EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Appellant/Respondent v. WILLIAM PEACE, Appellee/Petitioner; EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Appellee-Respondent, v. WILLIAM H. PEACE, III, Appellant-Petitioner

WILLIAM H. PEACE, III, Petitioner v. EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Respondent WILLIAM H. PEACE, III, Petitioner v. EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Respondent No. 599A97 (Filed 4 December 1998) 1. Labor and Employment § 68 (NCI4th)— property interest in continued employment Under North Carolina law, an employee has a protected “property” interest in continued employment only if the employee can show a legitimate claim to continued employment under a contract, a state statute, or a local ordinance. 2. Public Officers and Employees § 66 (NCI4th)— State employee — just cause protection — property interest Petitioner, as a career State employee, is entitled to the “just cause” protection of the State Personnel Act and is thereby imbued with a constitutionally protected “property” interest in continued employment. N.C.G.S. § 126-35. 3. Public Officers and Employees § 66 (NCI4th)— State employee — dismissal for just cause — burden of proof on employee — due process The allocation of the burden of proof to a career State employee in an action contesting the validity of a “just cause” termination pursuant to N.C.G.S. § 126-35 does not violate procedural due process under the Fourteenth Amendment to the United States Constitution. Under the balancing test set forth in Mathews v. Eldridge, 424 U.S. 319, the individual “property” interest sought to be protected by the employee, while important and significant, is decisively outweighed by the substantial government interest in maintaining a productive and efficient work force, and there is a very minimal risk of erroneous decision making when the existing administrative and judicial review protections are utilized. U.S. Const, amend. XIV. 4. Public Officers and Employees § 66 (NCI4th)— State employee — dismissal for just cause — burden of proof on employee — N.C. law A career State employee terminated pursuant to the “just cause” provision of N.C.G.S. § 126-35 should bear the burden of proof under North Carolina law in an action contesting the validity of that termination since the employee is the party attempting to alter the status quo; and neither party in a “just cause” termination dispute has peculiar knowledge not available to the opposing party because the employee may utilize available statutory and administrative procedures to obtain all necessary information to establish and advocate his or her position. Justice Frye concurring in part and dissenting in part. Justice Whichard joins in this concurring and dissenting opinion. Justice Wynn did not participate in the consideration or decision of this case. Appeal by petitioner pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, 128 N.C. App. 1, 493 S.E.2d 466 (1997), remanding an order entered by Bowen, J., on 13 March 1995 in Superior Court, Wake County. On 5 February 1998, the Supreme Court retained the Employment Security Commission’s notice of appeal of a substantial constitutional question pursuant to N.C.G.S. § 7A-30(1) and allowed discretionary review of an additional issue from the unanimous portion of that same decision of the Court of Appeals reversing and remanding an order entered by Cashwell, J., on 12 August 1994 in Superior Court, Wake County. Heard in the Supreme Court 29 May 1998. Hilliard & Jones, by Thomas Hilliard, III, for petitioner-appellant Peace. Michael F. Easley, Attorney General, by Andrew A. Vanore, Jr., Chief Deputy Attorney General; John R. Gome, Special Deputy Attorney General; and Sylvia Thibaut, Assistant Attorney General, for respondent-appellant and -appellee Employment Security Commission. LAKE, Justice. The essential question presented for review is whether the Court of Appeals erred in affirming the trial court’s determination that the State Personnel Commission improperly placed the burden of proof on the Employment Security Commission of North Carolina (ESC) in a claim for “just cause” termination pursuant to N.C.G.S. § 126-35. For the reasons discussed herein, we conclude that allocating the burden of proof to the disciplined employee does not violate that employee’s rights to due process. Accordingly, we affirm the Court of Appeals. Petitioner, William H. Peace, III, was hired by respondent ESC on 5 October 1985 as its Equal Employment Opportunity (EEO) officer. Petitioner was responsible for the direction of the employee relations section, and his duties included the administration of both internal and external EEO programs. During his employee orientation in 1985, petitioner learned that the ESC office employees maintained a petty fund, with monthly dues of $2.00. Petitioner also learned that