commission may adopt policies on alternative dispute resolution procedures for
matters not constituting grounds for a grievance under this Article that cannot be heard by the
Office of Administrative Hearings as a contested case.
"§ 126A-86. Judicial review of fee awards.
A decision of the Office of Administrative Hearings on whether to assess reasonable
witnesses' fees or a reasonable attorneys ' fee shall be subject to judicial review in accordance
with G.S. 126A-84(b). The reviewing court may reverse or modify the decision of the Office of
Administrative Hearings if the decision is unreasonable or the award is inadequate. An employee
who obtains a reversal or modification of the Office of Administrative Hearings ' decision in an
appeal under this section shall be entitled to recover court costs and a reasonable attorneys ' fee
for representation in connection with the appeal.
"Article 9.
"Separation, Offboarding, and Reductions in Force.
"§ 126A-90. Separation of employees.
The Commission shall establish policies on separation for positions subject to this Article,
including the following:
(1) The separation of employees.
(2) Voluntary separation incentives.
(3) Furloughs of employees by placing them on temporary leave without pay in
response to a loss of funding.
(4) Reductions in force.
"§ 126A-91. Voluntary separation incentives.
An agency may reorganize and restructure its positions through a voluntary separation
process that provides incentives to separate in accordance with Commission policy and subject
to approval by the Office of State Budget and Management.
"§ 126A-92. Reductions in force.
(a) Usage. – Agencies may use a reduction in force to reorganize its position s to better
accomplish its functions or respond to a lack of work or shortage of funds. Agencies may use a
reduction in force without a loss of funds and without eliminating any of the positions affected
by the reduction in force.
(b) Notification. – Agencies shall notify employees to be affected by a reduction in force
as soon as practicable and at least 30 days before the effective date of the reduction in force.
"§ 126A-93. Reductions in force priority policy.
The Commission shall adopt policies go verning the priority and salary rights of employees
separated as a result of reduction in force. The policies shall provide that a separated employee

Senate Bill 1041 Session Law 2026-40 Page 31
who accepts a position in an agency shall not be paid a salary higher than the maximum of the
salary range of the position accepted, except as provided in G.S. 126A-41.
"§ 126A-94. Discontinued service retirement allowance and severance wages for certain
employees.
(a) When the closing of an agency or a reduction in force will accomplish economies in
the State Budget, the employees who were separated from employment as a result of the closure
or reduction in force shall receive from the last employing agency either a discontinued service
retirement allowance or severance wages if reemployment is not available. As used in this
section, "economies in the State Budget " means economies resulting from elimination of a job
and its responsibilities or from a lack of funds to support the job. The agency head shall determine
whether to pay a discontinued service retirement allowance or severance wages, after the
opportunity for consultation with the Director of the Office of State Budget and Management and
OSHR. Severance wages shall not be paid to an employee who chooses a discontinued service
retirement. Severance wages shall not be subject to employer or employee retirement
contributions. Severance wages shall be paid according to the policies established by the
Commission.
(b) Notwithstanding any other provisions of the State's retirement laws, any employee (i)
who is a member of the Teachers ' and State Employees ' Retirement System or the Law
Enforcement Officers ' Retirement System and (ii) whose job is involuntarily terminated as a
result of economies in the State Budget may be entitled to a discontinued service retirement
allowance, subject to the approval of the employing agency and the availability of agency funds.
An unreduced discontinued service retirement allowance, not otherwise allowed, may be
approved for employees with 20 or more years of creditable retirement service who are at least
55 years of age, or a discontinued service retirement allowance, not o therwise allowed, may be
approved for employees with 20 or more years of creditable retirement service who are at least
50 years of age, reduced by one-fourth of one percent (1/4 of 1%) for each month that retirement
precedes the employee 's fifty-fifth birthday. In cases where a discontinued service retirement
allowance is approved, the employing agency shall make a lump sum payment to the
Administrator of the State Retirement Systems equal to the actuarial present value of the
additional liabilities imp osed upon the System, to be determined by the System 's consulting
actuary, as a result of the discontinued service retirement, plus an administrative fee to be
determined by the Administrator, plus an amount to be deposited in the Retiree Health Benefit
Fund. The amount to be deposited in the Retiree Health Benefit Fund shall be calculated by
multiplying the number of years between the employee's date of discontinued service retirement
and the employee 's earliest unreduced retirement date under G.S. 135-5 b y the most recent
employer contribution rate to the Retiree Health Benefit Fund and then, if the employee is or
would be eligible for retiree medical coverage under the State Health Plan for Teachers and State
Employees, multiplying that figure by the sala ry used in the discontinued salary retirement
calculation.
(c) The salary used to determine severance wages under this section is the last annual
salary except that if the employee was promoted within the previous 12 months, the last annual
salary is the annual salary prior to the promotion. If the annual salary prior to the promotion is
used, it shall be adjusted to account for any across -the-board legislative salary increases.
Excluded from any calculation are any benefits such as overtime pay, shift pay, holiday premium,
or longevity pay. The salary used to determine the discontinued retirement allowance under this
section is the same as the average final compensation under G.S. 135-1(5).
(d) Any employee separated from an agency and paid severance wages under this section
shall not be employed under a contractual arrangement by any agency, other than the constituent
institutions of The University of North Carolina and the community colleges, until the end of the
time period through which the employee is receiving severance. This subsection does not affect
any reduction in force rights that the employee may have under this Article.

Page 32 Session Law 2026-40 Senate Bill 1041
"Article 10.
"Inappropriate Political Activity.
"§ 126A-100. Appropriate political activity of employees.
(a) Each employee retains all the rights and obligations of citizenship provided in the
Constitution and laws of the State and the Constitution and laws of the United States. Employees
subject to this Article shall not do any of the following:
(1) Take any active part in managing a campaign, campaign for political office,
or otherwise engage in political activity while on duty or within any period of
time during which he or she is expected to perform services for which he or
she receives compensation from the State.
(2) Otherwise use the authority of their position, or utilize State funds, supplies ,
or vehicles to secure support for or oppose any candidate, party, or issue in an
election involving candidates for office or party nominations, or affect the
results thereof.
(b) No agency head or other employee exercising supervisory authority shall make, issue,
or enforce any rule or policy the effect of which is to interfere with the right of any employee as
an individual to engage in political activity while not on duty or at times during which he or she
is not performing services for which he or she receives compensation from the State. A n
employee who is or may be expected to perform his or her duties on a 24 hour per day basis shall
not be prevented from engaging in political activity except during regularly scheduled working
hours or at other times when actually performing the duties of office. The willful violation of this
section shall be a Class 1 misdemeanor.
"§ 126A-101. Promise or threat to obtain political contribution or support.
(a) It is unlawful for an employee or a person appointed to State office, other than elective
office or office on a board, commission, committee, or council whose function is advisory only,
whether or not subject to this Article, to coerce (i) an employee in a position subject to this Article
or (ii) an applicant for a position subject to this Article to support or contribute to a political
candidate, political committee as defined in G.S. 163-278.6, or political party, or to change the
party designation of the individual's voter registration by threatening that change in employment
status, discipline, or preferential personnel treatment will occur.
(b) It is unlawful for a public servant as defined in G.S. 138A-3(70)a. to coerce a person
as described in G.S. 138A-32(d)(1), (2), or (3) to support or contribute to a political candidate, a
political committee as defined in G.S. 163-278.6, or a political party by threatening discipline or
promising preferential treatment with regard to that person's business with the individual's State
office or that person's activities regulated by the individual's State office.
(c) Any person violating this section shall be guilty of a Class 2 misdemeanor.
(d) An employee subject to this Article who without probable cause falsely accuses a n
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. 126A-81
and may be subjec t to criminal penalties for perjury or civil liability for libel, slander, or
malicious prosecution.
"§ 126A-102. Threat to obtain political contribution or support.
(a) It is unlawful for any person to coerce (i) an employee subject to this Article or (ii)
an applicant for a position subject to this Article to support or contribute to a political candidate,
political committee as defined in G.S. 163-278.6, or political party , or to change the party
designation of his or her voter registration by explicitly threatening that change in employment
status, discipline, or preferential personnel treatment will occur.
(b) Any person violating this section shall be guilty of a Class 2 misdemeanor.
(c) An employee subject to this Article who without probable cause falsely accuses a
person of violating this section shall be subject to discipline or change in employment status in

Senate Bill 1041 Session Law 2026-40 Page 33
accordance with the provisions of G.S. 126A-81 and may be subject to criminal penalties for
perjury or civil liability for libel, slander, or malicious prosecution.
"§ 126A-103. Compelled speech prohibited.
(a) Each agency shall refrain from soliciting or requiring an applicant for employment to
do any of the following:
(1) Endorse or opine about beliefs, affiliations, ideals, or principles regarding
matters of contemporary political debate or social action as a condition of
employment.
(2) Describe the applicant's actions in support of, or in opposition to, the beliefs,
affiliations, ideals, or principles regarding matters of contemporary political
debate or social action as a condition of employment.
(b) Nothing in subsection (a) of this section shall infringe on the ability of an applicant
for employment to voluntarily opine or speak regarding any matter, including matters of
contemporary political debate or social action.
(c) No application for employment shall inquire into matters prohibited as compelled
speech under subsection (a) of this section.
(d) Nothing in this section shall be construed to:
(1) Prohibit discussion with or questions to an applicant regarding the content of
the applicant's resume, curriculum vitae, or other written work or oral remarks.
(2) Affect the ability of the employing agency to comply with applicable federal
or State law, including employment oaths, appointment affidavits, and
licensure and certification requirements.
(3) Apply to speech protected by the First Amendment of the U.S. Constitution.
"§ 126A-104. Ensuring dignity and nondiscrimination in State government workplaces.
(a) The General Assembly finds that Article I, Section 1 of the Constitution of this State
recognizes the equality and rights of all persons. Therefore, it is the intent of the General
Assembly that employees respect the dignity of others, acknowledge the right of others to express
differing opinions and the right to freedom of speech and association , and that agencies employ
training methods and procedures to further that intent.
(b) Agencies shall not compel employees to affirm or profess belief in any of the
following concepts in the workplace or as part of any employee training program:
(1) One race or sex is inherently superior to another race or sex.
(2) An individual, solely by virtue of his or her race or sex, is inherently racist,
sexist, or oppressive.
(3) An individual should be discriminated against or receive adverse treatment
solely or partly because of his or her race or sex.
(4) An individual's moral character is necessarily determined by his or her race or
sex.
(5) An individual, solely by virtue of his or her race or sex, bears responsibility
for actions committed in the past by other members of the same race or sex.
(6) Any individual, solely by virtue of his or her race or sex, should fe el
discomfort, guilt, anguish, or any other form of psychological distress.
(7) A meritocracy is inherently racist or sexist.
(8) The United States was created by members of a particular race or sex for the
purpose of oppressing members of another race or sex.
(9) The United States government should be violently overthrown.
(10) Particular character traits, values, moral or ethical codes, privileges, or beliefs
should be ascribed to a race or sex or to an individual because of the
individual's race or sex.
(11) The rule of law does not exist but instead is a series of power relationships
and struggles among racial or other groups.

Page 34 Session Law 2026-40 Senate Bill 1041
(12) All Americans are not created equal and are not endowed by their Creator with
certain unalienable rights, including life, liberty, and the pursuit of happiness.
(13) Governments should deny to any person within the government's jurisdiction
the equal protection of the law.
(c) Nothing in this section prevents a private contractor who provides training to
employees from responding to questions that are raised by participants in the training and which
pertain to the concepts in subsection ( b) of this section. However, the private contractor must
make it clear that the employing agency does not endorse those concepts.
(d) This section does not apply to speech protected by the First Amendment of the U.S.
Constitution.
"§ 126A-105. Disciplinary action for violation of Article.
Failure to comply with this Article is grounds for disciplinary action which, in case of
deliberate or repeated violation, may include dismissal or removal from office.
"Article 11.
"Temporary Employees.
"§ 126A-110. Temporary employment.
The Commission shall establish polices on temporary employment for positions subject to
this Article, including the following:
(1) The implementation of the JoinNC Program under G.S. 126A-111 in a
consistent manner.
(2) Temporary employment.
(3) Fees for use of the JoinNC Program.
"§ 126A-111. Use of JoinNC Program.
(a) All Cabinet agencies that utilize temporary employees shall employ them through the
JoinNC Program administered by OSHR, except as provided in subsection (e) of this section.
(b) Council of State agencies, constituent institutions of The University of North
Carolina, local agencies, and consolidated agencies as defined in G.S. 153A-77(b) may use the
JoinNC Program in accordance with this section.
(c) Temporary employees shall not be employed for longer than 11 consecutive months,
unless an exception is granted under subsection (f) o f this section. After 11 consecutive months
of employment, a temporary employee is eligible for reinstatement on the job assignment a fter
the employee is separated for at least 31 consecutive calendar days. It is the responsibility of
participating agencies to provide a separation request or notification of a 31 -day separation to
OSHR before the temporary employee exceeds 11 consecutive months of employment, unless an
exception under subsection (f) of this section applies. Failure to provide a timely separation
request to OSHR may limit an agency's future access to temporary employees.
(d) OSHR may prohibit any agency or entity, except the North Carolina National Guard,
from acquiring new temporary employees if the agency or entity has an invoice owed to JoinNC
that is (i) more than 90 days overdue and (ii) exceeds two hundred thousand dollars ($200,000).
If an agency or entity is prohibited, the prohibition shall continue until all overdue invoices are
paid.
(e) Notwithstanding the requirement of subsection (a) of this section, Cabinet agencies
may employ temporary employees outside of the JoinNC Program in the following
circumstances:
(1) The temporary employees are performing work that is information
technology-related.
(2) The Department of Transportation, Ferry Division, is employing temporary
employees when there is an established need for peak -season hires or when
the work requires a specific skillset beyond the scope of a temporary
employee.

Senate Bill 1041 Session Law 2026-40 Page 35
(3) The Director in his or her discretion creates an exception when all of the
following conditions are met:
a. The JoinNC Program cannot meet the agency's employment needs for
the temporary position's classification.
b. Failure to recruit for the positions will cause sev ere harm to the
agency's ability to provide services to the public.
(f) Notwithstanding the limitations of subsection (c) of this section, a temporary
employee may be employed for longer than 11 consecutive months in the following
circumstances:
(1) The temporary employee is a full -time student, a retired employee, an
offender, an intern, or an extern. The following definitions apply to this
subdivision:
a. Extern. – A student who, regardless of the number of credit hours
enrolled, is employed as part of a written agreement between the
agency and an academic institution through which the student is paid
and earns course credit.
b. Full-time student. – A student considered to be a full -time student by
his or her institution of higher education.
c. Intern. – A student who, regardless of the number of credit hours
enrolled, works to gain occupational experience for a period of at least
one academic semester.
d. Offender. – An individual in the custody of the Department of Adult
Correction participating in a work release program.
e. Retired employee. – An individual drawing retirement benefits who
has signed a sta tement that he or she is not available for or seekin g
permanent employment with an agency.
(2) The Director in his or her discretion creates an exception when all of the
following conditions are met:
a. The exception is in the best interests of the State because removing the
temporary employee from the assignment will cause severe harm to
the agency's ability to provide vital services to the public.
b. The exception will not result in extending the length of temporary
employment beyond 22 months from the employee's initial hire date.
(g) The North Carolina National Guard may request exceptions as provided in subsection
(f) of this section by the Director who shall not deny the exception. Requests for exceptions shall
be in writing, contain a justification of why the exception is necessary, and be kept on file in the
JoinNC Program office.
(h) To the extent practicable, the Director or his or her designee shall advise agencies of
alternative position classification options prior to approving any exceptions under subsection (e)
or (f) of this section.
(i) OSHR shall monitor the employment of all temporary employees placed through
JoinNC and directly employed by Cabinet agencies and Council of State agencies. When an
employee has exceeded 11 consecutive months of employment, OSHR shall intiate separation
from any applicable human resources and payroll systems no more than two weeks past the
11-month limit, unless an exception under subsection (f) of this section applies. OSHR shall
provide written notice to employing agencies at intervals of 90, 60, and 30 days prior to a
temporary employee reaching 11 consecutive months of employment.
"§ 126A-112. JoinNC Program assistance with recruiting.
The JoinNC Program may assist with recruiting employees for agencies , including for
permanent positions, using funds generated from the Program.
"Article 12.

