With Session Law 2026-40 (Senate Bill 1041), the North Carolina General Assembly repealed North Carolina General Statutes Chapter 126, better known as the State Human Resources Act, and replaced it with a new Chapter 126A. Chapter 126A’s stated purpose is “to establish a decentralized human resources system . . . , based on modern principles of personnel administration, that applies the best methods evolved through government and industry.” What does that mean for county departments of social services and health, district health departments, and area authorities/local management entities that were previously subject to Chapter 126? Not as much as you might think.
Background
Traditionally organized county social services departments and health departments have long been subject to the State Human Resources Act (“SHRA”) and the administrative rules of the State Human Resources Commission (SHRC). Counties that have consolidated their social services and health departments into a single human services agency under North Carolina General Statutes (“G.S.”) § 153A-77(b) are not subject to the SHRA, unless the county specifically chooses to keep agency employees under the SHRA (see blog posts here and here for more details). Multi-county district health departments and area authorities/local management entities (LMEs) have also been subject to the SHRA. Chapter 126, the “old” SHRA, and its associated rules for local government entities as set forth in the North Carolina Administrative Code (NCAC), had detailed requirements for hiring, compensating, and disciplining and discharging employees. The rules applicable to local government (found at 25 NCAC Subchapter 1I) were sometimes the same as those for state employees and sometimes differed.
Session Law 2026-40, entitled “An Act to Modernize and Simplify the State Human Resources System,” was enacted on June 6, 2026, and became effective on October 1, 2026. The new Act retains many, but not all, of the human resources provisions found in the now repealed Chapter 126. Interestingly, both old Chapter 126 and new Chapter 126A are titled “North Carolina Human Resources Act,” despite the widespread use of the names “State Human Resources Act” and “SHRA” to refer to Chapter 126. Those names will likely continue to be used. This blog post uses the terms “old SHRA” and “old Chapter 126” to refer to the pre-October 1 law and accompanying requirements and “new SHRA” and “new Chapter 126A” to refer to the law that took effect October 1.
Old Chapter 126 v. New Chapter 126A: The Big Picture
The new SHRA largely mirrors the old SHRA, with three main differences. First, the new SHRA substantially reorganizes the statute. Second, it streamlines the SHRA hiring process and expressly authorizes skills-based hiring practices. Third, it includes in the Act itself the standards and procedures for discipline and discharge that the SHRC had adopted as rules and set out in the Administrative Code. Many of the changes are relevant only to state government employment, not to local government SHRA departments and agencies.
Under new Chapter 126A, the State Human Resources Commission (which keeps its name) will continue to be the body that adopts the rules and policies implementing the new SHRA. The Office of State Human Resources (OSHR), which also keeps its name, will continue to administer those rules and policies, as well as provide advice, guidance, and training to state agencies and, as before, to local governments. Unlike the old Chapter 126, the new Act allows OSHR to charge fees for the costs of training and consultation services requested by a local government. These provisions are found in new G.S. §§ 126A-20 – 126A-24.
The rest of this blog post highlights the changes most likely to interest local agencies subject to the SHRA. It covers:
- the provisions and exemptions that apply to local government SHRA agencies;
- the discretion counties and local agencies have to depart from SHRC policies;
- substantially equivalent human resources systems;
- recruitment and hiring;
- classification and compensation;
- the just cause standard for discipline and discharge and the procedural requirements for disciplinary action;
- appeals and grievances; and
- and changes to the privacy of personnel information.
Provisions and Exemptions Applicable to Local Governments
Old Chapter 126 could be frustrating for those involved in local government. Its use of the terms “State employee” and “Career State Employee” did not always make clear when a provision applied to an SHRA-covered local government employee. New G.S. § 126A-2 defines four terms: “Career Employee,” “Local Employee,” “State Employee” and “Local Agency.” That is a step toward clarity, but the text of Chapter 126A does not always use these distinctions. Future technical corrections to the statute, and the rules review the SHRC is required to conduct, may clear up any ambiguities.