participation in the petty fund entitled participants to an occasional cup of coffee from the personnel file room. Petitioner chose to participate in the fund, paid his monthly dues, and occasionally obtained coffee from the file room. However, petitioner’s normal habit was to obtain coffee each morning from the agency cafeteria. Generally, petitioner did not attend the staff meetings where the employees discussed office policies, including the petty fund. At some point following petitioner’s 1985 orientation, a local commercial coffee service was contracted with, and a new and separate coffee fund, with monthly dues of $3.40, was established. The office employees maintained the new coffee fund separate from and in addition to the office petty fund. Petitioner was not aware of the new coffee fund, and he was not asked to participate in or contribute to the new fund. On 10 April 1991, petitioner was involved in an incident with a coworker, Ms. Catherine High, concerning access to coffee from the personnel file room. As was his normal custom, petitioner went to the agency cafeteria the morning of 10 April 1991 to obtain a cup of coffee. However, the cafeteria was out of coffee, so petitioner proceeded to obtain coffee from the personnel file room. As he was leaving the file room, Ms. High confronted petitioner and stated, “[Y]ou are going to have to pay me for that coffee.” Petitioner refused to pay for the coffee, and a heated exchange ensued. Following the exchange, petitioner alleged that Ms. High stated, “If you get another cup of coffee and do not pay me, I’m going to get a cup of coffee and scald you with it.” Several other office employees witnessed the argument between petitioner and Ms. High. Ms. High also informed her supervisor of the incident. Petitioner contacted the magistrate’s office on the afternoon of 10 April 1991 concerning the alleged threat made by his co-worker, Ms. High. The magistrate advised petitioner that if he believed Ms. High to be capable of carrying out her threat, he should take out a warrant. Petitioner approached Ms. High following his discussion with the magistrate, seeking an apology for her earlier actions and statements. Ms. High refused to provide an apology for the morning coffee incident. Later that same afternoon, petitioner again contacted the Wake County magistrate’s office and formally filed criminal charges against his co-worker for communicating a threat. On 21 May 1991, the trial court dismissed the charge as frivolous and ordered petitioner to pay court costs. Petitioner’s supervisors did not contact or question petitioner about the coffee incident pending resolution of the criminal charges. On 5 June 1991, petitioner’s immediate supervisor, Gene Baker, informed petitioner by written memorandum of a 6 June 1991 predismissal conference. The conference culminated in a decision to discharge petitioner from employment for “unacceptable personal conduct.” A 7 June 1991 letter from Ann Q. Duncan, chairperson of ESC, further explained petitioner’s dismissal. The 7 June letter reaffirmed the dismissal for “unacceptable personal conduct,” including the taking of coffee without payment and the filing of frivolous charges against a co-worker. The letter explained that the “unacceptable personal conduct” diminished petitioner’s respect among fellow employees and called into question his reputation as the EEO officer for the ESC. Petitioner filed two appeals from the ESC’s decision to discharge him from employment. Petitioner contended (1) that the ESC lacked “just cause” to dismiss him pursuant to N.C.G.S. § 126-35; and (2) that he had been terminated in retaliation for a discrimination complaint he filed against the ESC in 1989, for violation of title VII, section 704(a) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-3 (1988). The Civil Rights Division of the Office of Administrative Hearings (OAH) investigated petitioner’s retaliatory discharge claim pursuant to N.C.G.S. § 7A-759. The OAH found that there was reasonable cause to believe that a title VII violation had occurred. The OAH determined that petitioner could select one of three options: (1) receive a right-to-sue letter, (2) commence a contested-case hearing in OAH, or (3) do nothing. Petitioner decided to pursue his retaliatory discharge claim by commencing a contested-case hearing. As for his claim that the ESC lacked “just cause” to dismiss him, petitioner filed another petition for contested-case hearing pursuant to N.C.G.S. § 126-35. A consolidated hearing was conducted on petitioner’s two administrative appeals by Administrative Law Judge (ALJ) Sammie Chess, Jr. on 12-14 July 1993. ALJ Chess determined that under the applicable “just cause” termination statute, the ESC bears the ultimate burden of persuasion to demonstrate the validity of the termination. In his recommended decision to the State Personnel