Page 36 Session Law 2026-40 Senate Bill 1041
"Local Discretion over Local Government Employees.
"§ 126A-120. Local government policies.
(a) When a local government adopts policies governing annual leave, sick leave, hours
of work, holidays, and the administration of the pay plan for county local government employees
generally and the county local government rules and regulations are filed with the Director, those
county rules will supersede the policies established by the Commission as to the county
employees otherwise subject to the provisions of this Chapter.
(b) County employees otherwise subject to the provisions of this Chapter shall not be
paid a salary less than the minimum n or more than the maximum of the applicable salary range
adopted by the board of county commissioners. A board of county commissioners may adjust the
salary ranges applicable to employees who are otherwise subject to the provisions of this Chapter,
in order to cause the level of pa y to conform to local financial ability and fiscal policy. The
Commission shall establish policies to ensure that significant relationships within the schedule
of salary ranges are maintained.
(c) When two or more counties are comb ined into a district for the performance of an
activity whose employees are subject to the provisions of this Chapter, the boards of county
commissioners of the counties may jointly exercise the authority granted in subsections (a) and
(b) of this section.
(d) When a municipality is performing an activity by or through employees who are
subject to the provisions of this Chapter, the governing body of the municipality may exercise
the authority granted in subsections (a) and (b) of this section.
"§ 126A-121. Human resources services to local governmental units.
(a) The Director may make the services and facilities of OSHR available to units of local
government. These may include, without limitation:
(1) Providing State training programs to local governments.
(2) Providing customized training programs.
(3) Responding to questions regarding personnel laws.
(4) Posting jobs that are subject to this Chapter on OSHR's hiring platform.
(5) Collecting and distributing salary information from all county human services
agencies, including consolidated counties as defined by G.S. 153A-77.
(b) Notwithstanding the provisions of G.S. 126A-161, 126A -163, 153A -98, and
160A-168:
(1) When a local agency indicates that it will permanently appoint a person who
does not meet the minimum qualifications for the classification of a position
subject to this Chapter, except for trainee and work -against appointments,
OSHR may contact any relevant members of the board supervising that local
agency, the county manager and commissioners, and the Department of
Health and Human Services. The message may identify the particular
qualifications that the proposed appointee would need to meet to have the
minimum qualifications of the class specification.
(2) When a local agency requests that OSHR make the final determination as to
whether the employee or applicant meets the minimum qualifications, OSHR
may share the relevant portions of the personnel file of a specific employee or
applicant with the Deputy Director of the Public Health or Social Services
Division of the Department of Health and Human Services, or similar State
departmental staff, to assist in determining qualification status.
"§ 126A-122. Local human resources system.
(a) The board of county commissioners of any county may establish and maintain a
human resources system for all employees of the county subject to its jurisdiction . This system
and any substantial changes to the system are subject to the approval of the Commission. The
Commission shall approve a system that is substantially equivalent to the human resources

Senate Bill 1041 Session Law 2026-40 Page 37
system established under this Chapter for employees of local departments of social services, local
health departments, area mental he alth programs, and local emergency management programs.
If approved by the Commission, the employees covered by the county system shall be exempt
from all provisions of this Chapter except Article 15.
(b) With approval of each of the boards of commissioners of the county or counties which
comprise the area mental health authority, the area mental health authority may establish and
maintain a human resources system for all employees of the area mental health authority . This
system and any substantial changes to the system are subject to the approval of the Commission.
The Commission shall approve a system that is substantially equi valent to the human resources
system established under this Chapter for employees of area mental health authorities. If
approved by the Commission, the employees covered by the area mental health authority system
shall be exempt from all provisions of this Chapter except Article 15.
(c) A board of county commissioners may petition the Commission to determine whether
any portion of its human resources system meets the requirements in subsection (a) of this
section. Upon such determination, county employees shall be exempt from the provisions of this
Chapter relating to the approved portions of the county human resources system.
(d) The board of an area mental health authority, with the approval of each of the boards
of commissioners of the county or counties which comprise the area mental health authority, may
petition the Commission to determine whether any portion of its human resources system meets
the requirements in subsection ( b) of this section. Upon such determination, area mental health
authority employees shall be exempt from the provisions of this Chapter relating to the approved
portions of the area mental health authority human resources system except as provided in
G.S. 122C-121.
(e) OSHR shall monitor at least annually county or area mental health authority human
resources systems approved under this section to ensure compliance.
(f) To define "substantially equivalent, " the Commission shall implement the federal
merit system standards , which include recruitment and selection of employees , position
classification, pay administration, training, and employee relations.
"§ 126A-123. Bonuses for local government.
Local agencies are authorized to offer bonuses to employees subject to this Chapter. These
bonuses shall be consistent with the corresponding bonus policies for executive branch agency
employees.
"Article 13.
"Employee Workplace Requirements Program for Safety, Health, and Workers' Compensation.
"§ 126A-131. Program goals.
OSHR shall establish a written program for executive branch agencies for employee
workplace environmental, health, and safety, and workers ' compensation. The program shall
promote safe and healthful working conditions, be based on clearly stated goals and objectives,
and provide managers and employees with an understanding of the State's concern for protecting
employees from job -related injuries and health impairment; preventing accidents and fires;
planning for emergencies and emergency medical procedures; identifying and controlling
physical, chemical, biological, and radiological hazards in the workplace; communicating
potential hazards to employees; and assuring adequate housekeeping and sanitation.
"§ 126A-132. Program requirements.
The written program required under this Article shall describe, at a minimum, the following:
(1) The methods to be used to identify, analyze, and control new or existing
hazards, conditions, and operations.
(2) How managers, supervisors, and employees are responsible for implementing
the program, controlling accident -related expenditures, and how continued
participation of management and employees will be established, measured,
and maintained.

Page 38 Session Law 2026-40 Senate Bill 1041
(3) How the plan will be communicated to all affected employees so that they are
informed of work -related physical, chemical, biological, or radiological
hazards, and controls necessary to prevent injury or illness.
(4) How managers, supervisors, and employees will receive training in avoidance
of job-related injuries and health impairment.
(5) How workplace accidents will be reported and investigated and how
corrective actions will be implemented.
(6) How safe work practices and rules will be communicated and enforced.
(7) The safety and health training program that will be made available to
employees.
(8) How employees can make complaints concerning safety and health problems
without fear of retaliation.
(9) How employees will receive medical attention following a work-related injury
or illness.
"§ 126A-133. Model program; technical assistance; reports.
(a) Model Program. – OSHR shall do the following:
(1) Maintain a model pro gram of safety and health requirements to guide
executive branch agencies in the development of their individual programs
and in complying with the provisions of G.S. 95-148 and this Article.
(2) Establish guidelines for the creation and operation of executive branch agency
environmental, health and safety committees.
(3) Adopt policies that govern the administration of the workers ' compensation
program and monitor compliance with Chapter 97 of the General Statutes.
(4) Establish guidelines for the delegation of certain administrative functions as
necessary for the administration of the workers ' compensation program to
executive branch agencies, as defined in this section.
(b) Technical Assistance. – OSHR shall do the following:
(1) Provide consultative and technical services, including environmental, health,
and safety training to assist executive branch agencies in establishing and
administering their workplace environmental, health, and safety programs and
to address specific technical problems thr ough risk management and
mitigation.
(2) Monitor compliance with this Article.
"§ 126A-134. Executive branch agency safety and health committees.
OSHR shall create, pursuant to guidelines adopted under subsection (a) of G.S. 126A-133,
committees to perform workplace inspections, review injury and illness records, make advisory
recommendations to the agency's managers, and perform other functions determined by OSHR
to be necessary for the effective implementation of this Article.
"Article 14.
"Protection for Reporting Improper Government Activities.
"§ 126A-140. Statement of policy.
(a) It is the policy of the State that employees shall have a duty to report verbally or in
writing to their supervisor, agency head, or other appropriate authority, evide nce of activity by
an agency or an employee constituting any of the following:
(1) A violation of State or federal law, rule, or regulation.
(2) Fraud.
(3) Misappropriation of State resources.
(4) Substantial and specific danger to the public health and safety.
(5) Gross mismanagement, a gross waste of monies, or gross abuse of authority.
(b) Further, it is the policy of this State that employees be free of intimidation or
harassment when reporting to public bodies about matters of public concern, including offering

Senate Bill 1041 Session Law 2026-40 Page 39
testimony to or testifying before appropriate legislative panels, or providing statements or
testimony to agents and employees of legislative panels duly appointed by the President Pro
Tempore of the Senate or the Speaker of the House of Representatives designated to conduct
inquiries on behalf of a legislative panel.
"§ 126A-141. Protection from retaliation.
(a) Agency heads and other employee s exercising supervisory authority shall not
discharge, threaten, or otherwise discriminate against a n employee regarding the employee 's
compensation, terms, conditions, location, or privileges of employment because of any of the
following:
(1) The employee, or a person acting on behalf of the employee, reports or is
about to report, verbally or in writing, any activity described in
G.S. 126A-140, unless the employee knows or has reason to believe that the
report is inaccurate.
(2) The employee has refused to carry out a directive that in fact constitutes a
violation of State or federal law, rule, or regulation or poses a substantial and
specific danger to the public health and safety.
(b) Employees shall not retaliate against another employee because of any of the
following:
(1) The employee, or a person acting on behalf of the employee, reports or is
about to report, verbally or in writing, any activity described in
G.S. 126A-140.
(2) The e mployee has refused to carry out a directive that may constitute a
violation of State or federal law, rule, or regulation, or poses a substantial and
specific danger to the public health and safety.
(c) The protections of this Article apply to employees who report any activity described
in G.S. 126A-140 to the State Auditor as authorized by G.S. 147-64.6B, to the Joint Legislative
Commission on Governmental Operations as authorized by G.S. 120-75.1, or to a legislative
committee as required by G.S. 120-19.
"§ 126A-142. Civil actions for injunctive relief or other remedies.
(a) Any employee injured by a violation of G.S. 126A-141 who is not subject to Article
8 of this Chapter may maintain an action in superior court against the person or agency who
committed the alleged violation within one year after the occurrence.
(b) Any claim arising under Article 21 of Chapter 95 of the General Statutes may be
maintained pursuant to the provisions of that Article only and may be redressed only by the
remedies and relief available under that Article.
"§ 126A-143. Remedies.
(a) A court, in rendering a judgment in an action brought pursuant to this Article, may
order any one or more of the following:
(1) An injunction.
(2) Damages.
(3) Reinstatement of the employee.
(4) Payment of back wages.
(5) Full reinstatement of fringe benefits and seniority rights.
(6) Payment of costs.
(7) Reasonable attorneys' fees.
(8) Any combination of the subdivisions in this subsection.
(b) If an application for a permanent injunction is granted, the employee shall be awarded
costs and reasonable attorneys' fees.
(c) If in an action for damages the court finds that the employee was injured by a willful
violation of G.S. 126A-141, the court shall award as damages three times the amount of actual

Page 40 Session Law 2026-40 Senate Bill 1041
damages plus costs and reasonable attorneys' fees against the individual or individuals found to
be in violation of G.S. 126A-140.
"§ 126A-144. Notice of employee protections and obligations.
Employing agencies shall post notice in accordance with G.S. 95-9 or use other appropriate
means to keep employees informed of their protections and obligations under this Article.
"§ 126A-145. Communications with members of the General Assembly.
An employee's right to speak to a member of the General Assembly at the member's request
shall not be directly or indirectly limited by the employee 's supervisor or by any policy of the
employing agency.
"Article 15.
"Equal Employment and Compensation Opportunity.
"§ 126A-150. Equal opportunity for employment and compensation by executive branch
agencies and local political subdivisions.
All executive branch agencies and all local political subdivisions of the State shall give equal
opportunity for employment and compensation, without regard to race, religion, color, national
origin, sex, age, disability, or genetic information to all persons otherwise qualified.
"§ 126A-151. Equal employment opportunity training.
Each executive branch agency shall enroll each newly appointed supervisor or manager
within one year of appointment in the Equal Employment Opportunity training offered or
approved by OSHR.
"§ 126A-152. Retaliation by executive branch agencies and local political subdivisions.
No agency or local political subdivision of the State shall retaliate against an employee for
protesting alleged violations of G.S. 126A-150.
"§ 126A-153. Equal employment opportunity plans; reports; maintenance of services.
(a) Each member of the Council of State under G.S. 143A-11, each of the principal
departments enumerated in G.S. 143B-6, and The University of North Carolina shall develop and
submit to the Director for review and approval on or before March 1 annually an Equal
Employment Opportunity plan which shall include goals and programs that provide positive
measures to assure equitable and fair representation of North Carolina's citizens.
(b) The Director shall provide services of Equal Employment Opportunity technical
assistance, training, oversight, monitoring, evaluation, support programs, and reporting to assure
that the State government's workforce is diverse at all occupational levels. These services shall
be provided by qualified personnel.
"Article 16.
"The Privacy of Employee Personnel Records.
"§ 126A-160. Policies.
The Commission shall establish policies on personnel records of positions subject to this
Article.
"§ 126A-161. Personnel files not subject to inspection under G.S. 132-6.
(a) Except as provided in G.S. 126A-162, 126A-162.1, and 126A-163, personnel files of
employees shall not be subject to inspection and examination under G.S. 132-6.
(b) The following definitions apply in this Article:
(1) Reserved for future codification purposes.
(2) Employee. – A current employee, former employee, or applicant for
employment at an agency.
(3) Personnel file. – Any employment-related or personal information gathered
by an employ ing agency or by OSHR. Employment -related information
contained in a personnel file incl udes information related to an individual 's
application, selection, promotion, demotion, transfer, leave, salary, contract
for employment, benefits, suspension, performance evaluation, disciplinary
actions, and termination. Personal information contained i n a personnel file

Senate Bill 1041 Session Law 2026-40 Page 41
includes an individual 's home address, social security number, medical
history, personal financial data, marital status, dependents, and beneficiaries.
(4) Record. – The personnel information that each employing agency is required
to maintain in accordance with G.S. 126A-162.
(c) Personnel files of former employees who have been separated from agency
employment for 10 or more years may be open to inspection and examination, except for papers
and documents relating to demotions and to disciplinary actions resulting in the dismissal of the
former employee. Retirement files maintained by the Retirement Systems Division of the
Department of State Treasurer shall be made public pursuant to G.S. 128-33.1 and G.S. 135-6.1.
"§ 126A-162. Certain records to be kept by agencies open to inspection.
(a) Each employing agency shall maintain a record with the following information for
each of its employees:
(1) Name.
(2) Date of original employment or appointment to agency service.
(3) The terms of any contract by which the employee is employed whether written
or oral, past and current, to the extent that the agency has such record in its
possession.
(4) Current position.
(5) Title.
(6) Current salary.
(7) Date and amount of each increase or decrease in salary with that agency.
(8) Date and type of each promotion, demotion, transfer, suspension, separation,
or other change in position classification with that agency.
(9) Date and general description of the reasons for each promotion with that
agency.
(10) Date and type of each dismissal, suspension, or demotion for disciplinary
reasons taken by the agency. If the disciplinary action was a dismissal, a copy
of the written notice of the final decision of the agency head setting forth the
specific acts or omissions that are the basis of the dismissal.
(11) The office or station to which the employee is currently assigned.
(b) For the purposes of this section, the term "salary" includes pay, benefits, incentives,
bonuses, and deferred and all other forms of compensation paid by the employing entity.
(c) Subject only to Commission policies on safekeeping of the records, every person
having custody of records shall permit them to be inspected, examined, and copied by any person
during regular business hours. Except as provided in G.S. 126A-162.1, any person who is denied
access to a record shall have the right to compel compliance with the provisions of this section
by application to a court of competent jurisdiction for a writ of mandamus or other appropriate
relief.
"§ 126A-162.1. Certain restrictions on access to records.
(a) Notwithstanding G.S. 126A-162, persons in the custody of or under the supervision
of the Division of Institutions of the Department of Adult Correction and persons in the custody
of local confinement facilities are not entitled to access the records made public under
G.S. 126A-162 and are prohibited from obtaining those records, absent a court order authorizing
access, custody, or possession of the records.
(b) An attorney investigating allegations of unlawful misconduct or abuse by a
Department of Adult Correction, Division of Ins titutions, employee shall be provided, upon
request, the following information about the employee: (i) his or her name, (ii) his or her current
or former position within the Division, and (iii) his or her dates of employment. The attorney
shall not give th e offender copies of records or official documents absent a court order
authorizing access, custody, or possession.
"§ 126A-163. Confidential information in personnel files.

Page 42 Session Law 2026-40 Senate Bill 1041
(a) All other information contained in a personnel file is confidential and shall not be
open for inspection and examination, except to the following persons:
(1) The employee or his or her properly authorized agent, who may examine his
or her own personnel file in its entirety except for (i) letter of references
solicited prior to emp loyment or (ii) information concerning a medical
disability, mental or physical, that a prudent physician would not divulge to a
patient. An employee 's medical record may be disclosed to a licensed
physician designated in writing by the employee.
(2) The supervisor and indirect supervisors of the employee.
(3) A potential agency supervisor during the interview process, only with regard
to performance management documents or to prevent application fraud.
(4) Members of the General Assembly who may inspect an d examine personnel
records under the authority of G.S. 120-19.
(5) A party by authority of a proper court order may inspect and examine a
particular confidential portion of a n employee's personnel file. In this
subdivision, "court order" includes a lawful ly issued subpoena or discovery
request so long as the parties have moved for the court to issue a protective
order regarding the confidential personnel file information. A party may
lawfully delay producing requested confidential personnel file documents
until the court has ruled on that party 's motion for protective order regarding
those documents.
(6) An official of an agency of the federal government, State government, or any
political subdivision thereof. The official may inspect any personnel records
when the inspection is deemed by the agency head as necessary and essential
to the proper function of the agency or to protect the safety of another person.
This information shall not be divulged for purposes of a ssisting in a criminal
prosecution or for purposes of assisting in a tax investigation.
(7) Staff performing human resources functions at the employ ing agency or
OSHR.
(8) Persons accessing a personnel file under G.S. 17C-10.2 or G.S. 17E-7.1.
(9) A grieva nt's, d uring a grievance hearing held by the employing agency,
personnel file information may be provided to the grievant to the extent
necessary to adjudicate the grievance. If the agency provides confidential
personnel file information of a person other than the grievant, the grievant
shall keep that information confidential.
(10) An employing agency subject to this Article conducting a quasi -judicial
hearing or a party to that quasi -judicial hearing may have access to relevant
material in personnel files and may introduce copies of that material or
information based on that material as evidence in the hearing, either (i) upon
consent of the employee, former employee, or applicant for employment or
(ii) upon subpoena properly issued by the agency either upon request of a party
or on its own motion. Nothing in this Chapter shall impose liability on any
agent or officer of the State for compliance with this provision.
(b) Notwithstanding any other provision of this Article, an agency head may, in his or
her discretion, disclose to a person any promotion, demotion, suspension, reinstatement, transfer,
separation, dismissal, employment, or nonemployment of any employee and the reasons for the
action. An agency head may also permit any person to inspect or examine the personnel file , or
any portion of the file, of an employee when he or she determines that disclosure is essential to
maintaining the integrity of the agency or the level or quality of services it provides. Before
releasing any information or making any file available under this subsection, the agency head
shall prepare a memorandum stating the circumstances requiring disclosure and identifying the

Senate Bill 1041 Session Law 2026-40 Page 43
information to be disclosed. The memorandum shall be retained in agency files and shall be a
public record.
"§ 126A-164. Remedies of employee objecting to material in file.
(a) An employee who objects to material in the employee 's personnel file because he or
she considers it inaccurate or misleading may do any of the following:
(1) Place in his or her file a written statement relating to the material considered
inaccurate or misleading.
(2) Seek the removal of such material from the file in accordance with a grievance
procedure under G.S. 126A-85(b).
(b) If the agency determines that material in the employee 's personnel file is inaccurate
or misleading, the agency shall remove or amend the inaccurate material to ensure that the file is
accurate.
(c) Nothing in this section shall be construed to permit an employee to appeal the contents
of a performance appraisal or written disciplinary action.
"§ 126A-165. Penalty for permitting access to confidential file by unauthorized person.
Any public official or employee who knowingly and willfully permit s any person not
specifically authorized by G.S. 126A-163 to have access, custody, or possession of any portion
of a personnel file designated as confidential by this Article shall be guilty of a Class 3
misdemeanor and upon conviction shall only be fined in the discre tion of the court but not in
excess of five hundred dollars ($500.00).
"§ 126A-166. Penalty for accessing confidential file without authority.
Any person not specifically authorized by G.S. 126A-163 to have access to a personnel file
designated as confidential by this Article who knowingly and willfully examine s in its official
filing place or removes or copies any portion of a confidential personnel file shall be guilty of a
Class 3 misdemeanor and upon conviction shall only be fined in the discretion of the court but
not in excess of five hundred dollars ($500.00)."