The new SHRA applies to the same local government employees as the old: county social services departments, county health departments, district health departments, and LMEs. New G.S. § 126A-2(14) expressly states that a consolidated county human services agency is not subject to the SHRA. As before, a “local emergency management agency that receives federal grant-in-aid funds” is also subject to the SHRA. This means that a municipal emergency management department that is separate from county emergency management, and that independently receives federal emergency management funds, will also be covered by the new SHRA, as it was by the old.
Like old Chapter 126, new Chapter 126A has a long and confusing list of positions that are exempt from one provision of the SHRA or another. For local government purposes, new G.S. § 126A-15.2(o) says that the following provisions do not apply to local government employees:
- the veterans’ and National Guard preference (new G.S. § 126A-57.3);
- paid parental and bereavement leave, employee benefits and the terms and conditions of employment, paid holidays, and shared voluntary leave (found in Parts 1, 2, and 3 of Article 7 of new Chapter 126A); and
- discontinued service retirement allowances and payment of severance pay in certain situations (found in new G.S. § 126A-94).
These exemptions are consistent with old Chapter 126.
New Article 12: Local Government Discretion
New Article 12 is one of the most important parts of new Chapter 126A for local government employers. Like old Chapter 126, new G.S. § 126A-120 provides that local policies governing annual leave, sick leave, hours of work, holiday and administration of the pay plan, as well as other local policies relating to the terms and conditions of employment, will apply to local SHRA employees provided that these policies are filed with the Director of OSHR. Filing is all that is required; local policies are not subject to approval by OSHR or the SHRC. This section applies to counties, LMEs, district health departments, and municipalities that have emergency management employees covered by the SHRA.
Local Human Resources Systems That Are Substantially Equivalent to the SHRA
Under new Chapter 126A, counties and local government SHRA agencies whose local personnel policies provide policies and protections similar to those of the SHRA may continue to petition for “substantially equivalent” status. With that status, the local policies, instead of SHRC policies and NCAC rules, govern local SHRA employees and local non-SHRA employees alike. Counties and other local agencies may still petition for substantially equivalent status for their entire personnel policy or for a defined portion of it, such as recruitment and hiring, disciplinary action and appeals, or classification and compensation. See new G.S. § 126A-122. For a more in-depth discussion of what it means to be substantially equivalent, see here on pp. 6-8).
Recruitment and Hiring
The sections on SHRA recruitment and hiring are among the most thoroughly reorganized and consolidated in the new Act, and there are a few important substantive changes as well. Many of the provisions in new Article 5 did not appear in old Chapter 126; instead, they appeared in the SHRC’s rules, codified in the North Carolina Administrative Code. Now they are in the statute itself. Note, however, that the new statutory sections contain much less detail than the NCAC provisions found in Title 25, Subchapter 01I (the local government regulations).
New G.S. § 126A-51(b) expressly gives local government SHRA agencies the authority to determine whether to recruit only from internal candidates or to seek applicants more broadly. As under old Chapter 126, new Chapter 126A says that the decision not to recruit for a vacant position is to be made in accordance with business needs and the policies of the SHRC. New in Chapter 126A is a requirement that openly recruited positions be listed on an OSHR website, which already exists at https://oshr.nc.gov/work-nc. New G.S. § 126A-51(c) requires each posting to have a closing date unless the agency decides that the position needs continuous recruitment.
Recognition of Skills-Based Criteria for Hiring
New in Chapter 126A is express approval to use skills-based testing to determine whether an applicant meets minimum qualifications for the job. New G.S. § 126A-54(b) says that an agency may use “an assessment process that tests whether the applicant demonstrates sufficient competency or skill level in a technical discipline, behavioral skills or other relevant competencies,” rather than relying solely on education, experience or credentials. Assessment centers have long been a favorite technique of local governments for assessing job candidates, and this new statutory section might be an example of the “modernization” that the General Assembly sought in revamping the SHRA. While the new statute requires that agencies “ensure” that such a process is fair and reasonably related to predicting success in the job, it does not require a validation study (a formal study showing that the process predicts job performance).
