Under a Type II transfer, can a transferred state authority hire and fire its own staff independently of the parent department, or does the parent department control personnel decisions?
Plain-English summary
When the General Assembly reorganized state government under the Executive Organization Act of 1971, it created a taxonomy of "Type I" and "Type II" transfers to describe how agencies would be folded into the new principal departments. A Type II transfer is the lighter touch: the transferred agency keeps its prescribed statutory powers, but its "management functions" (planning, organizing, staffing, directing, coordinating, reporting, and budgeting, per G.S. 143A-6(c)) are performed under the direction and supervision of the head of the principal department.
The N.C. Technological Development Authority (NCTDA), created in 1983 and codified at G.S. 143B-471 et seq., was placed inside the Department of Commerce by a statutory provision deeming it transferred as a Type II transfer. G.S. 143B-471.3A(2) authorized the Authority to "employ such other professional staff and clerical and secretarial staff as it deems necessary." The Authority's Executive Director, Brent Lane, read those provisions as letting NCTDA make its own personnel decisions independently of Commerce.
Special Deputy AG Charles J. Murray, writing under AG Lacy H. Thornburg, said no. The NCTDA-specific statute had to be read in light of G.S. 143A-6, which controls all Type II transfers, and the Supreme Court's interpretation in Smith v. State, 298 N.C. 115 (1979). Smith involved the State Board of Mental Health, which had been Type-II-transferred to the Department of Human Resources. The Court held that the parent department had final authority over all management decisions, including the power to fire employees, because "staffing" is one of the management functions listed in § 143A-6(c). The Court rejected the argument that "direction and supervision" meant something less than control.
Applied to NCTDA: § 143B-471.3A(2) granted the Authority autonomy in policy matters and in deciding how to deploy its workforce to achieve policy goals, but it did not strip the Department of Commerce of management control. The Department had the authority to staff positions and to hire and fire personnel within the Department, including positions in NCTDA.
The opinion also cited a 1972 AG opinion (41 N.C.A.G. 921) on the same issue in the context of the Burial Commission's Type II transfer to Commerce, which reached the same result.
Currency note
This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
The Executive Organization Act framework remains in place, and Smith v. State remains the leading NC case on Type II transfer management authority. The N.C. Technological Development Authority has gone through subsequent reorganizations; some of its functions have been absorbed into other agencies, and Chapter 143B has been amended many times. Anyone asking the same kind of question today about a specific Type II-transferred agency should pull the current statutes for both the agency and the parent department.
Common questions
Q: What is a Type I transfer, versus Type II?
A: Under G.S. 143A-6(a), a Type I transfer moves an agency into a principal department with the agency's functions becoming functions of the department itself; the agency essentially disappears. A Type II transfer keeps the agency intact, exercising its statutory powers under the direction and supervision of the department head as to management.
Q: What was the practical difference for NCTDA after this opinion?
A: NCTDA could still set policy on technology grants and economic development. But staffing levels, who got hired, who got fired, and budget reporting all ran through Commerce. The Authority could not, for example, hire a new program officer without going through Commerce's human-resources approval channel.
Q: Why did the Smith court reject the "supervision only" reading?
A: Because § 143A-6(b) uses both "direction" and "supervision," and Black's Law Dictionary defined direction as "the act of governing; management; superintendence; a guiding or authoritative instruction." Reading "direction and supervision" as something less than control would, in the Court's words, treat the Type II transfer "as merely a change in name thus defeating the purpose of the Organization Act."
Q: What does "management functions" cover under § 143A-6(c)?
A: Planning, organizing, staffing, directing, coordinating, reporting, and budgeting. The Smith court did not decide whether that list was exclusive or merely illustrative, but it confirmed that staffing (including the power to fire) was clearly within it.
Q: Could the General Assembly have given NCTDA the staffing autonomy Lane wanted?
A: Yes, by writing into G.S. 143B-471.3A an express exception to § 143A-6 for NCTDA. The General Assembly did not do that. The "as it deems necessary" language in § 143B-471.3A(2) was not specific enough to override the general Type II framework.