PART II. LEGISLATIVE HUMAN RESOURCES
SECTION 2.(a) G.S. 120-32 reads as rewritten:
"§ 120-32. Commission duties.
The Legislative Services Commission is authorized to:
(1) Determine the number, titles, classification, functions, compensation, and
other conditions of employment of the joint legisla tive service employees of
the General Assembly, including but not limited to the following departments:
a. Legislative Services Officer and personnel.
b. Electronic document writing system.
c. Proofreaders.
d. Legislative printing.
e. Enrolling clerk and personnel.
f. Library.
g. Research and bill drafting.
h. Printed bills.
i. Disbursing and supply.
The provisions of G.S. 135-3(a)(8)c. do not apply to temporary employees of
the General Assembly with respect to compensation earned while a temporary
employee of the General Assembly.Establish human resources policies for the
legislative branch, as provided in Article 7E of this Chapter.
(2) Determine the classification and compensation of employees of the respective
houses other than staff elected officers; ho wever, the hiring of employees of
each house and their duties shall be prescribed by the rules and administrative
regulations of the respective house;

Page 44 Session Law 2026-40 Senate Bill 1041
(2a) Obtain a criminal history record check of a prospective employee, volunteer,
or contractor of the Ge neral Assembly and lobbyists and liaison personnel
registered under Chapter 120C of the General Statutes. The criminal history
record check shall be conducted by the State Bureau of Investigation as
provided in G.S. 143B-973. G.S.143B-1209.55. The criminal history report
shall be provided to the Legislative Services Officer and is not a public record
under Chapter 132 of the General Statutes.
…."
SECTION 2.(b) G.S. 120-32.5 is repealed.
SECTION 2.(c) Chapter 120 of the General Statutes is amended by addin g a new
Article to read:
"Article 7E.
"Legislative Human Resources.
"Part 1. Legislative Services Commission Policies.
"§ 120-36.30. Primary source of law.
In recognition of the separation of powers required by the Constitution of this State, all human
resources policies and all matters of employment within the legislative branch are the exclusive
jurisdiction of the General Assembly . When in conflict, p olicies established by the Legislative
Services Commission for legislative employees shall supersede all State laws to the contrary.
"§ 120-36.31. Policies.
The Legislative Services Commission is authorized to:
(1) Determine the number, titles, classification, functions, compensation, and all
other conditions of employment of the joint legislative services employees of
the General Assembly. The provisions of G.S. 135-3(a)(8)c. do not apply to
temporary employees of the General Assembly with respect to compensation
earned while a temporary employee of the General Assembly.
(2) Determine the classification and compensation of employees of the respective
houses other than staff-elected officers. The hiring of employees of each house
and their duties shall be prescribed by the rules and administrative regulations
of the respective house.
(3) Obtain a criminal history record check of a prospective employee, volunteer,
or contractor of the General Assembly and lobbyists and liaison personnel
registered under Chapter 120C of the General Statutes. Upon request, the State
Bureau of Investigation s hall conduct the criminal history record check as
provided in G.S. 143B-1209.55. The criminal history report shall be provided
to the Legislative Services Officer and is not a public record under Chapter
132 of the General Statutes.
(4) Confirm an individual's legal status or authorization to work in the United
States after hiring the individual as an employee, in accordance with the
E-Verify Program administered by the United States Department of
Homeland Security pursuant to 8 U.S.C. § 1101, et seq.
(5) Establish all personnel policies that govern legislative branch employees,
including vacation leave, sick leave, parental leave, and all other types of leave
benefits and holidays for legislative branch officers and employees. When an
individual transfers employment from an executive or judicial branch position
to a position in the legislative branch, the leave policies shall credit any
vacation and sick leave accrued with the transferring branch if the employee
is entitled to vacation and sick leave in the legislative branch position.
(6) Request that the Office of State Human Resources provide the following
programs, benefits, or assistance . Upon request, the Office of State Human
Resources shall coordinate:

Senate Bill 1041 Session Law 2026-40 Page 45
a. Flexible compensation benefits for legislative branch employees as
provided in G.S. 126A-76.
b. Safety, health, and workers ' compensation programs for legislative
branch employees.
c. Recruitment assistance for legislative branch positions.
d. Training for legislative branch employees.
e. Any o ther programs, benefits, or assistance reque sted by the
Legislative Services Commission.
"§ 120-36.32. Equal employment opportunities.
The General Assembly shall give equal opportunity for employment and compensation,
without regard to race, religion, color, national origin, sex, age, disability, or genetic information
to all persons otherwise qualified, and shall not retaliate against an employee for protesting
alleged violations of this section.
"Part 2. Employee Personnel Records.
"§ 120-36.40. Privacy of employee personnel records.
(a) The following definitions apply in this Part:
(1) Employee. – A current employee, former employee, or applicant for
employment.
(2) Legislative branch employer. – The office within the legislative branch that
hired an employee and has the power to separate the employee from a position.
If the legislative branch employer was a legislator who no longer holds office,
the Legislative Services Commission shall be deemed the legislative branch
employer.
(3) Personnel file. – Any employment-related or personal inf ormation gathered
by the legislature. Employment-related information contained in a personnel
file includes information related to an individual 's application, selection,
promotion, demotion, transfer, leave, salary, contract for employment,
benefits, suspension, performance evaluation, disciplinary actions, and
termination. Personal information contained in a personnel file includes an
individual's home address, social security number, medical history, personal
financial data, marital status, dependents, and beneficiaries.
(4) Record. – The personnel information that is maintain ed in accordance with
G.S. 120-36.41.
(b) The Legislative Services Commission shall establish policies on personnel records of
positions subject to this Part.
(c) Except as otherwise provided in this Part, personnel files of employees are not
administrative records and shall not be subject to inspection and examination under G.S. 132-6.
Personnel files of former employees who have been separated from employment for 10 or more
years may be open to inspection and examination, except for papers and documents relating to
demotions and to disciplinary actions resulting in the dismissal of the former employee.
"§ 120-36.41. Certain records to be kept by legislature open to inspection.
(a) The legislature shall maintain a record with the following information for each of its
employees:
(1) Name.
(2) Date of original employment or appointment to service.
(3) The terms of any contract by which the employee is employed whether written
or oral, past and current, to the extent that the legislature has such record in its
possession.
(4) Current position.
(5) Title.
(6) Current salary.

Page 46 Session Law 2026-40 Senate Bill 1041
(7) Date and amount of each increase or decrease in salary with the legislature.
(8) Date and type of each promotion, demotion, transfer, suspension, separation,
or other change in position classification with the legislature.
(9) Date and general description of the reasons for each pr omotion with the
legislature.
(10) The office or station to which the employee is currently assigned.
(b) The Legislative Services Commission shall establish a policy on inspection of the
records made public under subsection (a) of this section.
(c) Persons in the custody of or under the supervision of the Division of Institutions of
the Department of Adult Correction and persons in the custody of local confinement facilities are
not entitled to access the records made public under subsection ( a) of th is section and are
prohibited from obtaining those records.
"§ 120-36.42. Confidential information in personnel files.
(a) Other than information made public by G.S. 120-36.41, a ll other information
contained in a personnel file is confidential and shall not be open for inspection and examination,
except to the following persons:
(1) The employee or his or her properly authorized agent, who may examine his
or her own personnel file in its entirety except for (i) letter of references
solicited prior to employment or (ii) information concerning a medical
disability, mental or physical, that a prudent physician would not divulge to a
patient. An employee 's medical record may be disclosed to a licensed
physician designated in writing by the employee.
(2) The supervisor and indirect supervisors of the employee.
(3) A potential supervisor during the interview process, only with regard to
performance management documents or to prevent application fraud.
(4) Members of the General Assembly who may inspect and ex amine personnel
records under the authority of G.S. 120-19.
(5) A party by authority of a proper court order may inspect and examine a
particular confidential portion of an employee 's personnel file. In this
subdivision, "court order" includes a lawfully i ssued subpoena or discovery
request so long as the parties have moved for the court to issue a protective
order regarding the confidential personnel file information. A party may
lawfully delay producing requested confidential personnel file documents
until the court has ruled on that party 's motion for protective order regarding
those documents.
(6) An official of an agency of the federal government, State government, or any
political subdivision. The official may inspect any personnel records when the
inspection is deemed by the legislative branch employer as necessary and
essential to the proper function of the legislature or to protect the safety of
another person. This information shall not be divulged for purposes of
assisting in a criminal prosecu tion or for purposes of assisting in a tax
investigation.
(7) Staff performing human resources functions at the legislature.
(8) Persons accessing a personnel file under G.S. 17C-10.2 or G.S. 17E-7.1.
(b) Notwithstanding any other provision of this Part, the legislative branch employer
may, in its discretion, disclose to a person any promotion, demotion, suspension, reinstatement,
transfer, separation, dismissal, employment, or nonemployment of any employee and the reasons
for the action. The legislative branch employer may also permit any person to inspect or examine
the personnel file, or any portion of the file, of an employee when it determines that disclosure
is essential to maintaining the integrity of the legislature or the level or quality of servi ces it
provides. Before releasing any information or making any file available under this subsection,

Senate Bill 1041 Session Law 2026-40 Page 47
the legislative branch employer shall prepare a memorandum stating the circumstances requiring
disclosure and identifying the information to be disclosed. The memorandum shall be retained in
legislative files and shall be a public record.
"§ 120-36.43. Remedies of employee objecting to material in file.
(a) An employee who objects to material in the employee 's personnel file because he or
she considers it inaccurate or misleading may place in his or her file a written statement relating
to the material considered inaccurate or misleading.
(b) If the legislative branch employer determines that material in the e mployee's
personnel file is inaccurate or misleading, the legislative branch employer shall remove or amend
the inaccurate material to ensure that the file is accurate.
(c) Nothing in this section shall be construed to permit an employee to appeal the contents
of a performance appraisal or written disciplinary action.
"§ 120-36.44. Penalty for permitting access to confidential file by unauthorized person.
Any public official or employee who knowingly and willfully permit s any person not
specifically authorized by this Part to have access, custody, or possession of any portion of a
personnel file designated as confidential by this Part shall be guilty of a Class 3 misdemeanor
and upon conviction shall only be fined in the d iscretion of the court but not in excess of five
hundred dollars ($500.00).
"§ 120-36.45. Penalty for accessing confidential file without authority.
Any person not specifically authorized by this Part to have access to a personnel file
designated as confidential by this Part who knowingly and willfully examines in its official filing
place, or removes or copies any portion of a confidential personnel file, shall be guilty of a Class
3 misdemeanor and upon conviction shall only be fined in the discretion of the court but not in
excess of five hundred dollars ($500.00)."

PART III. JUDICIAL HUMAN RESOURCES SYSTEM
SECTION 3. Chapter 7A of the General Statutes is amended by adding a new Article
to read:
"Article 28E.
"Judicial Human Resources System.
"Part 1. Policies.
"§ 7A-339. Judicial Human Resources System.
(a) The Director of the Administrative Office of the Courts is authorized to establish
policies to:
(1) Confirm an individual 's legal status or authorization to work in the United
States after hiring the individual as an employee, in accordance with the
E-Verify Program administered by the United States Department of
Homeland Security pursuant to 8 U.S.C. § 1101, et seq.
(2) Establish vacation leave, sick leave, parental leave, and other types of leave
benefits and holidays for judicial branch officers and employees. When an
individual transfers employment from an executive or legislative branch
position to a position in the judicial branch, the leave policies shall credit any
vacation and sick leave accrued with the transferring branch if the employee
is entitled to vacation and sick leave in the judicial branch position.
(b) At the Director's request, the Office of State Human Resources shall coordinate to:
(1) Offer flexible compensation benefits for judicial branch employees as
provided in G.S. 126A-76.
(2) Offer safety, health, and workers' compensation programs for judicial branch
employees.
(3) Provide recruitment assistance for judicial branch positions.
(4) Provide training to judicial branch employees.

Page 48 Session Law 2026-40 Senate Bill 1041
(5) Secure temporary employees for the judicial branch.
(6) Provide a performance management system for the judicial branch.
"§ 7A-339.05. Equal employment opportunity.
The judicial branch shall give equal opportunity for employment and compensation, without
regard to race, religion, color, national origin, sex, age, disability, or genetic information to all
persons otherwise qualified, and shall not retaliate against an employee for protesting alleged
violations of this section.
"§ 7A-339.10. Ensuring dignity and nondiscrimination in workplaces.
(a) The General Assembly finds that Article I, Section 1 of the Constitution of this State
recognizes the equality and rights o f all persons. Therefore, it is the intent of the General
Assembly that employees respect the dignity of others, acknowledge the right of others to express
differing opinions and the right to freedom of speech and association, and that the judicial branch
employ training methods and procedures to further that intent.
(b) The judicial branch shall not compel employees to affirm or profess belief in any of
the following concepts in the workplace or as part of any employee training program:
(1) One race or sex is inherently superior to another race or sex.
(2) An individual, solely by virtue of his or her race or sex, is inherently racist,
sexist, or oppressive.
(3) An individual should be discriminated against or receive adverse treatment
solely or partly because of his or her race or sex.
(4) An individual's moral character is necessarily determined by his or her race or
sex.
(5) An individual, solely by virtue of his or her race or sex, bears responsibility
for actions committed in the past by other members of the same race or sex.
(6) Any individual, solely by virtue of his or her race or sex, should feel
discomfort, guilt, anguish, or any other form of psychological distress.
(7) A meritocracy is inherently racist or sexist.
(8) The United States was created by members of a particular race or sex for the
purpose of oppressing members of another race or sex.
(9) The United States government should be violently overthrown.
(10) Particular character traits, values, moral or ethical codes, privileges, or beliefs
should be ascribed to a race or sex or to an individual because of the
individual's race or sex.
(11) The rule of law does not exist but instead is a series of power relationships
and struggles among racial or other groups.
(12) All Americans are not created equal and are not endowed by their Creator with
certain unalienable rights, including life, liberty, and the pursuit of happiness.
(13) Governments should deny to any person within the government's jurisdiction
the equal protection of the law.
(c) Nothing in this section prevents a private contractor who provides training to
employees from responding to questions that are raised by participants in the training and which
pertain to the concepts in subsection (b) of this section. However, the private contractor must
make it clear that the employer does not endorse those concepts.
(d) This section does not apply to speech protected by the First Amendment of the U.S.
Constitution.
"Part 2. Protection for Reporting Improper Government Activities.
"§ 7A-339.15. Duty to report improper government activities.
(a) It is the policy of the State that employees shall have a duty to report verbally or in
writing to their supervisor or other appropriate authority evidence of activity in the judicial
branch or an employee constituting any of the following:
(1) A violation of State or federal law, rule, or regulation.