Allowable Types of Appointments under the SHRA
For local government SHRA employees, new G.S. § 126A-10 makes only two types of appointments available. A newly hired local government SHRA employee must be given a probationary appointment and will normally remain in that status for twelve months, unless the employee’s supervisor decides that an additional six months in probationary status is appropriate. No employee may remain in probationary status for longer than 18 months. See G.S. § 126A-10.1(a). Employees moving between two different local SHRA agencies or between state government and a local SHRA agency begin a new twelve-month probationary period, just as other new SHRA employees do. See G.S. § 126A-10.1(c).
Upon completion of their probationary period, local SHRA employees become “career employees,” whose discipline and dismissal are subject to the due process procedures set out in the new SHRA and in the Administrative Code (hint: they are similar to the old procedures; see below).
Classification and Compensation: A Potentially Significant New Requirement
Consistent with old Chapter 126, under new Chapter 126A, the SHRC is charged with establishing a position classification system that includes minimum qualifications (see Article 3) and a compensation system with salary ranges (see Article 4). State and local government SHRA agencies alike have the authority to set salaries within the approved range set by the SHRC.
A notable addition to new Chapter 126A requires a minimum salary of $31,200 for all full-time SHRA employees (this equals $15.00 an hour for an employee working 2,080 hours each year). The statute exempts local government SHRA positions that are state-funded – but does say whether that means only those positions that are fully-funded by the state or includes positions that are only partly paid for using state funds. See G.S. § 126A-42. Nevertheless, the exemption for state-funded positions implies that all other local SHRA positions are now subject to the minimum salary of $31,200.
New Article 12, however, which addresses the powers of local SHRA agencies, says that local SHRA employees “shall not be paid less than the minimum nor more than the maximum of the applicable salary range” adopted by the county or other applicable local governing board” (e.g., area authority board, district health board or municipality) and that the governing board may adjust the salary ranges of SHRA employees so that they “conform to local financial ability and fiscal policy.” And under the local government SHRA provisions of the Administrative Code, 25 NCAC 01I .2101(a) says that “local jurisdictions may establish and administer compensation plans which provide a level of pay based upon financial ability, fiscal policy, and local prevailing rates.” Whether local governments retain that flexibility, and so may set a minimum salary lower than $31,200, will not be clear until the SHRC reviews Subchapter I, the special rules applicable to local SHRA agencies.
Just Cause, Disciplinary Actions and Grievances
“Just cause” protection from dismissal has long been a hallmark of the SHRA. New Article 8 expands on the concepts set out in old G.S. § 126-35 and incorporates into the new SHRA many of the definitions and requirements found in the Administrative Code. As before, no local government SHRA employee may be dismissed, suspended or demoted for disciplinary reasons unless there is just cause to do so. Again, as before, just cause may be based on unsatisfactory job performance or grossly inefficient job performance or on unacceptable personal conduct. Those terms are defined in the Administrative Code. See new G.S. § 126A-81(b) and (d); 25 NCAC 01I .2302; 25 NCAC 01I .2303. New G.S. § 126A-81(b) goes a step further. It sets out the factors for determining whether there is just cause to take disciplinary action or to dismiss an employee for unacceptable personal conduct. This provision codifies (that is, writes into the statute) the factors the North Carolina Supreme Court set out in Wetherington v. North Carolina Dep’t of Public Safety, 368 N.C. 583, 592 (2015). These factors had not previously been included in either old Chapter 126 or the Administrative Code. The factors are:
- the severity of the conduct;
- the subject matter of the conduct and whether it was job-related;
- 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;
- the employee’s work history; and
- the discipline imposed in past cases of similar violations.
The process for appealing a disciplinary action is the same under new Chapter 126A as it was under old Chapter 126:
- Once a local SHRA agency has decided to take disciplinary action, it must give the employee a written notice that sets out the acts and/or omissions for which disciplinary action is being taken.
- The employee then has 15 days to appeal the decision using the agency’s own appeal procedure.
- Employees may appeal a final agency decision to the Office of Administrative Hearings (OAH) within 30 days.
See new G.S. § 126A-81.
