{
  "id": 11889979,
  "name": "NORTH CAROLINA DEPARTMENT OF TRANSPORTATION, Petitioner v. GLENN I. HODGE, JR., Respondent",
  "name_abbreviation": "North Carolina Department of Transportation v. Hodge",
  "decision_date": "1996-11-19",
  "docket_number": "No. COA95-1329",
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    "judges": [
      "Judges JOHNSON and WYNN concur."
    ],
    "parties": [
      "NORTH CAROLINA DEPARTMENT OF TRANSPORTATION, Petitioner v. GLENN I. HODGE, JR., Respondent"
    ],
    "opinions": [
      {
        "text": "LEWIS, Judge.\nBoth this case and a companion case, Betsy Johnson Powell v. North Carolina Department of Transportation (COA95-1320) (opinions filed simultaneously), raise the issue of whether the Governor properly designated certain State employee positions as \u201cpolicymak-ing\u201d under N.C. Gen. Stat. section 126-5.\nBeginning on 1 January 1992, Glenn I. Hodge, Jr. was employed by the N.C. Department of Transportation (\u201cDOT\u201d) as an internal auditor. On 23 May 1992, he was promoted to Chief of the Internal Audit Section. On 3 May 1993, the Secretary of the DOT notified Hodge that his position would be designated \u201cpolicymaking exempt\u201d effective 17 May 1993. On 30 November 1993, the Secretary of the DOT notified Hodge that he would be fired from his position effective. 3 December 1993.\nHodge filed a petition for a contested case hearing in the Office of Administrative Hearings (\u201cOAH\u201d) challenging the designation of his position as policymaking exempt. After hearing, Senior Administrative Law Judge (\u201cAU\u201d) Fred G. Morrison, Jr. recommended that the designation be reversed. In a Decision and Order dated 22 November 1994, the State Personnel Commission (\u201cCommission\u201d) agreed and reversed the designation of Hodge\u2019s position as policymaking exempt. The DOT petitioned for judicial review. On 6 September 1995, Judge Donald W. Stephens affirmed the Commission\u2019s Decision and Order. The DOT appeals.\nThe DOT contends that Judge Stephens erred by affirming the Commission\u2019s decision. We agree.\nThe State Personnel Act permits the Governor to designate as exempt \u201cpolicymaking positions\u201d in certain departments, including the DOT. See N.C. Gen. Stat. \u00a7 126-5(d)(l) (1995). Designation of a State position as policymaking exempt deprives the employee holding the position of certain protections otherwise afforded to State employees. See G.S. \u00a7 126-5(e)(3). In N.C. Gen. Stat. section 126-5(b), a \u201cpolicymaking position\u201d is defined as \u201ca position delegated with the authority to impose the final decision as to a settled course of action to be followed within a department, agency, or division.\u201d G.S. \u00a7 126-5(b) (1995).\nBy adopting the findings and conclusions of the ALJ, the Commission applied federal constitutional law standards under the First Amendment to determine whether Hodge\u2019s position was properly designated policymaking exempt. In particular, the Commission determined that the legal question presented was \u201cwhether the hiring authority can demonstrate that party affiliation is an appropriate requirement for the effective performance of the public office involved.\u201d\nApplication of this principle was legal error. The constitutional issue was not raised by either party. In fact, in the prehearing order, the parties stipulated that the issue was whether the position was correctly designated \u201cpolicymaking\u201d in accordance with G.S. section 126-5. Hodge also raised an additional issue but did not raise a constitutional challenge to the designation. The Commission should have limited its review to the issues presented by the parties.\nFurthermore, G.S. section 126-5 does not require the Commission to determine whether party affiliation is an appropriate requirement for the position. Rather, it only requires the Commission to decide whether the position is one \u201cdelegated with the authority to impose the final decision as to a settled course of action to be followed within a department, agency, or division.\u201d G.S. \u00a7 126-5(b). The Commission erred by applying the incorrect legal standard, and the trial court, in turn, erred by concluding that the Commission\u2019s Decision and Order was not affected by an error of law.\nWhen an issue on appeal is whether a state agency erred in interpreting a statutory term, an appellate court may freely substitute its judgment for that of the agency and employ de novo review. Brooks, Com\u2019r of Labor v. Rebarco, Inc., 91 N.C. App. 459, 463, 372 S.E.2d 342, 344 (1988). After review of the findings of fact made by the Commission and the evidence of record, we conclude that the Commission erred by determining that Hodge\u2019s position was not properly designated as policymaking exempt.