Background and statutory framework
The Executive Organization Act of 1971 (and its successor, the Executive Organization Act of 1973) reorganized North Carolina state government from a sprawl of independent agencies into a smaller set of "principal departments" (Commerce, Human Resources, Environment Health and Natural Resources, etc., as they were named at the time). The transfer-type taxonomy in G.S. 143A-6 was the legislative tool for handling the absorption: Type I for full integration, Type II for agencies that kept their identities but lost their independence on management.
The N.C. Technological Development Authority was created by the 1983 General Assembly to promote technology-based economic development. It made grants, hired consultants, and ran programs aimed at helping NC-based technology companies. The statutory choice to place it in Commerce by a deemed Type II transfer was deliberate: the legislature wanted policy independence (so the Department head could not veto a grant decision) but operational integration (so the Authority would not become an unaccountable parallel HR shop).
This opinion resolved a tension that arose almost immediately. NCTDA's Executive Director read his agency's authorizing statute as a grant of staffing autonomy; Commerce read it as subordinate to § 143A-6's general Type II framework. The AG sided with Commerce, citing the controlling Supreme Court case directly on point.
Citations
- N.C.G.S. § 143A-6(b) (Type II transfer definition; management functions under direction/supervision of department head)
- N.C.G.S. § 143A-6(c) (definition of "management functions": planning, organizing, staffing, directing, coordinating, reporting, budgeting)
- N.C.G.S. § 143A-9 (companion organizational provision)
- N.C.G.S. § 143B-471 (NCTDA placement in Department of Commerce)
- N.C.G.S. § 143B-471.3A (NCTDA staffing authority)
- N.C.G.S. § 143B-471.3A(2) (executive director and staff hiring language)
- Smith v. State, 298 N.C. 115, 257 S.E.2d 399 (1979) (parent department controls staffing under Type II transfer; "direction and supervision" means control, not mere oversight)
- 41 N.C.A.G. 921 (June 7, 1972) (1972 AG opinion on Burial Commission Type II transfer to Commerce, in accord)
Source
Original opinion text
Requested By: Mr. Brent Lane, Executive Director, N.C. Technological Development Authority
Question: Does the N.C. Technological Development Authority have the right to make decisions in regard to the staffing of positions and the hiring and firing of its employees independently of the Department of Commerce?
Conclusion: No. The Department of Commerce has the authority to manage and direct the staffing of positions and hiring and firing of the employees of all agencies transferred to the Department as "Type II" transfers including the N.C. Technological Development Authority notwithstanding the provisions of G.S. 143B-471.3A(2).
The N.C. Technological Development Authority (NCTDA) was created by legislation enacted in 1983 codified as G.S. 143B-471 et. seq. Relevant statutory provisions specifically relating to NCTDA are as follows:
The Authority shall be administratively located within the Department of Commerce, but shall exercise its powers independently of the head of that department, as if it had been transferred to the Department of Commerce by a Type II transfer as defined in G.S. 143A-6(b).
G.S. 143B-471.
In order to enable it to carry out the purposes of this Part, the Authority may:
. . .
(2) Employ an executive director, whose salary shall be set by the General Assembly in the Current Operations Appropriations Act. The Authority may employ such other professional staff and clerical and secretarial staff as it deems necessary within the funds available to it. The salaries of such other personnel shall be set under the State Personnel Act.
G.S. 143B-471.3A.
Standing alone, the above cited provisions could support an argument that the NCTDA is empowered to act independently of the Department of Commerce (Department) in regard to personnel matters. However, those provisions must be examined in the light of G.S. 143A-6(b) and (c) and the decisions of the Supreme Court relating to Type II transfers. G.S. 143A-6(b) and (c) read as follows:
(b) Under this Chapter, a Type II transfer means the transferring intact of an existing agency, or part thereof, to a principal department established by this Chapter. When any agency, or part thereof, is transferred to a principal department under a Type II transfer, that agency, or part thereof, shall be administered under the direction and supervision of that principal department, but shall exercise all its prescribed statutory powers independently of the head of the principal department, except that under a Type II transfer the management functions of any transferred agency, or part thereof, shall be performed under the direction and supervision of the head of the principal department.