Senate Bill 1041 Session Law 2026-40 Page 49
(2) Fraud.
(3) Misappropriation of State resources.
(4) Substantial and specific danger to the public health and safety.
(5) Gross mismanagement, a gross waste of monies, or gross abuse of authority.
(b) Further, it is the policy of this State that employees be free of intimidation or
harassment when reporting to public bodies about matters of public concern, including offering
testimony to or testifyin g before appropriate legislative panels, or providing statements or
testimony to agents and employees of legislative panels duly appointed by the President Pro
Tempore of the Senate or the Speaker of the House of Representatives designated to conduct
inquiries on behalf of a legislative panel.
(c) Officers of the judicial branch and employees exercising supervisory authority shall
not discharge, threaten, or otherwise discriminate against an employee regarding the employee's
compensation, terms, conditions, location, or privileges of employment because of any of the
following:
(1) The employee, or a person acting on behalf of the employee, reports or is
about to report, verbally or in writing, any activity described in subsection (a)
of this section , unless the employee knows or has reason to believe that the
report is inaccurate.
(2) The employee has refused to carry out a directive that in fact constitutes a
violation of State or federal law, rule, or regulation or poses a substantial and
specific danger to the public health and safety.
(d) Employees shall not retaliate against another employee because of any of the
following:
(1) The employee, or a person acting on behalf of the employee, reports or is
about to report, verbally or in writing, any activity described in subsection (a)
of this section.
(2) The employee has refused to carry out a directive that may constitute a
violation of State or federal law, rule, or regulation or poses a substantial and
specific danger to the public health and safety.
(e) The protections of this Part apply to employees who report any activity described in
subsection (a) of this section to the State Auditor as authorized by G.S. 147-64.6B, to the Joint
Legislative Commission on Governmental Operations as authorized by G.S. 120-75.1, or to a
legislative committee as required by G.S. 120-19.
(f) Any employee injured by a violation of this section may maintain an action in superior
court against the person or employer who committed the alleged violation within one year after
the occurrence. Any claim arising under Article 21 of Chapter 95 of the General Statutes may be
maintained pursuant to the provisions of that Article only and may be redressed only by the
remedies and relief available under that Article.
(g) A court, in rend ering a judgment in an action brought pursuant to this section, may
order any one or more of the following:
(1) An injunction.
(2) Damages.
(3) Reinstatement of the employee.
(4) Payment of back wages.
(5) Full reinstatement of fringe benefits and seniority rights.
(6) Payment of costs.
(7) Reasonable attorneys' fees.
(8) Any combination of the subdivisions in this subsection.
(h) If an application for a permanent injunction is granted, the employee shall be awarded
costs and reasonable attorneys' fees.

Page 50 Session Law 2026-40 Senate Bill 1041
(i) If in an action for damages the court finds that the employee was injured by a willful
violation of this section , the court shall award as damages three times the amount of actual
damages plus costs and reasonable attorneys' fees against the individual or individuals found to
be in violation of this section.
(j) The judicial branch shall post notice in accordance with G.S. 95-9 or use other
appropriate means to keep employees informed of their protections and obligations under this
Part.
(k) An employee's right to speak to a member of the General Assembly at the member 's
request shall not be directly or indirectly limited by the employee 's supervisor or by any policy
of the judicial branch.
"Part 3. Employee Personnel Records.
"§ 7A-339.20. Privacy of employee personnel records.
(a) The following definitions apply in this Part:
(1) Employee. – A current judicial branch employee, former judicial branch
employee, or applicant for employment with the judicial branch.
(2) Judicial branch employer. – The office within the judicial branch that hired an
employee and has the power to separate the employee from a position. For
elected officials, the judicial branch employer is the office to which the
individual was elected. For magistrates, the judicial branch employer is the
office of the chief district court judge for the judicial district that includes the
magistrate's county of appointment.
(3) Personnel file. – Any employment-related or personal information gathered
by the judicial branch . Employment-related information contained in a
personnel file includes information related to an individual 's application,
selection, promotion, demotion, transfer, leave, salary, contract for
employment, benefits, suspension, performance evaluation, discip linary
actions, and termination. Personal information contained in a personnel file
includes an individual 's home address, social security number, medical
history, personal financial data, marital status, dependents, and beneficiaries.
(4) Record. – The personnel information that is maintain ed in accordance with
G.S. 7A-339.25.
(b) Except as otherwise provided in this Part, personnel files of employees shall not be
subject to inspection and examination under G.S. 132-6. Personnel files of former employees
who have been separated from employment for 10 or more years may be open to inspection and
examination, except for papers and documents relating to demotions and to disciplinary actions
resulting in the dismissal of the former employee.
"§ 7A-339.25. Certain records to be kept open to inspection.
(a) The Administrative Office of the Courts shall maintain a record with the following
information for each judicial branch employee:
(1) Name.
(2) Date of original employment or appointment to service.
(3) The terms of any contract by which the employee is employed whether written
or oral, past and current, to the extent that the judicial branch has such record
in its possession.
(4) Current position.
(5) Title.
(6) Current salary.
(7) Date and amount of each increase or decrease in salary with the judicial
branch.
(8) Date and type of each promotion, demotion, transfer, suspension, separation,
or other change in position classification with the judicial branch.

Senate Bill 1041 Session Law 2026-40 Page 51
(9) Date and general desc ription of the reasons for each promotion with the
judicial branch.
(10) Date and type of each dismissal, suspension, or demotion for disciplinary
reasons taken by the judicial branch. If the disciplinary action was a dismissal,
a copy of the written notice of the final decision setting forth the specific acts
or omissions that are the basis of the dismissal.
(11) The office or station to which the employee is currently assigned.
(b) For the purposes of this section, the term "salary" includes pay, benefits, incentives,
bonuses, and deferred and all other forms of compensation paid by the judicial branch.
(c) The Administrative Office of the Courts shall permit records made public by this
section to be inspected, examined, and copied by any person during regular business hours.
Except as provided in G.S. 7A-339.30, any person who is denied access to a record shall have
the right to compel compliance with the provisions of this section by applicatio n to a court of
competent jurisdiction for a writ of mandamus or other appropriate relief.
"§ 7A-339.30. Certain restrictions on access to records.
The Administrative Office of the Courts is not required to provide persons in the custody of
or under the supervision of the Division of Institutions of the Department of Adult Correction
and persons in the custody of local confinement facilities access to the records made public under
G.S. 7A-339.25, absent a court order authorizing access, custody, or possession of the records.
"§ 7A-339.35. Confidential information in personnel files.
(a) Other than information made public by G.S. 7A-339.25, a ll other information
contained in a personnel file is confidential and shall not be open for inspection and examination,
except to the following persons:
(1) The employee or his or her properly authorized agent, who may examine his
or her own personnel file in its entirety except for (i) letter of references
solicited prior to employment or (ii) information conc erning a medical
disability, mental or physical, that a prudent physician would not divulge to a
patient. An employee 's medical record may be disclosed to a licensed
physician designated in writing by the employee.
(2) The supervisor and indirect supervisors of the employee.
(3) A potential supervisor during the interview process, only with regard to
performance management documents or to prevent application fraud.
(4) Members of the General Assembly who may inspect and examine personnel
records under the authority of G.S. 120-19.
(5) A party by authority of a proper court order may inspect and examine a
particular confidential portion of an employee 's personnel file. In this
subdivision, "court order" includes a lawfully issued subpoena or discovery
request so long as the parties have moved for the court to issue a protective
order regarding the confidential personnel file information. A party may
lawfully delay producing requested confidential personnel file documents
until the court has ruled on that party 's motion for protective order regarding
those documents.
(6) An official of an agency of the federal government, State government, or any
political subdivision thereof. Such an official may inspect any personnel
records when the inspection is deemed by the judicial branch employer as
necessary and essential to the proper function of the judicial branch or to
protect the safety of another person. This information shall not be divulged
for purposes of assisting in a criminal prosecution or for purposes of assisting
in a tax investigation.

Page 52 Session Law 2026-40 Senate Bill 1041
(7) Staff performing human resources functions for the judicial branch, including
staff at the Office of State Human Resources , only to the extent necessary to
maintain human resources data on behalf of the judicial branch.
(8) Persons accessing a personnel file under G.S. 17C-10.2 or G.S. 17E-7.1.
(b) Notwithstanding any other provision of this Article, the judicial branch employer
may, in its discretion, disclose to a person any promotion, demotion, suspension, reinstatement,
transfer, separation, dismissal, employment, or nonemployment of any employee and the reasons
for the action. The judicial branch employer may also permit any person to i nspect or examine
the personnel file, or any portion of the file, of an employee when it determines that disclosure
is essential to maintaining the integrity of the judicial branch employer or the level or quality of
services it provides. Before releasing any information or making any file available under this
subsection, the judicial branch employer shall prepare a memorandum stating the circumstances
requiring disclosure and identifying the information to be disclosed. The memorandum shall be
retained in the judicial branch employer's files and shall be a public record.
"§ 7A-339.40. Remedies of employee objecting to material in file.
(a) An employee who objects to material in the employee 's personnel file because he or
she considers it inaccurate or misleading may place in his or her file a written statement relating
to the material considered inaccurate or misleading.
(b) If the judicial branch employer determines that material in the employee's personnel
file is inaccurate or misleading, the judicial branch employer shall remove or amend the
inaccurate material to ensure that the file is accurate.
(c) Nothing in this section shall be construed to permit an employee to appeal the contents
of a performance appraisal or written disciplinary action.
"§ 7A-339.45. Penalty for permitting access to confidential file by unauthorized person.
Any public official or employee who knowingly and willfully permit s any person not
specifically authorized by this Part to have access, custody, or possession of any portion of a
personnel file designated as confidential by this Part shall be guilty of a Class 3 misdemeanor
and upon conviction shall only be fined in the discretion of the court but not in excess of five
hundred dollars ($500.00).
"§ 7A-339.50. Penalty for accessing confidential file without authority.
Any person not specifically authorized by this Part to have access to a personnel file
designated as confidential by this Part who knowingly and willfully examines in its official filing
place, or removes or copies any portion of a confidential personnel file, shall be guilty of a Class
3 misdemeanor and upon conviction shall only be fined in the discretion of the court but not i n
excess of five hundred dollars ($500.00)."

PART IV. CONFORMING CHANGES
SECTION 4.1. G.S. 1-54(9) reads as rewritten:
"(9) As provided in Article 14 of Chapter 126 Chapter 126A of the General
Statutes, entitled "Protection for Reporting Improper Government
Activities"."
SECTION 4.2. G.S. 7A-29(a) reads as rewritten:
"(a) From any final order or decision of the North Carolina Utilities Commission not
governed by subsection (b) of this section, the Department of Health and Human Services under
G.S. 131E-188(b), the North Carolina Industrial Commission, the North Carolina State Bar under
G.S. 84-28, the Property Tax Commission under G.S. 105-290 and G.S. 105-342, the
Commissioner of Insurance under G.S. 58-2-80, the State Board of Elections under
G.S. 163-127.6, the Office of Administrative Hearings under G.S. 126-34.02, G.S. 126A-84, or
the Secretary of Environmental Quality under G.S. 104E-6.2 or G.S. 130A-293, appeal as of right
lies directly to the Court of Appeals."
SECTION 4.3. G.S. 7A-146(13) reads as rewritten:

Senate Bill 1041 Session Law 2026-40 Page 53
"(13) Investigating written complaints against magistrates. The chief district judge
may, in writing, delegate authority to an appointed chief magistrate to make
preliminary investigations into written complaints against magistrates and to
make a written report of their preliminary findings to the chief district judge.
However, the delegation shall not authorize the chief magistrate to make
written findings of misconduct or take any disciplinary action. Upon
investigation and written findings of misconduct in violation of the Rules of
Conduct for Magistrates, a chief district court judge may discipline a
magistrate in accordance with the Rules of Conduct for Magistrates. Written
complaints received by the chief district court judge an d records of
investigations into those complaints are to be treated as personnel records
under Article 7 of Chapter 126 Article 16 of Chapter 126A of the General
Statutes. Notwithstanding Article 7 of Chapter 126 Article 16 of Ch apter
126A of the General Statutes, once a letter of caution, written reprimand, or
suspension has been issued by the chief district court judge, the written
complaint, and the record of the chief district court judge's action on that
complaint, including any investigatory records, are no longer confidential
personnel records."
SECTION 4.4. G.S. 7A-754 reads as rewritten:
"§ 7A-754. Qualifications; standards of conduct; removal.
Only persons duly authorized to practice law in the General Court of Justice shall be eligible
for appointment as the Director and chief administrative law judge or as an administrative law
judge in the Office of Administrative Hearings. The Chief Administrative Law Judge and the
administrative law judges shall comply with the Model Code of Judicial Conduct for State
Administrative Law Judges, as adopted by the National Conference of Administrative Law
Judges, Judicial Division, American Bar Association, (revised August 1998), as amended from
time to time, except that the provisions of this section shall con trol as to the private practice of
law in lieu of Canon 4G, and G.S. 126-13 G.S. 126A-100 shall control as to political activity in
lieu of Canon 5. Failure to comply with the applicable provisions of the Model Code may
constitute just cause for disciplinary action under Chapter 126 Chapter 126A of the General
Statutes and grounds for removal from office. Neither the chief administrative law judge nor any
administrative law judge may engage in the private practice of law as defined in G.S. 84-2.1
while in office; violation of this provision shall constitute just cause for disciplinary action under
Chapter 126 Chapter 126A of the General Statutes and shall be grounds for removal from office.
Each administrative law judge shall take the oaths required by Chapter 11 of the General Statutes.
An administrative law judge may be removed from office by t he Director of the Office of
Administrative Hearings for just cause, as that term is used in G.S. 126-35 G.S. 126A-81 and this
section."
SECTION 4.5. G.S. 7A-759 reads as rewritten:
"§ 7A-759. Role as deferral agency.
(a) The Office of Administrative Hearings is designated to serve as the State's deferral
agency for cases deferred by the Equal Employment Opportunity Commission to the Office of
Administrative Hearings as provided in Section 706 of the Civil Rights Act of 1964, 42 U.S.C.
§ 2000e -5, the A ge Discrimination in Employment Act, 29 U.S.C. § 621 et seq., and the
Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. for charges filed by State or local
government employees covered under Chapter 126 Chapter 126A of the General Statutes and
shall have all of the powers and authority necessary to function as a deferral agency.
(b) The Chief Administrative Law Judge is authorized and directed to contract with the
Equal Employment Opportunity Commission for the Office of Administrative Hearings to serve
as a deferral agency and to establish and maintain a Civil Rights Division in the Office of
Administrative Hearings to carry out the functions of a deferral agency.

Page 54 Session Law 2026-40 Senate Bill 1041
(b1) As provided in the contract between the Office of Administrative Hearings and th e
Equal Employment Opportunity Commission, a deferred charge for purposes of 42 U.S.C. §
2000e-5(c) or (d) is a charge that is filed by a State or local government employee covered under
Chapter 126 Chapter 126A of the General Statutes and alleges an unlawful employment practice
prohibited under that Chapter or any other State law. A deferred charge may be filed with either
agency.
The date a deferred charge is filed with either agency is considered to be a commencement
of proceedings under State law for pu rposes of 42 U.S.C. § 2000e -5(c) or (d). The filing of a
deferred charge automatically tolls the time limit under G.S. 126 -7.2, 126-35, 126 -38,
G.S. 126A-81 and 150B-23(f) G.S. 150B-23(f) and any other State law that sets a time limit for
filing a contested case under Article 3 of Chapter 150B of the General Statutes alleging an
unlawful employment practice. These time limits are tolled until the completion of the
investigation and of any informal methods of resolution pursued pursuant to subsection (d) of
this section.
…."
SECTION 4.6. G.S. 7A-760 reads as rewritten:
"§ 7A-760. Number and status of employees; staff assignments.
(a) The number of administrative law judges of the Office of Administrative Hearings
shall be established by the General Assembly. For matters related to Office of Administrative
Hearings staff, the Chief Administrative Law Judge shall have the same powers as those granted
to the head of a principal State department in G.S. 143B-10(c).
(a1) The Chief Administrative Law Judge and five employees of the Office of
Administrative Hearings as designated by the Chief Administrative Law Judge are exempt from
provisions of the North Carolina Human Resources Act as provided by G.S. 126-5(c1)(27).
G.S. 126A-15. All other employees of the Office of Administrative Hearings are subject to the
North Carolina Human Resources Act.
(b) The Chief Administrative Law Judge shall appoint a Codifier of Rules to serve in the
Office of Administrative Hearings. No person shall be appointed or designa ted the Codifier of
Rules except as provided in this section. The salary of the Codifier of Rules shall be ninety
percent (90%) of the salary of the Chief Administrative Law Judge. In lieu of merit and other
increment raises, the Codifier of Rules shall re ceive longevity pay on the same basis as is
provided to employees who are subject to the North Carolina Human Resources Act."
SECTION 4.7. G.S. 18C-113(c) reads as rewritten:
"(c) Personnel records of the Commission are subject to Article 7 of Chapter 126 Article
16 of Chapter 126A of the General Statutes."
SECTION 4.8. G.S. 18C-120 reads as rewritten:
"§ 18C-120. Selection of the Director; powers and duties.
(a) The Commission shall select a Director to operate and administer the Lottery and to
serve as the Secretary of the Commission. Except as to the provisions of Articles 6 and 7 of
Chapter 126 Articles 15 and 16 of Chapter 126A of the General Statutes, the Dir ector shall be
exempt from the North Carolina Human Resources Act.
(b) The Director shall have the following powers and duties, under the supervision of the
Commission:
…
(3) To set the salaries of all Commission employees, subject to the approval of
the Commission. Except for the provisions of Articles 6 and 7 of Chapter 126
Articles 15 and 16 of Chapter 126A of the General Statutes, all employees of
the Commission shall be exempt from the North Carolina Human Resources
Act.
…."
SECTION 4.9. G.S. 53C-2-3 reads as rewritten:

Senate Bill 1041 Session Law 2026-40 Page 55
"§ 53C-2-3. The Office of the Commissioner of Banks.
…
(c) Except as otherwise provided in this Chapter, the OCOB and its employees are
exempt from portions of the North Carolina Human Resources Act as provided in
G.S. 126A-15.2, including the classification and compensation rules policies established by the
State Human Resources Commission pursuant to G.S. 126-4(1) through (4); G.S. 126-4(5) only
as it applies to for classification, compensation, hours and days of work, vacation, vacation and
sick leave; G.S. 126-4(6) only as it applies to leave, promotion and transfer; G.S. 126-4(10) only
as it applies to the transfer, and prohibition of the establishment of incentive pay programs; and
Article 2 of Chapter 126 of the General Statutes, except for G.S. 126-7.1. programs. The salary
of the Commissioner shall be fixed by the General Assembly.
(d) The Attorney General shall assign an attorney from the Department of Justice to work
full time with the Commission. The attorney shall b e subject to all provisions of Chapter 126
Chapter 126A of the General Statutes relating to the State Human Resources system. The
Commission shall fully reimburse the Department of Justice for the compensation, secretarial
support, equipment, supplies, records, and other property to support the attorney."
SECTION 4.10. G.S. 62-12 reads as rewritten:
"§ 62-12. Organization of Commission; adoption of rules and regulations therefor.
To facilitate the work of the Commission and for administrative purposes, the chairman of
the Commission, with the consent and approval of the Commission, may organize the work of
the Commission in several hearing divisions and operating departments and may designate a
member of the Commission as the head of any division or div isions and assign to members of
the Commission various duties in connection therewith. Subject to the provisions of the North
Carolina Human Resources Act (Article 2 of Chapter 143 of the General Statutes), Act, the
Commission shall prepare and adopt rules and regulations governing the personnel, departments
or divisions and all internal affairs and business of the Commission."
SECTION 4.11. G.S. 62-14 reads as rewritten:
"§ 62-14. Commission staff; structure and function.
(a) The Commission is authorized and empowered to employ hearing examiners; court
reporters; a chief clerk and deputy clerk; a commission attorney and assistant commission
attorney; transportation and pipeline safety inspectors; and such other professional,
administrative, technical, and clerical personnel as the Commission may determine to be
necessary in the proper discharge of the Commission's duty and responsibility as provided by
law. The chairman shall organize and direct the work of the Commission staff.
(b) The salaries and compen sation of all such personnel shall be fixed in the manner
provided by law for fixing and regulating salaries and compensation by other State agencies,
except that the Commission and its employees are exempt from the classification and
compensation rules portions of the North Carolina Human Resources Act as provided in
G.S. 126A-15.2, including policies established by the State Human Resources Commission
pursuant to G.S. 126-4(1) through (4); G.S. 126-4(5) only as it applies to for classification,
compensation, hours and days of work, vacation, vacation and sick leave; G.S. 126-4(6) only as
it applies to leave, promotion and transfer; G.S. 126-4(10) only as it applies to the transfer, and
prohibition of the establishment of incentive pay programs; and Article 2 of Chapter 126 of the
General Statutes, except for G.S. 126-7.1.programs.
(c) The chairman, within allowed budgetary limits and as allowed by law, shall authorize
and approve travel, subsistence and related expenses of such personnel, incurred while traveling
on official business."
SECTION 4.12. G.S. 62-15(c) reads as rewritten:
"(c) Except for the executive director, the salaries and compensation of all such personnel
shall be fixed in the manner provided by law for fixing and regulating salaries and compensation
by other State agencies, except that the Public Staff and its employees are exempt from the

Page 56 Session Law 2026-40 Senate Bill 1041
classification and compensation rules portions of the North Carolina Human Resour ces Act as
provided in G.S. 126A-15.2, including policies established by the State Human Resources
Commission pursuant to G.S. 126-4(1) through (4); G.S. 126-4(5) only as it applies to for
classification, compensation, hours and days of work, vacation, vacation and sick leave;
G.S. 126-4(6) only as it applies to leave, promotion and transfer; G.S. 126-4(10) only as it applies
to the transfer, and prohibition of the establishment of incentive pay programs; and Article 2 of
Chapter 126 of the General Statutes, except for G.S. 126-7.1.programs."
SECTION 4.13. G.S. 63A-24(b) reads as rewritten:
"(b) Notwithstanding G.S. 126-5(c1)(15), G.S. 126A-15.2, the Secretary of
Transportation may designate employees of the Authority as subject to Chapter 126 Chapter
126A of the General Statutes."
SECTION 4.14. G.S. 74-24.19(a) reads as rewritten:
"(a) The Commissioner shall appoint a Director to assist him or her in administering the
provisions of this Article and, through the Director, shall have authority t o appoint, subject to
Chapter 126 Chapter 126A of the General Statutes of North Carolina, such officers, engineers,
inspectors, and employees as he or she deems requisite for the administration of this Article; and
to prescribe powers, duties, and responsi bilities of all officers, engineers, inspectors, and
employees engaged in the administration of this Article."
SECTION 4.15. G.S. 90-270.51(f) reads as rewritten:
"(f) The Board may employ, subject to the provisions of Chapter 126 Chapter 126A of the
General Statutes, attorneys, experts, and other employees as necessary to perform its duties."
SECTION 4.16. G.S. 90-333(h) reads as rewritten:
"(h) The Board may employ, subject to the provisions of Chapter 126 Chapter 126A of the
General Statutes, the n ecessary personnel for the performance of its functions, and fix their
compensation within the limits of funds available to the Board."
SECTION 4.17. G.S. 90B-5(e) reads as rewritten:
"(e) The Board may employ, subject to the provisions of Chapter 126 Chapter 126A of the
General Statutes, the necessary personnel for the performance of its functions, and fix their
compensation within the limits of funds available to the Board."
SECTION 4.18. G.S. 95-127(3) reads as rewritten:
"(3) Classified service. – A position included in the State Merit System of
Personnel Administration Human Resources subject to the laws, rules and
regulations of the State Personnel Board State Human Resources Commission
as administered by the State Personnel Director of the Office of State Human
Resources and as set forth in Chapter 126 Chapter 126A of the General
Statutes."
SECTION 4.19. G.S. 97-77(b) reads as rewritten:
"(b) One member, to be designated by the Governor, shall act as chairman.
The chairman shall be the chief judicial officer and the chief executive officer of the Industrial
Commission; such authority shall be exercised pursuant to the provisions of Chapter 126 Chapter
126A of the General Statutes and the rules and policies of th e State Human Resources
Commission. Notwithstanding the provisions of this Chapter, the chairman shall have such
authority as is necessary to direct and oversee the Commission. The chairman may delegate any
duties and responsibilities as may be necessary to ensure the proper management of the Industrial
Commission. Notwithstanding the provisions of this Chapter, Chapter 143A, and Chapter 143B
of the General Statutes, the chairman may hire or fire personnel and transfer personnel within the
Industrial Commission.
The Governor may designate one vice-chairman from the remaining commissioners."
SECTION 4.20. G.S. 99A-2(e) reads as rewritten:

Senate Bill 1041 Session Law 2026-40 Page 57
"(e) Nothing in this section shall be construed to diminish the protections provided to
employees under Article 21 of Cha pter 95 or Article 14 of Chapter 126 Chapter 126A of the
General Statutes, nor may any party who is covered by these Articles be liable under this section."
SECTION 4.21. G.S. 114-4 reads as rewritten:
"§ 114-4. Assistants; compensation; assignments.
The Attorney General shall be allowed to appoint from among his or her staff such number
of assistant attorneys general as he or she shall deem advisable, and each of such assistant
attorneys general shall be subject to all of the provisions of Chapter 126 Chapter 126A of the
General Statutes relating to the State Human Resources system. Two assistant attorneys general
shall be assigned to the State Department of Revenue. The other assistant attorneys general shall
perform such duties as may be assigned by the Attorney General: Provided, however, the
General. The provisions of this section shall not be construed as preventing the Attorney General
from assigning additional duties to the assistant attorneys general assigned to the State
Department of Revenue."
SECTION 4.22. G.S. 114-4.2B reads as rewritten:
"§ 114-4.2B. Employment of attorney for University of North Carolina Hospitals at Chapel
Hill.
The Attorney General is hereby authorized to employ an attorney to be assigned by him full
time to the University of North Carolina Hospitals at Chapel Hill. Such attorney shall be subject
to all the provisions of Chapter 126 Chapter 126A of the General Statutes, relating to the State
Human Resources system. Such attorney shall also perform additional duties as may be assigned
to him by the Attorney General.
The attorney employed by the Attorney General under provisions of this section shall be paid
from the funds of the University of North Carolina Hospitals at Chapel Hill."
SECTION 4.23. G.S. 114-4.2C reads as rewritten:
"§ 114-4.2C. Employment of attorney for the Real Estate Commission.
The Attorney General is hereby authorized to employ an attorney and assign him full time to
the North Carolina Real Estate Commission. Such attorney shall be subject to all th e provisions
of Chapter 126 Chapter 126A of the General Statutes relating to the State Human Resources
system. Such attorney shall also perform such additional duties as may be assigned to him by the
Attorney General.
The North Carolina Real Estate Commiss ion shall fully reimburse the North Carolina
Department of Justice for the compensation of such attorney employed under the provisions of
this section."
SECTION 4.24. G.S. 115C-21(a)(1) reads as rewritten:
"(1) To organize and establish a Department of Pu blic Instruction which shall
include divisions and departments for supervision and administration of the
public school system, to administer the funds appropriated for the operation
of the Department of Public Instruction, in accordance with all needed rul es
and regulations adopted by the State Board of Education, and to enter into
contracts for the operations of the Department of Public Instruction. All
appointments of administrative and supervisory personnel to the staff of the
Department of Public Instruction and the State Board of Education, except for
certain personnel appointed by the State Board of Education as provided in
G.S. 115C-11(j), shall be under the control and management of the
Superintendent of Public Instruction who may terminate these app ointments
in conformity with Chapter 126 Chapter 126A of the General Statutes, the
North Carolina Human Resources Act."
SECTION 4.25. G.S. 115C-64.28(b) reads as rewritten:
"(b) The Associate Superintendent shall be appointed by the Superintendent of Public
Instruction at a salary established by the Superintendent of Public Instruction within the funds

Page 58 Session Law 2026-40 Senate Bill 1041
appropriated for that purpose. The Associate Superintendent may be removed from the position
by the Superintendent of Public Instruction. The Associate Superintendent shall be exempt from
the provisions of Chapter 126 Chapter 126A of the General Statutes, except for Articles 6 and 7
of Chapter 126 Articles 15 and 16 of Chapter 126A of the General Statutes.
All other staff shall be appointed, supervised, and directed by the Associate Superintendent
and shall be subject to the provisions of Chapter 1 26 Chapter 126A of the General Statutes.
Except for the Associate Superintendent, salaries and compensation of all staff personnel shall
be fixed in the manner provided by law for fixing and regulating salaries and compensation by
other State agencies."
SECTION 4.26. G.S. 115C-218.90(a)(6) reads as rewritten:
"(6) A board of directors may (i) provide paid parental leave consistent with the
requirements of G.S. 126-8.6 G.S. 126A-71 or (ii) require, as a condition of a
contract with an education management organization or charter management
organization to employ and provide teachers, that paid parental leave be
provided to those teachers consistent with the requirements of G.S. 126-8.6.
G.S. 126A-71. If the board provides paid parental leave to its employees or
requires paid parental leave be provided by contract, it shall be eligible to
receive funds as provided in G.S. 115C-336.1(b). If the board does not provide
paid parental leave, it shall provide written notice to individuals upon offering
employment. The notice shall state that employment with the charter school
will not count toward any minimum period of service established pursuant to
G.S. 126-8.6(c1).G.S. 126A-71."
SECTION 4.27. G.S. 115C-238.68 reads as rewritten:
"§ 115C-238.68. Employees.
The board of directors shall appoint all certified and noncertified staff.
…
(7) Exemptions. – Employees of the board of directors shall be exempt from
Chapter 126 Chapter 126A of the General Statutes, except Articles 6 and
7.Articles 15 and 16.
(8) Paid parental leave. – Teachers employed by the board of directors shall be
eligible for paid parental leave as provided in G.S. 126-8.6. G.S. 126A-71.
The board of directors shall be eligible to receive funds as provided in
G.S. 115C-336.1(b)."
SECTION 4.28. G.S. 115C-268.1(g) reads as rewritten:
"(g) Personnel. – The Commission may employ, subject to Chapter 126 Chapter 126A of
the General Statutes, the necessary personnel for the performance of its functions and fix
compensation within the limits of funds available to the Commission."
SECTION 4.29. G.S. 115C-302.1(j) reads as rewritten:
"(j) Parental Leave. – In addition to paid parental leave authorized by G.S. 126-8.6,
G.S. 126A-71, a teacher may use annual leave, personal leave, or leave without pay to care for a
newborn child or for a child placed with the teacher for adoption or foster care. A teacher may
also use up to 30 days of sick leave to care for a child placed with the teacher for adoption. The
leave may be for consecutive workdays during the first 12 months after the date of birth or
placement of the child, unless the teacher and local board of education agree otherwise."
SECTION 4.30. G.S. 115C-336.1 reads as rewritten:
"§ 115C-336.1. Parental leave.
(a) In addition to paid parental leave authorized by G.S. 126-8.6, G.S. 126A-71, a school
employee may use annual leave or leave without pay to care for a newborn child or for a child
placed with the employee for adoption or foster care. A school employee may also use up to 30
days of sick leave to care for a child placed with the empl oyee for adoption. The leave may be

Senate Bill 1041 Session Law 2026-40 Page 59
for consecutive workdays during the first 12 months after the date of birth or placement of the
child, unless the school employee and the local board of education agree otherwise.
(b) To the extent funds are made availab le for this purpose, the Department of Public
Instruction shall administer funds to public school units for the payment of substitute teachers
for any public school unit teacher using paid parental leave as provided in
G.S. 126-8.6.G.S. 126A-71."
SECTION 4.31. G.S. 115C-407.61(a)(6) reads as rewritten:
"(6) Agree to adopt procedures for its operations that are comparable to those of
Chapter 132 of the General Statutes, the Public Records Law, and provide for
enforcement by the Superintendent. The procedure s may provide for the
confidentiality of personnel files comparable to Article 7 of Chapter 126
Article 16 of Chapter 126A of the General Statutes."
SECTION 4.32. G.S. 115D-3(a3) reads as rewritten:
"(a3) The President shall be assisted by such professional staff members as may be deemed
necessary to carry out the provisions of this Chapter, who shall be elected by the State Board on
nomination of the President. The compensation of the staff members elected by the Board shall
be fixed by the State Board of Community Colleges, upon recommendation of the President of
the Community Colleges System, from funds provided in the Current Operations Appropriations
Act. These staff members shall include such officers as may be deemed desirable by the President
and State Board. Provision shall be made for persons of high competence and strong professional
experience in such areas as academic affairs, public service programs, business and financial
affairs, institutional studies and long -range planning, student affairs, research, legal affairs,
health affairs and institutional development, and for State and federal programs administered by
the State Board. In addition, the President shall be assisted by such other employees as may be
needed to carry out the provisions of this Chapter, who shall be subject to the provisions of
Chapter 126 Chapter 126A of the General Statutes. The staff complement shall be established by
the State Board on recommendation of the President to insure that there are persons on the staff
who have the professional competence and experience to carry out the duties assigned and to
insure that there are persons on the staff who are familiar with the problems and capabilities of
all of the principal types of institutions represented in the system."
SECTION 4.33. G.S. 116-14(b) reads as rewritten:
"(b) The President shall be assisted by such professional staff members as may be deemed
necessary to carry out the provisions of this Article, who shall be elected by the Board on
nomination of the President. The Board shall fix the compensation of the staff members it elects.
These staff members shall include a senior vice -president and such other vice -presidents and
officers as may be deemed desirable. Provision shall be made for persons of high competen ce
and strong professional experience in such areas as academic affairs, public service programs,
business and financial affairs, institutional studies and long -range planning, student affairs,
research, legal affairs, health affairs and institutional deve lopment, and for State and federal
programs administered by the Board. In addition, the President shall be assisted by such other
employees as may be needed to carry out the provisions of this Article, who shall be subject to
the provisions of Chapter 126 Chapter 126A of the General Statutes. The staff complement shall
be established by the Board on recommendation of the President to insure that there are persons
on the staff who have the professional competence and experience to carry out the duties assigned
and to insure that there are persons on the staff who are familiar with the problems and
capabilities of all of the principal types of institutions represented in the system. Subject to
approval by the Board, the President may establish and abolish employment positions within the
staff complement authorized by this subsection in the manner of and under the conditions
prescribed by G.S. 116-30.4 for special responsibility constituent institutions."
SECTION 4.34. G.S. 116-30.4 reads as rewritten:
"§ 116-30.4. Position management.