\nThe DOT asserts that at the time Hodge\u2019s position was designated as policymaking, the Internal Audit Section was a \u201cdivision\u201d of the DOT, a principal state department under G.S. section 143B-6. The term \u201cdivision\u201d is not defined in the State Personnel Act. However, it is defined in the Executive Organization Act, N.C. Gen. Stat. section 143B-1 et. seq., as \u201cthe principal subunit of a principal State department.\u201d G.S. \u00a7 143B-3 (1993).\nContrary to the DOT\u2019s assertions, the record does not show that, as Chief Internal Auditor, Hodge headed a division within the DOT. Rather, all of the evidence shows that, even after a departmental reorganization in February 1993, the Internal Audit \u201cSection\u201d remained a \u201csection\u201d and was not denominated a \u201cdivision.\u201d The record evidence also does not show that this section functioned as a \u201cprincipal subunit of a principal State department\u201d so as to qualify as a division pursuant to G.S. section 143B-3.\nHowever, the record evidence does show and the Commission\u2019s finding number 3 supports the conclusion that Hodge, as Chief of the Internal Audit Section, was delegated with the authority to impose the final decision as to a settled course of action to be followed within the DOT and within divisions of the DOT. The Commission found:\n3. As Chief of the Internal Audit Section, the Petitioner exercised broad flexibility and independence. In addition to supervising other auditors, he could decide who, what, when, how, and why to audit within the Department. While he could not order implementation of any recommendations, he was free to contact the State Bureau of Investigation concerning his findings.\nThe DOT objects to this finding on the grounds that it is incomplete. Although we agree that this finding is incomplete in that it does not show the extent of the impact of Hodge\u2019s decisions on the entire DOT, we find it adequate to support a conclusion that his position was properly designated policymaking exempt.\nIn addition, the undisputed record evidence supports our conclusion that the position was properly designated \u201cpolicymaking.\u201d The record evidence shows that, as Chief of the Internal Audit Section, Hodge determined which audits would be performed throughout the DOT, including the Office of the Secretary, and made recommendations for change in policies and practices within the audited departmental unit. Although the persons supervising the audited unit decided whether to implement any recommended changes, the audit recommendations of Hodge were distributed to the Deputy Secretary, the State Auditor\u2019s office, and in some cases, but not all, to the Federal Highway Administration. As the Commission found, Hodge had the authority to report his findings to the State Bureau of Investigation when required by law.\nFinding number 3 and the other record evidence demonstrate that he had authority to impose the final decision on a settled course of action within the DOT and within divisions of the DOT. This is true even though others higher in the departmental hierarchy ultimately decided whether the DOT would implement audit recommendations. Almost everyone in the DOT is supervised by someone. Even the Secretary of the DOT must ultimately answer to the Governor. It would be illogical to construe G.S. section 126-5(b) as requiring that persons in policymaking positions have absolute decisionmaking autonomy.\nAn appellate court may reverse or modify a final agency decision if the substantial rights of the petitioner may have been prejudiced because the agency\u2019s findings, inferences, conclusions, or decisions are, inter alia, affected by error of law. N.C. Gen. Stat. \u00a7 150B-51(b)(4) (1995); Professional Food Services Mgmt. v. N.C. Dept. of Admin., 109 N.C. App. 265, 268, 426 S.E.2d 447, 449 (1993). We hold that the Commission\u2019s findings, as supported by substantial record evidence, can only support the legal conclusion that Hodge\u2019s position was properly designated as policymaking exempt, and that substantial rights of petitioner DOT have been prejudiced by legal error in the Commission\u2019s Decision and Order.\nSince the trial court erred by affirming the contrary conclusion reached by the Commission, we reverse the trial court\u2019s order and the Commission\u2019s Decision and Order. The case is remanded with the mandate that the position of Chief of the Internal Audit Section be designated policymaking exempt.\nJudges JOHNSON and WYNN concur.",
        "type": "majority",
        "author": "LEWIS, Judge."