Employees may continue to file grievances under new Chapter 126A. Unlike old Chapter 126, however, the new Act gives local SHRA agencies the authority to establish grievance procedures consistent with the new Act without OSHR approval. Employers now have 120 days to complete the grievance process rather than the 90 days allowed under old Chapter 126. See new G.S. § 126A-83. OAH may hear appeals of grievances that allege (1) unlawful discrimination or harassment, (2) unlawful retaliation, (3) lack of just cause for a dismissal, demotion, or suspension (this would constitute an appeal of a final agency decision), or (4) an employer’s failure to post an opening as Chapter 126A requires. OAH may also hear appeals of grievances related to whistleblowing. OAH will not hear appeals of any other type of grievance. See new G.S. § 126A-84(c).
Personnel File Privacy: An Important and Unexpected Change
G.S. § 126-22, the old SHRA personnel privacy statute, was expressly limited to State employees and applicants to State employment. New Article 16 and new G.S. § 126A-162.1 contain no such limitation. Now, the new SHRA personnel privacy statute applies to county SHRA agencies. Under old Chapter 126, G.S. § 153A-98, the personnel privacy statute for counties applied. Counties that have consolidated their social services and/or and health departments into one human services agency in accordance with G.S. § 153A-77(b) remain subject to G.S. § 153A-98 with other county employees.
The New SHRA Personnel Privacy Statute v. Local Personnel Privacy Statutes
New G.S. § 126A-161(b) sets forth definitions that apply in new Article 16. At subsection (b)(2), “employee” is defined as “[A] current employee, former employee, or applicant for employment at an agency” [italics added]. In new G.S. § 126A-2, the definitions section for Chapter 126A as a whole, “agency” is defined as “[A]n executive branch agency or a local agency.” In subsection (14) of that statute, a “local agency” is defined as an area authority, a local social services department, a county health department or district health department, or a local emergency management agency receiving federal grant-in-aid funds. Put all that together and the personnel records privacy provisions of new Chapter 126A apply to local SHRA employees.
Since new Article 16 applies to local social services and health departments that have not been consolidated under G.S. § 153A-77(b), then new Article 16 presumably also applies to LMEs and district health departments. That would be so even though LMEs have their own personnel privacy statute (G.S. § 122C-158) and G.S. § 130A-42 provides that the county personnel privacy statute governs the personnel records of district health departments.
Bringing local SHRA employees out from under local personnel privacy statutes and making them subject to a global SHRA personnel privacy law is an unexpected change and one that we cannot be sure the General Assembly intended. After all, new Article 16 makes no reference to local statutes. It could have amended G.S. § 153A-98 to remove county SHRA employees from its provisions. It also could have repealed the LME personnel privacy statute and the district health personnel records statute (G.S. § 122C-158 and G.S. § 130A-42 respectively).
If bringing local SHRA employees under the new SHRA personnel privacy statutes in new Article 16 is not what the General Assembly intended, it will hopefully be corrected through later legislation or through the State Human Resources Commission’s review of SHRA local government regulations in the Administrative Code, as provided for in Section 5.2(b) of S.L. 2026-40. There are currently no provisions in Title 25, Subchapter I of the Administrative Code (that is, the local government SHRA regulations) that apply to personnel privacy.
The Differences Between the Old and the New SHRA Personnel Privacy Statutes
How does new G.S. § 126A-162.1, the new SHRA personnel privacy statute, differ from G.S. § 153A-98, the county personnel privacy statute? They are, for the most part, similar. Importantly, the same information is open to public inspection in both statutes. They differ most in the provisions listing who is allowed to see otherwise confidential material in an employee’s personnel file. In the county statute, those exceptions to the rule of confidentiality are set forth in G.S. § 153A-98(c). New G.S. § 126A-163 sets forth the exceptions for SHRA employees. Here are the most important differences:
- The most striking difference is the presence of an exception that does not appear in the county personnel privacy statute at all. The new SHRA personnel privacy statute, G.S. § 126A-163(a)(9), allows an employee filing a grievance to have access to another employee’s file during a grievance hearing to the extent necessary to resolve the grievance. The grievant must keep the material confidential.
- G.S. § 153A-98(c)(4), the county personnel privacy statute, allows access to confidential information when a person has obtained a court order granting access. It does not allow access in response to a subpoena. New G.S. § 126A-163(a)(5), in contrast, allows disclosure in response to a subpoena so long as the parties to the court proceeding have asked the court for a protective order.