(c) Whenever the term "management functions" is used it shall mean planning, organizing, staffing, directing, coordinating, reporting and budgeting.
The North Carolina Supreme Court has interpreted G.S. 143A-6(b) and (c) as granting the exclusive power to fire to the head of the principal department, Smith v. State, 298 N.C. 115, 257 S.E.2d 399 (1979). In Smith, the plaintiff claimed that because the State Board of Mental Health had been transferred by a Type II transfer to the Department of Human Resources, the Department of Human Resources lacked the capacity to fire him. Plaintiff maintained that the Department had only the power to supervise the State Board of Mental Health. The Supreme Court rejected that argument, stating that the power to direct and supervise gave the Department final authority over all management decisions.
When an agency is transferred to a new department by a "type II transfer," G.S. 143A-6(b) provides that the management functions of the agency shall be performed not only under the "supervision" but also the "direction" of the head of the principal department. The word "direction" refers to the "act of governing; management; superintendence; a guiding or authoritative instruction." Black's Law Dictionary (Rev. 4th ed. 1968). Clearly, the legislature intended for the head of the Department of Human Resources to have final authority over all management functions, not merely "supervisory" power. To hold that a transferred agency could exercise all of its former powers after the reorganization, subject only to some undefined supervision by the head of the new department, would treat the transfer as merely a change in name thus defeating the purpose of the Organization Act.
G.S. 143A-6(c) defines the term "management functions" to mean "planning, organizing, staffing, directing, coordinating, reporting and budgeting." Even if this definition was intended to be inclusive, an issue we need not now decide, the power to fire clearly falls within its scope since the Act expressly gives the head of the principal department power over "staffing."
298 N.C. at pp. 126, 127, 257 S.E.2d at pp. 405, 406.
The Court in Smith, supra, reviewed the report of the Committee on State Government Reorganization and made the following statement regarding the legislative intent of G.S. 143A-6(b) and (c).
In providing for a "type II transfer," the legislature clearly intended to distinguish between the rule-making or policy functions of a transferred agency and its management function. Under the statutory scheme established by the Act, the former functions were to remain in control of the transferred agency while the latter were to become the sole province of the heads of the principal departments. . . . . With this distinction in mind it is clear that the power to fire a disobedient employee must be considered an aspect of management rather than an aspect of policy-making.
298 N.C. at p. 128, 257 S.E.2d at p. 406.
In an Attorney General's opinion dated June 7, 1972 involving an analogous question between the Burial Commission and the Department of Commerce it was concluded that:
Once transfer of the Commissioner and Commission to the Department of Commerce has been accomplished, all administrative employees heretofore employed by either the Commissioner or Commission are subject to the supervision and direction of the Secretary of Commerce, including the power of the Secretary of Commerce to appoint, dismiss, or transfer administrative personnel within the offices included in the Department of Commerce.
41 N.C.A.G. 921
Seen in the context of the powers of a principal Department over agencies transferred as Type II transfers, the provisions of G.S. 143B-471 and G.S. 143B-473.3A can be seen as granting autonomy to NCTDA in all policy matters and also in regard to how to best use its employees in implementing those policies. However, the clear legislative intent of the Executive Reorganization Act of 1971 as found by the Supreme Court in the Smith decision supra, is that the principal Department is to have the authority to staff positions as well as the authority to hire and fire personnel within the Department. By the reference in G.S. 143B-471 to "Type II" transfers, the General Assembly incorporated the provisions of G.S. 143A-6 and G.S. 143A-9 which clearly place the authority for personnel decisions within the Department of Commerce.
LACY H. THORNBURG
ATTORNEY GENERAL
Charles J. Murray
Special Deputy Attorney General