Page 60 Session Law 2026-40 Senate Bill 1041
The Chancellor of a special responsibility constituent institution, when he finds that to do so
would help to maintain and advance the programs and services of the institution, may establish
and abolish positions, acting in accordance with:
(1) State personnel policies and procedures if these positions are subject to the
North Carolina Human Resources Act and if the institution is operating under
the terms of a Performance Agreement or a Decentralization Agreement
authorized under Chapter 126 Chapter 126A of the General Statutes; or
(2) Policies and procedures of the Board of Governors if these positions are
exempt from the North Carolina Human Resources Act.
The results achieved by establishing and abolishing positions pursuant to the conditions set forth
in subdivision (1) of this section shall be subject to postauditing by the Office of State Human
Resources. Implementation of personnel actions shall be subject to the availability of funds
within the institution's current budget to fund the full annualized costs of these actions."
SECTION 4.35. G.S. 116-33.2 reads as rewritten:
"§ 116-33.2. Cooperative Extension Service employees.
The Board of Trustees of North Carolina State University shall adopt personnel policies
governing the employment of the employees of the North Carolina Cooperative Extension
Service who are exempted from certain provisions of Chapter 126 Chapter 126A of the General
Statutes pursuant to G.S. 126-5(c1)(9a).G.S. 126A-15.2."
SECTION 4.36. G.S. 116-37.3(b) reads as rewritten:
"(b) Personnel. – Employees of UNC -CH Dental School Clinical Operations shall be
deemed to be employees of the State and shall be subject to all relevant provisions of State law
relevant thereto; provided, however, that except as to the provisions of Articles 5, 6, 7, and 14 of
Chapter 126 of the General law. Except as provided in Part 3 of Article 1 of Chapter 126A of the
General Statutes Statutes, the North Carolina Human Resources Act shall not apply to employees
of UNC-CH Dental School Clinical Operations, and the policies and procedures governing the
terms and conditions of employment of such employees shall be adopted by the Board of Trustees
of the University of North Carolina at Chapel Hill; provided, that with Hill. With respect to such
employees as may be members of the faculty of the University of North Carolina at Chapel Hill,
no such policies and procedures may be inconsistent with policies established by, or adopted
pursuant to delegation from, the Board of Governors of The University of North Carolina. Such
These policies and procedures shall be implemented on behalf of UNC -CH Dental School
Clinical Operations by a personnel office maintained by the University of North Carolina at
Chapel Hill. The following provisions apply:
(1) The board of trustees shall fix or approve the schedules of pay, expense
allowances, and other compensation, and adopt position classification plans
for employees of UNC-CH Dental School Clinical Operations.
(2) The board of trustees may adopt or provide for rules and regulations
concerning, but not limited to, annual leave, sick leave, special leave with full
pay, or with partial pay supplementing workers' compensation payments for
employees injured in accidents arising out of and in the course of employment,
working conditions, service awards, and incentive award programs, grounds
for dismissal, demotion, or discipline, other personnel policies, and any other
measures that promote the hiring and retention of capable, diligent, and
effective career employees. However, an employee who has achieved was
appointed as a career State employee status employee, as defined by
G.S. 126-1.1 G.S. 126A-2, by June 30, 2022, shall not have his or her
compensation reduced as a result of this subdivision. Further, an employee
who has achieved was appointed as a career State employee status employee,
as defined by G.S. 126-1.1 G.S. 126A-2, by June 30, 2022, shall be subject to
the rules regarding discipline or discharge that were effective on June 30,

Senate Bill 1041 Session Law 2026-40 Page 61
2022, and shall not be subject to the rules regarding discipline or discharge
adopted after June 30, 2022.
(3) The board of trustees may prescribe the office hours, workdays, and holidays
to be observed by the various offices and departments of UNC -CH Dental
School Clinical Operations.
(4) The board of trustees may establish boards, committees, or councils to conduct
hearings upon the appeal of employees who have bee n suspended, demoted,
otherwise disciplined, or discharged, to hear employee grievances, or to
undertake any other duties relating to personnel administration that the board
of trustees may direct.
The board of trustees shall submit all initial classification and pay plans, and other rules and
regulations adopted pursuant to subdivisions (1) through (4) of this subsection, to the Office of
State Human Resources for review upon adoption by the board. Any subsequent changes to these
plans, rules, and policies adopted by the board shall be submitted to the Office of State Human
Resources for review. Any comments by the Office of State Human Resources shall be submitted
to the Chancellor of the University of North Carolina at Chapel Hill and the President of The
University of North Carolina."
SECTION 4.37. G.S. 116-239.10 reads as rewritten:
"§ 116-239.10. Employees.
The chancellor shall appoint all licensed and nonlicensed staff in accordance with the
following:
…
(8) Exemptions. – Employees of the constituent institution shall be exempt from
Chapter 126 Chapter 126A of the General Statutes, except Articles 6 and
7.Articles 15 and 16.
(9) Paid parental leave. – Teachers employed by the board of the constituent
institution shall be eligible for paid parental leave as provided in G.S. 126-8.6.
G.S. 126A-71. The constituent institution shall be eligible to receive funds as
provided in G.S. 115C-336.1(b)."
SECTION 4.38. G.S. 116-350.30(a) reads as rewritten:
"(a) Employment Authority. – The System may employ a workforce to conduct its
operations. Employees who are employed directly by the System, and not by a System affiliate,
are State employees whose terms and conditions of employment, including benefit plans and
programs, are determined by the Board. Only Articles 5, 6, 7, and 14 of Chapter 126 of the
General Statutes, Except as provided in Part 3 of Article 1 of Chapter 126A of the General
Statutes, the State North Carolina Human Resources Act, Act shall not apply to these State
employees. The Board of the System may authorize the System to employ the faculty and staff
of the University of North Carolina School of Medicine as well as other health affairs schools
and components of the University of North Caroli na at Chapel Hill subject to the provisions of
this subsection, provided that any employees who are faculty members shall remain subject to
the faculty policies of the University of North Carolina at Chapel Hill, as established or adopted
pursuant to delegation from the Board of Governors of The University of North Carolina. A State
employee employed by the System immediately prior to January 1, 2024, has the right to (i)
continued State employment if the employee remains in the employee's current role or p osition,
unless terminated in accordance with the terms of employment that existed immediately prior to
January 1, 2024, subject to all relevant provisions of State and federal law and (ii) continued
participation in the State Teachers' and State Employees' Retirement System if the employee was
enrolled in the Retirement System immediately prior to January 1, 2024, and maintains State
employee status."
SECTION 4.39. G.S. 116-360.5(2) is repealed.
SECTION 4.40. G.S. 116-360.15(b) reads as rewritten:

Page 62 Session Law 2026-40 Senate Bill 1041
"(b) Certain Career State Employees. – Notwithstanding subsection (a) of this section, all
of the following applies:
(1) For employees of the Medical Faculty Practice Plan. – The compensation of a
State employee who achieved was appointed as a career State employee status
employee, as defined by G.S. 126A-2, by October 31, 1998, shall not be
reduced as a result of this section and that employee shall (i) remain subject
to the rules regarding discipline or discharge that were effective on October
31, 1998, and (ii) not be subject to the rules regarding discipline or discharge
adopted after that date.
(2) For employees of the ECU Dental School Clinical Operations. – The
compensation of a State employee who achieved was appointed as a career
State employee status employee, as defined by G.S. 126A-2, by June 30, 2022,
shall not be reduced as a result of this section and that employee shall (i)
remain subject to the rules regarding discipline or discharge that were
effective on June 30, 2022, and (ii) not be subject to the rules regarding
discipline or discharge adopted after that date."
SECTION 4.41. G.S. 120-86.1 reads as rewritten:
"§ 120-86.1. Personnel-related action unethical.
It shall be unethical for a legislator to take, promise, or threaten any legislative action, as
defined in G.S. 120C-100(9), for the purpose of influencing or in retaliation for any action
regarding State employee hirings, promotions, grievances, or disciplinary actions subject to
Chapter 126 Chapter 126A of the General Statutes."
SECTION 4.42. G.S. 122C-112.1(b)(6) reads as rewritten:
"(6) Notwithstanding G.S. 126-18, G.S. 126A-52, authorize funds for contracting
with a person, firm, or corporation for aid or assistance in locating, recruiting,
or arranging employment of health care professionals in any facility listed in
G.S. 122C-181."
SECTION 4.43. G.S. 122C-121(a1) reads as rewritten:
"(a1) The area board shall establish the area director's salary under Article 3 of Chapter 126
Article 12 of Chapter 126A of the General Statutes. Notwithstanding G.S. 126-9(b),
G.S. 126A-120, an area director may be paid a salary that is in excess of the salary ranges
established by the State Human Resources Commission. Any salary that is higher than the
maximum of the applicable salary range shall be supported by documentation of comparable
salaries in comparable operations within the region and shall also include the specific amount the
board proposes to pay the director. The area board shall not authorize any salary adjustment that
is above the normal allowable salary range without obtaining prior approval from the Director of
the Office of State Human Resources."
SECTION 4.44. G.S. 122C-154 reads as rewritten:
"§ 122C-154. Personnel.
Employees under the direct super vision of the area director are employees of the area
authority. For the purpose of personnel administration, Chapter 126 Chapter 126A of the General
Statutes applies unless otherwise provided in this Article. Notwithstanding G.S. 126-9(b),
G.S. 126A-120, an employee of an area authority may be paid a salary that is in excess of the
salary ranges established by the State Human Resources Commission. Any salary that is higher
than the maximum of the applicable salary range shall be supported by documentation of
comparable salaries in comparable operations within the region and shall also include the specific
amount the board proposes to pay the employee. The area board shall not authorize any salary
adjustment that is above the normal allowable salary range without obtaining prior approval from
the Director of the Office of State Human Resources."
SECTION 4.45. G.S. 122C-156(a) reads as rewritten:

Senate Bill 1041 Session Law 2026-40 Page 63
"(a) The area authority shall establish a salary plan which shall set the salaries for
employees of the area authority. The salary plan shall be in compliance with Chapter 126 Chapter
126A of the General Statutes. In a multi-county area, the salary plan shall not exceed the highest
paying salary plan of any county in that area. In a single -county area, the salary plan shall not
exceed the county's salary plan. The salary plan limitations set forth in this section may be
exceeded only if the area authority and the board or boards of county commissioners, as the case
may be, jointly agree to exceed these limitations."
SECTION 4.46. G.S. 122C-191(b) reads as rewritten:
"(b) Each area authority and State facility shall comply with the rules of the Commission
regarding quality assurance activities, including: program evaluation; utilization and peer review;
and staff qualif ications, privileging, supervision, education, and training. These rules may not
nullify compliance otherwise required by Chapter 126 Chapter 126A of the General Statutes."
SECTION 4.47. G.S. 122C-270(f) reads as rewritten:
"(f) The Attorney General may employ four attorneys, one to be assigned by him full-time
to each of the State facilities for the mentally ill, to represent the State's interest at commitment
hearings, rehearings and supplemental hearings held under this Article at the State facilities f or
respondents admitted to those facilities pursuant to Part 3, 4, 7, or 8 of this Article or
G.S. 15A-1321 and to provide liaison and consultation services concerning these matters. These
attorneys are subject to Chapter 126 Chapter 126A of the General Statutes and shall also perform
additional duties as may be assigned by the Attorney General. The attorney employed by the
Attorney General in accordance with G.S. 114-4.2B shall represent the State's interest at
commitment hearings, rehearings and supplem ental hearings held for respondents admitted to
the University of North Carolina Hospitals at Chapel Hill pursuant to Part 3, 4, 7, or 8 of this
Article or G.S. 15A-1321."
SECTION 4.48. G.S. 128-15(d) reads as rewritten:
"(d) The provisions of this section shall be subject to the provisions of Article 1 of Chapter
165 of the General Statutes, G.S. 126-83, Statutes and Parts 13 and 19 of Article 9 of Chapter
143B of the General Statutes. Exempt policymaking employees and designated employees of
policymakers, statutorily exempt employees, State employees compensated as teachers, as
defined in Chapter 126A of the General Statutes , employees of the legislative and judicial
branches, and employees covered by G.S. 126A-15.1(b) are subject to this statute."
SECTION 4.49. G.S. 128-24(6) reads as rewritten:
"(6) Employees of a sending agency participating in an intergovernmental
exchange of personnel under the provisions of Article 10 of Chapter 126 Part
2 of Article 5 of Chapter 126A of the General Statutes shall remain members
entitled to all benefits of the Retirement System provided that the
requirements of Article 10 of Chapter 126 Part 2 of Article 5 of Chapter 126A
of the General Statutes are met. A member may retain membership status
while serving as a n assigned employee or employee on leave under the
provisions of Article 10 of Chapter 126 Part 2 of Article 5 of Chapter 126A
of the General Statutes for purposes of receiving the death benefit and, if
applicable, benefits under the Death Benefit Plan reg ardless of whether the
member and the member's employer are contributing to the member's account
during the exchange period, except that no duplicate benefits shall be paid."
SECTION 4.50. G.S. 128-33.1(a) reads as rewritten:
"(a) The following definitions apply in this section:
(1) Employment-related information. – As defined in
G.S. 126-22(b)(3).G.S. 126A-161.
(2) Personal information. – As defined in G.S. 126-22(b)(3).G.S. 126A-161.

Page 64 Session Law 2026-40 Senate Bill 1041
(3) Retirement file. – Any employment -related, retirement -related, or personal
information of members in a State -administered retirement plan gathered by
the Retirement Systems Division of the Department of State Treasurer.
(4) Retirement-related information. – Information including membership and
service details, benefit pa yment information, and other information the
Retirement Systems Division of the Department of State Treasurer deems
necessary to administer a retirement plan."
SECTION 4.51. G.S. 130A-41(b)(12) reads as rewritten:
"(12) To employ and dismiss employees of the local health department in
accordance with Chapter 126 Chapter 126A of the General Statutes; and"
SECTION 4.52. G.S. 130A-45.12 reads as rewritten:
"§ 130A-45.12. Personnel.
Employees under the supervision of the public health authority director are employees of the
public health authority and shall be exempt from Chapter 126 Chapter 126A of the General
Statutes, unless otherwise provided in this Part."
SECTION 4.53. G.S. 132-1.4A(b) reads as rewritten:
"(b) Public Record and Personnel Record Classification. – Recordings are not public
records as defined by G.S. 132-1. Recordings are not personnel records as defined in Part 7 of
Chapter 126 Article 16 of Chapter 126A of the General Statutes, G.S. 160A-168, or
G.S. 153A-98."
SECTION 4.54. G.S. 135-3(c) reads as rewritten:
"(c) Members who are participating in an intergovernmental exchange of personnel under
the provisions of Article 10 of Chapter 126 Part 2 of Article 5 of Ch apter 126A of the General
Statutes may retain their membership status and receive all benefits provided by this Chapter
during the period of the exchange provided the requirements of Article 10 of Chapter 126 Part 2
of Article 5 of Chapter 126A of the Gene ral Statutes are met. A member participating in an
intergovernmental exchange of personnel under Article 10 of Chapter 126 Part 2 of Article 5 of
Chapter 126A of the General Statutes shall, notwithstanding whether the member and the
member's employer are m aking contributions to the member's account during the exchange
period, be entitled to the death benefit and, if applicable, benefits under the Death Benefit Plan
under Article 8 of this Chapter, if the member otherwise qualifies under the provisions of th is
Article, except that no duplicate benefits shall be paid."
SECTION 4.55. G.S. 135-5.1(a)(3) reads as rewritten:
"(3) Nonfaculty instructional and research staff who are exempt from the North
Carolina Human Resources Act, as defined by the provisions of
G.S. 126-5(c1)(8), Part 3 of Article 1 of Chapter 126A of the General Statutes,
and the faculty of the North Carolina School of Science and Mathematics."
SECTION 4.56. G.S. 135-6.1(a) reads as rewritten:
"(a) The following definitions apply in this section:
(1) Employment-related information. – As defined in
G.S. 126-22(b)(3).G.S. 126A-161.
(2) Personal information. – As defined in G.S. 126-22(b)(3).G.S. 126A-161.
(3) Retirement file. – Any employment -related, retirement -related, or personal
information of members in a State -administered retirement plan gathered by
the Retirement Systems Division of the Department of State Treasurer.
(4) Retirement-related information. – Information including membership and
service details, benefit payment inf ormation, and other information the
Retirement Systems Division of the Department of State Treasurer deems
necessary to administer a retirement plan."
SECTION 4.57. G.S. 135-48.23 reads as rewritten:
"§ 135-48.23. Executive Administrator.