      }
    ],
    "attorneys": [
      "Attorney General Michael F. Easley, by Special Deputy Attorney General Grayson G. Kelley, Associate Attorney General Robert 0. Crawford, III, and Associate Attorney General Melanie Lewis Vtipil, for petitioner-appellant.",
      "John C. Hunter for respondent-appellee."
    ],
    "corrections": "",
    "head_matter": "NORTH CAROLINA DEPARTMENT OF TRANSPORTATION, Petitioner v. GLENN I. HODGE, JR., Respondent\nNo. COA95-1329\n(Filed 19 November 1996)\n1. Public Officers and Employees \u00a7 41 (NCI4th)\u2014 Personnel Commission \u2014 designation of job as exempt \u2014 constitutional standards not raised by either party\nThe State Personnel Commission erred in an action arising from the designation of a state job as policymaking exempt by applying federal constitutional standards under the First Amendment and by determining that the legal question was whether party affiliation is an appropriate requirement for the position. The constitutional issue was not raised by either party and N.C.G.S. \u00a7 126-5 only requires the Commission to determine whether the position is one \u201cdelegated with the authority to impose the final decision as to a settled course of action to be followed within a department, agency, or division.\u201d The Commission should have limited its review to the issues presented by the parties.\nAm Jur 2d, Civil Service \u00a7\u00a7 13, 15.\n2. Public Officers and Employees \u00a7 43 (NCI4th)\u2014 exempt position \u2014 DOT Internal Audit Section \u2014 not a division\nThe State Personnel Commission erred in an action arising from the designation of the Chief Auditor of DOT as a policy-making exempt position by determining that the Internal Audit Section of DOT was a division of a principal State department. All of the evidence shows that the Internal Audit Section remained a section and was not denominated a division even after a departmental reorganization. The record evidence also does not show that this section functioned as a principal subunit of a principal State department so as to qualify as a division pursuant to N.C.G.S. \u00a7 143B-3.\nAm Jur 2d, Civil Service \u00a7 15.\n3. Public Officers and Employees \u00a7 43 (NCI4th)\u2014 chief DOT auditor \u2014 designation as policymaking exempt\nThe trial court erred by affirming the State Personnel Commission\u2019s decision to reverse the designation of respondent\u2019s state government position as policymaking exempt where respondent was Chief of the Internal Audit Section at DOT; the Commission found that respondent supervised other auditors, decided who, what, when, how, and why to audit within the Department and was free to contact the State Bureau of Investigation concerning his findings; respondent made recommendations for change in policies and practices within the audited departmental unit; and, although the supervisor of the audited unit decided whether to implement any recommended changes, the audit recommendations were distributed to the Deputy Secretary, the State Auditor\u2019s office, and in some cases to the Federal Highway Administration. In N.C.G.S. \u00a7 126-5(b), a policymaking position is defined as a position delegated with the authority to impose the final decision as to a settled course of conduct to be followed within a department, agency, or division. Respondent had that authority; almost everyone in the DOT is supervised by someone (even the Secretary must ultimately answer to the Governor) and it is illogical to construe N.C.G.S. \u00a7 126-5(b) as requiring that persons in policymaking positions have absolute decision-making autonomy. The Commission\u2019s findings, as supported by substantial record evidence, can only support the legal conclusion that respondent\u2019s position was properly designated as policymaking exempt.\nAm Jur 2d, Civil Service \u00a7 15.\nAppeal by petitioner from order entered 6 September 1995 by Judge Donald W. Stephens in Wake County Superior Court. Heard in the Court of Appeals 9 September 1996.\nAttorney General Michael F. Easley, by Special Deputy Attorney General Grayson G. Kelley, Associate Attorney General Robert 0. Crawford, III, and Associate Attorney General Melanie Lewis Vtipil, for petitioner-appellant.\nJohn C. Hunter for respondent-appellee."
  },
  "file_name": "0515-01",
  "first_page_order": 553,
  "last_page_order": 558
}