- Both the county and the new SHRA personnel privacy statutes contain an exception allowing release of some otherwise confidential personnel information (the reasons for promotion, demotion, suspension, reinstatement, transfer, separation, dismissal, employment or nonemployment) when disclosure is essential to maintain public confidence. At G.S. § 153A-98(c)(7), the county statute requires the county manager, with the concurrence of the board, to put in writing the reasons why releasing the information is essential. Under new G.S. § 126A-163(a)(10), it is the agency head – here, the county director of social services or the local health director – who makes the finding and who must prepare a memorandum setting forth the circumstances that make disclosure essential and identifying the specific information that will be disclosed.
- New G.S. § 126A-163(a)(2) allows both “supervisors and indirect supervisors” access to the entire personnel file (except for confidential medical information, which federal law directs may only be shared on a strict need-to-know basis). The statute does not define “indirect supervisor.” The county personnel privacy statute allows access to county employees “having supervisory authority over the employee.” Are “indirect supervisors” and people “having supervisory authority over the employee” functionally the same? It isn’t clear.
- Note that new G.S. § 126A-163(a)(4) provides that “members of the General Assembly who may inspect and examine personnel records under the authority of G.S. 120-19” may have access to the confidential information in a personnel file. This does not mean members of the General Assembly have unfettered access to the personnel files of county SHRA employees. The referenced G.S. § 120-19 does not extend to counties, only to State departments and agencies.
- Another change worth noting is that under the new SHRA personnel privacy statute, the personnel records of employees who have been separated from service for 10 years or more are open to inspection, except for documents relating to demotion or dismissal. See G.S. § 126A-161(c). Under the county statute, the records of former employees remain confidential indefinitely.
Management of County SHRA Personnel Records
It is unclear whether new Article 16 envisions that county human resources personnel will manage the confidentiality and permitted disclosures of county SHRA employees’ personnel records or whether the Article intends for local agencies to maintain those records. In new G.S. § 126A-161, the statute defines “personnel file” as “[a]ny employment-related or personnel information gathered by an employing agency or by OSHR.” [italics added] New G.S. § 126A-162(a) directs “[e]ach employing agency” to maintain a personnel record. [italics added] While we usually refer to counties as the employers of local social services and health department employees, neither new Chapter 126A generally nor new Article 16 uses the term “employer.” We have already seen that new Chapter 126A defines “agency” as an executive branch agency or a local agency. The implication is that each local social services department and each local health department shall be responsible for the personnel files of its employees. This would not apply to consolidated human services agencies, since they are exempt from the SHRA.
Other Provisions
Inappropriate Political Activity
Under old Chapter 126, Article 5, entitled “Political Activity of Employees,” was limited to State employees. Most of old Article 5’s provisions have been moved to new Chapter 126A’s Article 10, which is not limited to State employees, although some provisions, such as new G.S. § 126A-101, seem to apply only to State officeholders and employees. The protections afforded local SHRA employees in new Article 10 are somewhat broader, or at least more detailed, than those provided by G.S. § 153A-99. In practice, however, they are unlikely to have a different effect.
Use of the JoinNC Program
Although new Chapter 126A only recognizes only two types of appointments for local SHRA employees, that of probationary employee and career employee (while establishing several categories of temporary employees for State agencies), new G.S. § 126A-111 allows both local SHRA agencies and consolidated human services agencies to use OSHR’s JoinNC Program to hire temporary employees for a period of no more than eleven months.
Conflicts Between the Old and the New Chapters and Ongoing Proceedings
Session Law 2026-40 does not repeal any rule in Title 25 (the SHRA title) of the Administrative Code. However, if new Chapter 126A and the Administrative Code conflict, new Chapter 126A controls. See Section 5.2(a) of S.L. 2026-40. Section 5.1(a) of S.L. 2026-40 provides that old Chapter 126 will continue to govern (1) any contested case that is before the SHRC or OAH as of October 1, 2026 (when new Chapter 126A becomes effective); (2) any grievance, disciplinary action, or appeal that was initiated before October 1, 2026, and is not yet resolved; and (3) any cause of action (that is, a legal claim) that accrued before October 1, 2026, regardless of when the administrative action or lawsuit is filed.