Senate Bill 1041 Session Law 2026-40 Page 65
(a) The Plan sh all have an Executive Administrator. The Executive Administrator
position is exempt from the provisions of Chapter 126 Chapter 126A of the General Statutes as
provided in G.S. 126-5(c1).G.S. 126A-15.2.
…."
SECTION 4.58. G.S. 136-4 reads as rewritten:
"§ 136-4. Chief Engineer.
There shall be a Chief Engineer, who shall be a career official and who shall be the
administrative officer of the Department of Transportation for highway matters. For purposes of
this section, the term "highway matters" includes p lanning, design, construction, maintenance,
operations, procurements, agreements, delivery methods, standards, and specifications for
current and future State -maintained roads. The Chief Engineer shall be appointed by the
Secretary of Transportation and he or she may be removed at any time by the Secretary of
Transportation. He or she shall be paid a salary to be set in accordance with Chapter 126 Chapter
126A of the General Statutes, the North Carolina Human Resources Act. The Chief Engineer
shall have suc h powers and perform such duties as the Secretary of Transportation shall
prescribe."
SECTION 4.59. G.S. 138A-3(70) reads as rewritten:
"(70) Public servants. – All of the following:
…
e. Confidential assistants and secretaries as defined in G.S. 126-5(c)(2),
G.S. 126A-15, to individuals designated under sub -subdivision a., c.,
or d. of this subdivision.
f. Employees in exempt positions designated in accordance with
G.S. 126-5(d)(1), (2), or (2a) G.S. 126A-15.4 and confidential
secretaries to these individuals.
…."
SECTION 4.60. G.S. 138A-12 reads as rewritten:
"§ 138A-12. Inquiries by the Commission.
…
(c) Institution of Proceedings. – On its own motion, in response to a signed and sworn,
under oath or affirmation, complaint of any registered voter filed with the Commission, or upon
the written request of any public servant or those responsible for the hiring, appointing, or
supervising of a public servant, the Commission shall conduct an inquiry into any of the
following:
(1) The application or alleged violation of this Chapter.
(2) For legislators, the application or alleged violations of Part 1 of Article 14 of
Chapter 120 of the General Statutes.
(3) An alleged violation of the criminal law by a covered person in the
performance of that individual's official duties.
(4) An alleged violation of G.S. 126-14.G.S. 126A-101.
Upon receipt of a referral under G.S. 147-64.6B or a report under G.S. 147-64.6(c)(19), the
Commission may conduct an inquiry under this section on its own motion. Allegations of
violations of the Code of Judicial Conduct shall be referred to the Judicial Standards Commission
without investigation.
…
(e) Complaint. –
(1) A sworn complaint filed under this Chapter shall state the name, address, and
telephone number of the individual filing the complaint, the name and job title
or appointive position of the covered person or legislative employee against
whom the complaint is filed, and a concise statement of the nature of the
complaint and specific facts indicating that a violatio n of this Chapter or

Page 66 Session Law 2026-40 Senate Bill 1041
Chapter 120 of the General Statutes or G.S. 126-14 G.S. 126A-101 or the
criminal law in the performance of that individual's official duties has
occurred, the date the alleged violation occurred, and either (i) that the
contents of the complaint are within the knowledge of the individual verifying
the complaint, or (ii) the basis upon which the individual verifying the
complaint believes the allegations to be true.
…."
SECTION 4.61. G.S. 143-202.4 reads as rewritten:
"§ 143-202.4. Roanoke Island Festival Park staff.
The Association shall serve as a search committee to seek out, interview, and recommend to
the Secretary of Natural and Cultural Resources an Executive Director of Roanoke Island Festival
Park. All Festival Park staff shall be considered employees of the Department of Natural and
Cultural Resources and shall be paid from the Historic Roanoke Island Fund as provided in
G.S. 143-202.3. Except as otherwise provided in this section, or G.S. 126-5, Part 3 of Article 1
of Chapter 126A of the General Statutes , these employees shall retain the same designations
under the North Carolina Human Resources Act, Chapter 126 Chapter 126A of the General
Statutes, as they had prior to the transfer."
SECTION 4.62. G.S. 143-300.35(a) reads as rewritten:
"(a) The sovereign immunity of the State is waived for the limited purpose of allowing
State employees, except for those in exempt policy-making positions designated pursuant to G.S.
126-5(d), G.S. 126A-15.4, to maintain lawsuits in State and federal courts and obtain and satisfy
judgments against the State or any of its departments, institutions, or agencies under:
(1) The Fair Labor Standards Act, 29 U.S.C. § 201, et seq.
(2) The Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq.
(3) The Family and Medical Leave Act, 29 U.S.C. § 2601, et seq.
(4) The Americans with Disabilities Act, 42 U.S.C. § 12101, et seq."
SECTION 4.63. G.S. 143-554(a) reads as rewritten:
"(a) Any employee or former employee of an employing entity within the m eaning of
G.S. 143-552(1)a whose employment is terminated pursuant to the provisions of this Part shall
be given the opportunity to appeal the employment termination to the State Human Resources
Commission according to the normal appeal and hearing procedu res provided by Chapter 126
Chapter 126A of the General Statutes and the State Human Resources Commission rules adopted
pursuant to the authority of that Chapter; however, nothing herein shall be construed to give the
right to termination reviews to anyone exempt from that right under G.S. 126-5.Part 3 of Article
1 of Chapter 126A of the General Statutes."
SECTION 4.64. Article 63 of Chapter 143 of the General Statutes is repealed.
SECTION 4.65. G.S. 143-652.2(f) reads as rewritten:
"(f) Staff Assistance. – The Commission shall hire a person to serve as Executive Director
of the Commission. If necessary, the Executive Director may train and contract with independent
contractors for the purpose of regulating and monitoring events, issuing licenses, collecting fees,
and enforcing rules of the Commission. The Executive Director may initiate and review criminal
background checks on persons requesting to work as independent contractors for the Commission
or persons applying to be licensed by the Commission. The Commission may also hire additional
staff. The Executive Director is exempt from provisions of the North Carolina Human Resources
Act as provided by G.S. 126-5. G.S. 126A-15.2. All other staff of the Commission are subject to
the North Carolina Human Resources Act."
SECTION 4.66. G.S. 143-728(e) reads as rewritten:
"(e) Benefits. – An officer, employee, or member of a governing board of NCInnovation
is not a State employee, is not covered by Chapter 126 Chapter 126A of the General Statutes,
and is not entitled to State-funded employee benefits, including membership in the Teachers' and

Senate Bill 1041 Session Law 2026-40 Page 67
State Employees' Retirement System and the State Health Plan for Teachers and State
Employees."
SECTION 4.67. G.S. 143-747(a1) reads as rewritten:
"(a1) The Council shall hire an Executive Director as selected by a majority of the Council.
The Executive Director shall serve at the will of the Council and be exempt from the provisions
of the North Carolina Human Resources Act under Chapter 126 Chapter 126A of the General
Statutes."
SECTION 4.68. G.S. 143B-53.2(c) reads as rewritten:
"(c) The exemptions to Chapter 126 Chapter 126A of the General Statutes authorized by
G.S. 126-5(c11) G.S. 126A-15.2 for the employees of the Department of Natural and Cultural
Resources listed in that subsection section shall be used to develop organizational classification
and compensation innovations that will result in the enhanced efficiency of operations. The
Office of State Human Resources shall assist the Secretary of Natural and Cultural Resources in
the development and implementation of an organizational structure and human resources
programs that make the most appropriate use of the exemptions, including (i) a system of job
categories or descriptions tailored to the agency's needs; (ii) policies regarding paid time off for
agency personn el and the voluntary sharing of such time off; and (iii) a system of uniform
performance assessments for agency personnel tailored to the agency's needs. The Secretary of
Natural and Cultural Resources may, under the supervision of the Office of State Huma n
Resources, develop and implement organizational classification and compensation innovations
having the potential to benefit all State agencies."
SECTION 4.69. G.S. 143B-168.12(a)(2) reads as rewritten:
"(2) The North Carolina Partnership and the local partnerships shall agree to adopt
procedures for its operations that are comparable to those of Article 33C of
Chapter 143 of the General Statutes, the Open Meetings Law, and Chapter
132 of the General Statutes, the Public Records Law, and provide for
enforcement by the Department. The procedures may provide for the
confidentiality of personnel files comparable to Article 7 Article 16 of Chapter
126 Chapter 126A of the General Statutes."
SECTION 4.70. G.S. 143B-168.14(a)(2) reads as rewritten:
"(2) Each local partnership shall agree to adopt procedures for its operations that
are comparable to those of Article 33C of Chapter 143 of the General Statutes,
the Open Meetings Law, and Chapter 132 of the General Statutes, the Public
Records Law, and provid e for enforcement by the Department. The
procedures may provide for the confidentiality of personnel files comparable
to Article 7 of Chapter 126 Article 16 of Chapter 126A of the General
Statutes."
SECTION 4.71. G.S. 143B-216.70(b) reads as rewritten:
"(b) Under the direction of the Secretary of Health and Human Services, the Director of
the Office of Policy and Planning shall have the authority to direct Divisions, offices, and
programs within the Department to conduct periodic reviews of policies, pla ns, and rules and
shall advise the Secretary when it is determined to be appropriate or necessary to modify, amend,
and repeal departmental policies, plans, and rules. All policy and management positions within
the Office of Policy and Planning are exempt positions as that term is defined in G.S. 126-5.as
provided in Part 3 of Article 1 of Chapter 126A of the General Statutes."
SECTION 4.72. G.S. 143B-216.80(b)(1) reads as rewritten:
"(1) Employees of the Division of Health Benefits shall not be subject to the North
Carolina Human Resources Act, except as provided in
G.S. 126-5(c1)(33).G.S. 126A-15.2."
SECTION 4.73. G.S. 143B-394.2(a) reads as rewritten:

Page 68 Session Law 2026-40 Senate Bill 1041
"(a) The office of Coordinator of Services for Victims of Sexual Assault is hereby created
in the Department of Administration. The office shall be under the direction and supervision of
a full-time salaried State employee who shall be designated as the State Coordinator. The State
Coordinator shall be appointed by the Secretary of the Department of Ad ministration and shall
receive a salary commensurate with State government pay schedules for the duties of this office,
or such salary to be set by the State Human Resources Commission pursuant to G.S. 126-4.
Article 4 of Chapter 126A of the General Statutes. Necessary travel allowance or reimbursement
for expenses shall be authorized for the State Coordinator in accordance with G.S. 138-6.
Sufficient clerical staff shall be provided under the direction of the Secretary of the Department
of Administration."
SECTION 4.74. G.S. 143B-431.01(j) reads as rewritten:
"(j) Benefits. – An officer, employee, or member of a governing board of a North Carolina
nonprofit corporation with which the Department contracts pursuant to this section is not a State
employee, is not covered by Chapter 126 Chapter 126A of the General Statutes, and is not entitled
to State-funded employee benefits, including membership in the Teachers' and State Employees'
Retirement System and the State Health Plan for Teachers and State Employees."
SECTION 4.75. G.S. 143B-1209.11(f) reads as rewritten:
"(f) The Bureau may provide a criminal record check to the schools within the Department
of Health and Human Services of a person who is employed, applies for employment, or applies
to be selected as a volunteer, if the employee or applicant consents to the record check. The
Department of Health and Human Services shall keep all information pursuant to this subsection
confidential, as provided in Article 7 Article 16 of Chapter 126 Chapter 126A of the General
Statutes."
SECTION 4.76. G.S. 143B-1212 reads as rewritten:
"§ 143B-1212. Personnel of the Department of Military and Veterans Affairs.
Notwithstanding G.S. 114-2.3, the Secretary of Military and Veterans Affairs shall have the
power to appoint all employees, including consultants and legal counsel, necessary to carry out
the powers and duties of the office. These employees shall be subject to the North Carolina
Human Resources Act, except that employees in positions designated as exempt under G.S.
126-5(d)(1) G.S. 126A-15.4 are not subject to the Act, in accordance with the provisions of that
section."
SECTION 4.77. G.S. 143B-1322(b) reads as rewritten:
"(b) Departmental Personnel. – The State CIO may appoint one or more deputy State
CIOs, each of whom shall be under the direct supervision of the State CIO. The salaries of the
deputy State CIOs shall be set by the State CIO. The State CIO and the Deputy State CIOs are
exempt from the North Carolina Human Resources Act. Subject to the approval of the Governor
and limitations of the G.S. 126-5, Part 3 of Article 1 of Chapter 126A of the General Statutes,
the State CIO may appoint or designate additional managerial and policy making positions,
including, but not limited to, the Department's chief financial officer and general counsel, each
of whom shall be exempt from the North Carolina Human Resources Act."
SECTION 4.78. G.S. 143C-6-10 reads as rewritten:
"§ 143C-6-10. Flexible compensation plan.
Notwithstanding any other provision of law, the Director may establish a program of
dependent care assistance and a flexible compensation plan for eligible officers and employees
of State agencies as provided in G.S. 126-95. G.S. 126A-76. With the approval of the Director,
savings in the employer's share of contributions under the Federal Insurance Contributions Act
on account of the reduction in salary may also be used as provided by G.S.
126-95.G.S. 126A-76."
SECTION 4.79. G.S. 147-64.6(d) reads as rewritten:
"(d) Reports and Work Papers. – The Auditor shall maintain for 10 years a complete file
of all audit reports and reports of other examinations, investigations, surveys, and reviews issued

Senate Bill 1041 Session Law 2026-40 Page 69
under the Auditor's auth ority. Audit work papers and other evidence and related supportive
material directly pertaining to the work of the Auditor's office shall be retained according to an
agreement between the Auditor and State Archives. To promote intergovernmental cooperation
and avoid unnecessary duplication of audit effort, and notwithstanding the provisions of
G.S. 126-24, G.S. 126A-163, pertinent work papers and other supportive material related to an
audit or investigation made pursuant to this section may be, at the discretion of the Auditor and
unless otherwise prohibited by law, made available for inspection by duly authorized
representatives of the State and federal government who desire access to and inspection of the
records in connection with some matter officially before them, including criminal investigations.
Except as provided in this section, or upon an order issued in Wake County Superior Court
upon 10 days' notice and hearing finding that access is necessary to a proper administration of
justice, audit wor k papers and related supportive material are confidential, including any
interpretations, advisory opinions, or other information or materials furnished to or by the State
Ethics Commission under this section."
SECTION 4.80. G.S. 147-65.2 reads as rewritten:
"§ 147-65.2. Salary of State Treasurer and certain Department employees.
(a) State Treasurer. – The salary of the State Treasurer shall be as established in the
Current Operations Appropriations Act. In addition to the salary set by the General Assembly in
the Current Operations Appropriations Act, longevity pay shall be paid on the same basis as is
provided to employees of the State who are subject to the North Carolina Human Resources Act.
(b) Certain Departmental Employees. – The State Treasurer is authorized to establish,
consistent with the duties of the State Treasurer as prescribed by law, market -oriented
compensation plans, including salaries and performance -related bonuses, for employees
possessing specialized skills or knowledge necessary for the proper administration of investment
programs. In accordance with G.S. 126-5(c12), G.S. 126A-15.2, these employees are exempt
from the classification and compensation rules established by the Office of State Human
Resources. The design and administratio n of those compensation plans shall be based on
compensation studies conducted by a nationally recognized firm specializing in public fund
investment compensation. The compensation and other associated employee benefits shall be
apportioned and paid equita bly among the funds and programs utilizing the services of these
employees in a manner prescribed by the State Treasurer. The Treasurer shall report the salaries
and bonuses paid to the Joint Legislative Oversight Committee on General Government
annually."
SECTION 4.81. G.S. 147-72.1(c) reads as rewritten:
"(c) Employment of Staff. – The Chief Investment Officer shall employ staff necessary to
assist the CIO and the Board of Directors in carrying out duties and responsibilities under this
Article or as prescribed in any other law. Unless otherwise provided by law, Investment Authority
employees shall serve at the pleasure of the CIO and any vacancies in these positions may be
filled by the CIO. The CIO may designate managerial, professional, and policy-making positions
as exempt from the North Carolina Human Resources Act, in accordance with G.S. 126-5(c1).
G.S. 126A-15.2. Compensation of employees is set by the CIO within the limits set by the
compensation plan approved by the Board of Directors under G.S. 147-71.2."
SECTION 4.82. G.S. 148-118.8(a) reads as rewritten:
"(a) The Grievance Resolution Board, in consultation with the Secretary of the
Department of Adult Correction, shall provide the Governor with at least three nominees, and
the Governor sh all appoint an Executive Director from those nominees. The Grievance
Resolution Board shall appoint grievance examiners. The Executive Director shall manage the
staff and perform such other functions as are assigned to the Director by the Grievance Resolution
Board. The Executive Director shall serve at the pleasure of the Governor. The grievance
examiners shall serve at the pleasure of the Grievance Resolution Board. The grievance
examiners shall be subject to Article 2 of Chapter 126 Articles 4 and 7 of Chapter 126A of the

Page 70 Session Law 2026-40 Senate Bill 1041
North Carolina General Statutes for purposes of salary and leave. Support staff, equipment, and
facilities for the Board shall be provided by the Department of Adult Correction."
SECTION 4.83. G.S. 150B-23(a) reads as rewritten:
"(a) A contested case shall be commenced by paying a fee in an amount established in
G.S. 150B-23.2 and by filing a petition with the Office of Administrative Hearings and, except
as provided in Article 3A of this Chapter, shall be conducted by that Office. The party that files
the petition shall serve a copy of the petition on all other parties and, if the dispute concerns a
license, the person that holds the license. A party that files a petition shall file a certificate of
service together with the petition. A petition shall be signed by a party, an attorney representing
a party, or other representative of the party as may specifically be authorized by law, and, if filed
by a party other than an agency, shall state facts tending to establish that the agency nam ed as
the respondent has deprived the petitioner of property, has ordered the petitioner to pay a fine or
civil penalty, or has otherwise substantially prejudiced the petitioner's rights and that the agency
did any of the following:
(1) Exceeded its authority or jurisdiction.
(2) Acted erroneously.
(3) Failed to use proper procedure.
(4) Acted arbitrarily or capriciously.
(5) Failed to act as required by law or rule.
The parties in a contested case shall be given an opportunity for a hearing without undue
delay. Any person aggrieved may commence a contested case under this section.
A local government employee, applicant for employment, or former employee to whom
Chapter 126 Chapter 126A of the General Statutes applies may commence a contested case under
this Article in the same manner as any other petitioner. The case shall be conducted in the same
manner as other contested cases under this Article.
A business entity may represent itself using a nonattorney representative who is one or more
of the following o f the business entity: (i) officer, (ii) manager or member -manager, if the
business entity is a limited liability company, (iii) employee whose income is reported on IRS
Form W-2, if the business entity authorizes the representation in writing, or (iv) own er of the
business entity, if the business entity authorizes the representation in writing and if the owner's
interest in the business entity is at least twenty-five percent (25%). Authority for and prior notice
of nonattorney representation shall be made in writing, under penalty of perjury, to the Office on
a form provided by the Office."
SECTION 4.84. G.S. 150B-25.1(c) reads as rewritten:
"(c) The burden of showing by a preponderance of the evidence that a career State
employee subject to Chapter 126 Chapter 126A of the General Statutes was discharged,
suspended, or demoted for just cause rests with the agency employer."
SECTION 4.85. G.S. 150B-33(b)(11) reads as rewritten:
"(11) Order the assessment of reasonable attorneys' fees and witnesses' fees against
the State agency involved in contested cases decided under this Article where
the administrative law judge finds that the State agency named as respondent
has substantially prejudiced the petitioner's rights and has acted arbitrarily or
capriciously o r under Chapter 126 Chapter 126A of the General Statutes
where the administrative law judge finds discrimination, harassment, or orders
reinstatement or back pay."
SECTION 4.86. G.S. 153A-92(b)(5) reads as rewritten:
"(5) The board of commissioners shall fix the salaries, allowances and other
compensation of county employees subject to the North Carolina Human
Resources Act according to the procedures set forth in Chapter 126. Chapter
126A of the General Statutes . The board may make these employees subject

Senate Bill 1041 Session Law 2026-40 Page 71
to a county position classification plan only as provided in Chapter
126.Chapter 126A of the General Statutes."
SECTION 4.87. G.S. 153A-439(b) reads as rewritten:
"(b) The policies adopted by the Board of Trustees of North Carolina State University and
North Carolina Agricultural and Technical State University, respectively, for the employees of
the North Carolina Cooperative Extension Service shall govern the employment of employees
exempted from certain provisions of Chapter 126 Chapter 126A of the General Statutes pursuant
to G.S. 126-5(c1)(9a). Part 3 of Article 1 of Chapter 126A of the General Statutes. The policies
adopted by the University of North Carolina Board of Governors and the employing constituent
institution shall govern the employment of employees of the North Carolina Cooperative
Extension Service exempted from certain provisions of Chapter 126 Chapter 126A of the General
Statutes pursuant to G.S. 126-5(c1)(8).Part 3 of Article 1 of Chapter 126A of the General
Statutes."
SECTION 4.88. G.S. 168A-10.1 reads as rewritten:
"§ 168A-10.1. Dispute resolution in public services discrimination cases.
The North Carolina Office on the Americans with Disabilities Act shall adopt rules to provide
a consistent and comprehensive mechanism for accommodating requests regarding accessibility
to public services, and shall adopt dispute resolution procedures to govern responsiveness to
those requests. This section does not authorize the North Carolina Office on the Americans with
Disabilities Act to adopt rules or procedures that apply to the resolution of matters constituting
grounds for a contested case under Chapter 126 Chapter 126A of the General Statutes."
SECTION 4.89. G.S. 169-13(b) reads as rewritten:
"(b) The Executive Director shall serve at the pleasure of the Council, with the position
being exempt from Chapter 126 Chapter 126A of the General Statutes, the State Human
Resources Act."
SECTION 4.90. Chapter 126 of the General Statutes is repealed.

PART V. CLARIFYING AND TRANSITION PROVISIONS

CLARIFICATIONS REGARDING GRIEVANCES/STATUS OF CERTAIN
EMPLOYEES/OTHER MATTERS
SECTION 5.1.(a) The provisions of Chapter 126 of the General Statutes that exist
on September 30, 2026, shall continue to govern all of the following:
(1) Any contested case pending before the State Human Resources Commission
or the Office of Administrative Hearings on the effective date of this act,
including any judicial review of such a case pending in the General Court of
Justice.
(2) Any grievance, disciplinary action, or appeal initiated under Chapter 126 of
the General Statutes prior to the effective date of this act that is not finally
resolved as of that date.
(3) Any claim for back pay, reinstatement, or other relief arising from
employment actions that occurred prior to the effective date of this act.
(4) Any right to career State employee status vested under G .S. 126-1.1 prior to
the effective date of this act.
(5) Any cause of action arising under Chapter 126 of the General Statutes that
accrued prior to the effective date of this act regardless of when the suit or
administrative action is initiated.
SECTION 5.1.(b) The following provisions apply only to employees hired on or
after October 1, 2026:
(1) G.S. 126A-10.1(a)(2), as enacted by this act.
(2) G.S. 126A-15.2(e), as enacted by this act.

Page 72 Session Law 2026-40 Senate Bill 1041
SECTION 5.1.(c) Employees designated under G.S. 126-5 on or before September
30, 2026, shall be designated as the following under Part 3 of Article 1 of Chapter 126A of the
General Statutes, as enacted by this act, effective October 1, 2026:
(1) Employees designated as confidential assistants or confidential secretaries are
automatically redesignated as designated employees of policymakers.
(2) Employees designated as exempt wardens are automatically redesignated as
exempt wardens.
(3) Employees designated as exempt policymaking employees are automatically
redesignated as exempt policymaking employees.
(4) Employees designated as exempt managerial employees are automatically
redesignated as exempt managerial employees.

SYSTEMATIC REVIEW OF RULES
SECTION 5.2.(a) If a provision of Chapter 126A of the General Statutes conflicts
with an existing rule in Title 25, Chapter 01 of the North Carolina Administrative Code, the
provisions of Chapter 126A of the General Statutes, as enacted by this act, shall control. This
subsection does not repeal any rule by operation of this act.
SECTION 5.2.(b) The State Human Resources Commission shall review rules in
Title 25, Chapter 01 of the North Carolina Administrative Code pursuant to G.S. 150B-21.5 and
repeal any rules it determines to be unnecessary after enactment of this act.

EFFECT ON AGREEMENTS AND PENDING LITIGATION
SECTION 5.3.(a) All decentralization agreements, delegation agreements, and
memoranda of understanding between the Office of State Human Resources and any a gency,
department, or institution in effect on September 30, 2026, shall remain in effect until modified
or terminated in accordance with the terms of those agreements or memoranda or superseded by
agreements executed under the authority of Chapter 126A of the General Statutes, as enacted by
this act.
SECTION 5.3.(b) No action or proceeding brought by or against the State Human
Resources Commission or the Office of State Human Resources, or against the State of North
Carolina concerning either the State Human Resources Commission or the Office of State Human
Resources, that is pending on October 1, 2026, shall be abated, suspended, or otherwise affected
by the enactment of this act. Any such action or proceeding shall be prosecuted or defended under
the law applicable at the time the action or proceeding was initiated, provided that nothing in this
subsection shall preclude any party from citing provisions for persuasive guidance where the
language of Chapter 126A of the General Statutes, as enacted by this act, and Chapter 126 of the
General Statutes as it exists on September 30, 2026, is identical or substantially identical.

CLASSIFICATION AND COMPENSATION ASSESSMENT
SECTION 5.4.(a) The Office of State Human Resources shall assess the State's
classification and compensation system and identify opportunities for improvement, consulting
with agencies and outside experts, as needed. By October 1, 2027, the Office of State Human
Resources shall report its findings and recommendations to the chairs of the Senat e
Appropriations/Base Budget Committee, the chairs of the House Appropriations Committee, the
Joint Legislative Commission on Governmental Operations pursuant to G.S. 120-36.7, and the
Fiscal Research Division.
SECTION 5.4.(b) By March 1, 2027, and annually thereafter, each executive branch
agency shall report the following information to the Office of State Human Resources, upon
request:
(1) The five job classifications most difficult to recruit and retain during the prior
fiscal year.

Senate Bill 1041 Session Law 2026-40 Page 73
(2) Actions taken t o address those challenges, including requests for
reclassification, pay adjustments, or other flexibilities from the Office of State
Human Resources.
(3) Whether existing classification or compensation policies constrained the
agency's ability to address those challenges, and if so, how.
SECTION 5.4.(c) The Office of State Human Resources shall incorporate trends and
recommended legislative actions from this assessment into the annual State of the State
workforce report required by G.S. 126A-24.
SECTION 5.4.(d) Following the initial assessment and review of agency data, the
Office of State Human Resources shall contemplate executing a pilot on classification and
compensation recommendations in one or more executive branch agencies that volunteer to
participate. The purpose of the pilot is to test modifications to classification and compensation
practices, including alternative job titling, revised qualification standards, or adjusted pay-setting
flexibility, that the Office of State Human Resources determi nes are likely to improve
recruitment, retention, or time-to-hire outcomes.

DEVELOP IMPROVED WORKFORCE ACCOUNTABILITY SYSTEM
SECTION 5.5. By December 1, 2026, the Office of State Human Resources shall
submit to the State Human Resources Commission and the Governor a revised disciplinary policy
containing an improved process for managing State employee performance and conduct. The
State Human Resources Commission, subject to the approval of the Governor, shall adopt a
revised Disciplinary Action Policy by April 1, 2027.

STATE OF THE STATE WORKFORCE REPORT
SECTION 5.6. The Office of State Human Resources shall submit the first State of
the State workforce report required by G.S. 126A-24, as enacted by this act, by January 15, 2027.

SHERIFFS' OFFICE CHANGES
SECTION 5.6A. G.S. 153A-103 reads as rewritten:
"§ 153A-103. Number of employees in offices of sheriff and register of deeds.
(a) Subject to the limitations set forth below, the board of commissioners may fix the
number of salaried employees in the offices of the sheriff and the register of deeds. In exercising
the authority granted by this section, the board of commissioners is subject to the following
limitations:
(1) Each sheriff and register of deeds elected by the people has the exclusive right
to hire, discharge, and supervise the employees in his office. However, the
board of commissioners must approve the appointment by such an officer of
a relative by blood or marriage of nearer kinship than first cousin or of a
person who has been convicted of a crime involving moral turpitude.
(2) Each sheriff and register of deeds elected by the people is entitled to at least
two deputies who shall be reasonably compensated by the county, provided
that the register of deeds justifies to the Board of Cou nty Commissioners the
necessity of the second deputy. Each deputy so appointed shall serve at the
pleasure of the appointing officer.
(3) In addition to the number of salaried employees fixed by the board of
commissioners, each sheriff is entitled to the n umber of school resource
officers required to satisfy any agreements entered into under
G.S. 162-26.5(b).
(b) Notwithstanding the foregoing provisions of subsection (a) of this section, approval
of the board of commissioners is not required for the reappointment or continued employment of

Page 74 Session Law 2026-40 Senate Bill 1041
a near relative of a sheriff or register of deeds who was not related to the appointing officer at the
time of initial appointment.
(c) The board of commissioners shall not designate employees of the sheriff 's office as
subject to the State Human Resources Act under Chapter 126A of the General Statutes."

CONFORMING CHANGES TO PENDING LEGISLATION
SECTION 5.7.(a) If House Bill 1214, 2025 Regular Session, becomes law,
G.S. 64-25(4), as amended by House Bill 1214, 2025 Regular Session, reads as rewritten:
"(4) Employer. – Any person, business entity, or other organization that transacts
business in this State and that employs 25 or more employees in this State.
The term also includes any entity required to participate in E-Verify pursuant
to any of the following:
a. State and local entities pursuant to G.S. 126-7.1(i).G.S. 126A-61.
b. Counties pursuant to G.S. 153A-99.1.
c. Municipalities pursuant to G.S. 160A-169.1."
SECTION 5.7.(b) If House Bill 1214, 2025 Regular Session, becomes law, Section
1(j) of House Bill 1214, 2025 Regular Session, is repealed.
SECTION 5.7.(c) If House Bill 1214, 2025 Regular Session, becomes law,
G.S. 126A-61(a), as enacted by this act, reads as rewritten:
"(a) Each agency, community college, and public school unit as defined in G.S. 115C-5
shall (i) verify, in accordance with the E -Verify Program administered by the United States
Department of Homeland Security pursuant to 8 U.S.C. § 1101, et seq., each individual's legal
status or authorization to work in the United States after hiring the individual as an employee to
work in the United States.States and (ii) comply with Article 2 of Chapter 64 of the General
Statutes."
SECTION 5.7.(d) If House Bill 1214, 2025 Regular Session, becomes law, Section
3(a) of House Bill 1214, 2025 Regular Session, reads as rewritten:
"SECTION 3.(a) There is appropriated from the General Fund to the Department of Labor
the sum of ninety thousand dollars ($90,000) in recurring funds for the 2026-2027 fiscal year for
one full-time equivalent position to assist in the enforcement of this act. This position shall be
designated as an exempt policymaking position of the Commissioner of Labor, not subject to the
limitations under G.S. 126-5(d)(2).Labor in accordance with G.S. 126A-15.4(d)(7)."
SECTION 5.7.(e) If House Bill 1214, 2025 Regular Session, becomes law,
G.S. 126A-15.4(d)(7), as enacted by this act, reads as rewritten:
"(7) The Commissioner of Labor. – Notwithstanding the designation limits of this
subsection, th e Commissioner shall designate (i) three additional full -time
equivalent attorney positions and (ii) one additional official primarily
responsible for ensuring compliance with Article 2 of Chapter 64 of the
General Statutes as exempt policymaking positions."
SECTION 5.8.(a) If House Bill 171, 2025 Regular Session, becomes law, then
G.S. 126-14.7, as enacted by that act, is recodified as G.S. 126A-104.5.
SECTION 5.8.(b) If House Bill 171, 2025 Regular Session, becomes law, then
G.S. 126A-15.2, as enacted by Section 1 of this act, is amended by adding the following
subsections to read:
"(p) The University of North Carolina employees are exempt from G.S. 126A-104.5.
(q) Community College System Office employees are exempt from G.S. 126A-104.5."
SECTION 5.9.(a) If Senate Bill 257, 2025 Regular Session, becomes law, then the
Revisor of Statutes shall replace the phrase "G.S. 135-6.1" with the phrase "G.S. 135-13.1" in
G.S. 126A-161, as enacted by this act.

Senate Bill 1041 Session Law 2026-40 Page 75
SECTION 5.9.(b) If Senate Bill 257, 2025 Regular Session, becomes law, then the
Revisor of Statutes shall replace the phrase "Chapter 126" with the phrase "Chapter 126A" in
G.S. 115C-229.45(7), as enacted by Senate Bill 257, 2025 Regular Session.
SECTION 5.9.(c) If Senate Bill 257, 2025 Regular Session , becomes law, then the
Revisor of Statutes shall replace the phrase "Articles 6 and 7" with the phrase "Articles 15 and
16" in G.S. 115C-229.45(7), as enacted by Senate Bill 257, 2025 Regular Session.
SECTION 5.9.(d) If Senate Bill 257, 2025 Regular Session, becomes law, then the
Revisor of Statutes shall replace the phrase "G.S. 126-8.6" with the phrase "G.S. 126A-71" in
G.S. 115C-229.45, as enacted by Senate Bill 257, 2025 Regular Session.
SECTION 5.9.(e) If Senate Bill 257, 2025 Regular Session, becom es law, then the
Revisor of Statutes shall replace the phrase "Part 10 of Article 16" with the phrase "Article 15A"
in G.S. 126A-15(8)h., as enacted by this act.
SECTION 5.9.(f) If Senate Bill 257, 2025 Regular Session, becomes law, then
G.S. 126A-15(8), as enacted by this act, is amended by adding a new sub-subdivision to read:
"gg. Employees of the Utilities Commission who work under the direction
of the Commission as provided by G.S. 62-14."
SECTION 5.9.(g) If Senate Bill 257, 2025 Regular Session, bec omes law, then
G.S. 126A-15(5)d., as enacted by this act, reads as rewritten:
"d. Employees of the Utilities Commission and the Commission's Public
Staff."
SECTION 5.9.(h) If Senate Bill 257, 2025 Regular Session, becomes law, then the
Revisor of Statutes shall replace the phrase "G.S. 126-5(c1)(43)" with the phrase
"G.S. 126A-15(8)gg." in G.S. 62-14(b), as amended by Senate Bill 257, 2025 Regular Session.
SECTION 5.9.(i) If Senate Bill 257, 2025 Regular Session, becomes law, then the
Flood Resiliency Blu eprint positions authorized by Section 12.10 of Senate Bill 257, 2025
Regular Session, are exempt from the State Human Resources Act, Chapter 126A of the General
Statutes, except Articles 15 and 16 of that Chapter.
SECTION 5.9.(j) Effective January 1, 202 7, if Senate Bill 257, 2025 Regular
Session, becomes law, then G.S. 126A-15(8), as enacted by this act, is amended by adding a new
sub-subdivision to read:
"hh. Employees of the Building Codes and Interpretations Bureau
established pursuant to Article 24 of Chapter 95 of the General
Statutes."
SECTION 5.9.(k) If Senate Bill 257, 2025 Regular Session, becomes law, then
G.S. 126A-111(e), as enacted by this act, is amended by adding a new subdivision to read:
"(4) The Department of Natural and Cultural Resou rces is employing temporary
employees in any of the following administrative divisions:
a. Division of Parks and Recreation.
b. Division of North Carolina Aquariums.
c. Division of State Historic Sites.
d. Division of State History Museums.
e. North Carolina Museum of Art.
f. North Carolina State Museum of Natural Sciences.
g. North Carolina Zoological Park.
h. Tryon Palace Commission.
i. U.S.S. North Carolina Battleship Commission."
SECTION 5.9.( l) If Senate Bill 257, 2025 Regular Session, becomes law, then
G.S. 126A-41(b), as enacted by this act, reads as rewritten:
"(b) Each agency with an exempt policymaking position or an exempt managerial position
may set the salary for that position within th e salary range established by the Commission plus
thirty percent (30%).ten percent (10%)."

Page 76 Session Law 2026-40 Senate Bill 1041

PART VI. EFFECTIVE DATE
SECTION 6.1. This act becomes effective October 1, 2026.
In the General Assembly read three times and ratified this the 2nd day of July, 2026.

s/ Rachel Hunt
President of the Senate

s/ Destin Hall
Speaker of the House of Representatives

s/ Josh Stein
Governor

Approved 3:18 p.m. this 6th day of July, 2026