Commission (SPC), the AU concluded that the ESC had failed to meet its burden of proof and recommended petitioner’s reinstatement with back pay. In determining petitioner’s claim as to retaliatory discharge under title VII, ALJ Chess again put the burden of proof on the ESC. The ALJ then found petitioner was the victim of a retaliatory discharge, and he therefore ordered reinstatement. The SPC adopted the AU’s recommendation for petitioner’s “just cause” claim with slight modification by an order dated 3 November 1994. The SPC agreed that the ESC bore the burden of proof in a “just cause” termination and affirmed the order reinstating petitioner with back pay. The ESC petitioned for judicial review of the SPC decision and the AU decision separately, pursuant to N.C.G.S. § 150B-50. In a 12 August 1994 order, Superior Court Judge Narley L. Cashwell upheld the ALJ’s final decision as to petitioner’s retaliatory discharge claim. By order dated 13 March 1995, Superior Court Judge Wiley E Bowen reversed the SPC’s decision with prejudice and dismissed petitioner’s “just cause” claim on the basis of two prejudicial errors of law: (1) that the SPC inappropriately placed the burden of proof on the ESC, and (2) that the SPC incorrectly concluded that petitioner was dismissed without “just cause.” The ESC then appealed to the Court of Appeals Judge Cashwell’s order affirming the decision concerning petitioner’s retaliatory discharge claim. Petitioner also appealed to the Court of Appeals Judge Bowen’s order reversing the SPC’s decision to reinstate him. The Court of Appeals consolidated the ESC’s appeal and petitioner’s appeal, and both were originally heard in the Court of Appeals on 7 May 1996. See Employment Sec. Comm’n v. Peace, 122 N.C. App. 313, 740 S.E.2d 63 (1996). This Court allowed the ESC’s petition for discretionary review and thereupon remanded the case to the Court of Appeals in order for the Court of Appeals to reconsider its ruling in light of Soles v. City of Raleigh Civil Serv. Comm’n, 345 N.C. 443, 480 S.E.2d 685 (1997). Employment Sec. Comm’n v. Peace, 345 N.C. 640, 483 S.E.2d 706 (1997). On 2 December 1997, the Court of Appeals, on remand, with Judge Greene dissenting, held that the burden of proof in “just cause” claims pursuant to N.C.G.S. § 126-35 may be allocated to an employee without violating due process. The Court of Appeals ruled that while the trial court may not substitute its judgment for that of the agency with respect to the evidence, the trial court did not err in determining that the SPC’s decision and order improperly placed the burden of proof on the ESC. Employment Sec. Comm’n v. Peace, 128 N.C. App. 1, 14, 493 S.E.2d 466, 474 (1997). Therefore, the Court of Appeals remanded the matter to the superior court for further remand to the SPC for application of the proper burden of proof. Id. at 14, 493 S.E.2d at 474-75. Petitioner subsequently filed his notice of appeal, based on the dissent, to this Court on 17 December 1997. On 6 January 1998, the ESC petitioned this Court for discretionary review seeking to have this Court determine whether the OAH acted ultra vires when it adjudicated petitioner’s title VII claim. Contemporaneously with its petition for discretionary review, ESC filed with this Court a notice of appeal asserting a substantial constitutional question pursuant to N.C.G.S. § 7A-30(1) as to whether the provisions of N.C.G.S. § 7A-759(d) and (e) violate the provisions of Article IV, Sections 1 and 3 of the North Carolina Constitution. This Court entered an order allowing discretionary review and retaining ESC’s notice of appeal; upon review, we conclude this petition was improvidently allowed, and such appeal should be dismissed. With respect to the issue which this Court previously remanded to the Court of Appeals and which is again before us by virtue of the dissent, petitioner asserts that the Court of Appeals incorrectly concluded that this Court’s holding in Soles mandates the assignment of the burden of proof in “just cause” termination disputes to the employee. Petitioner also contends that the assignment of the burden of proof to the employee following a “just cause” termination violates the procedural protections required by the Due Process Clause of the Fourteenth Amendment. For the reasons stated below, we reject these assertions. Procedural due process restricts governmental actions and decisions which “deprive individuals of ‘liberty’ or ‘property’ interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment.” Mathews v. Eldridge, 424 U.S. 319, 332, 47 L. Ed. 2d 18, 31 (1976). A terminated employee must initially demonstrate a “property” interest in continued employment in order to invoke procedural due process protection. Board of Regents v. Roth, 408 U.S. 564, 570-71, 33 L. Ed. 2d 548, 557 (1972). State law determines whether an individual employee does or does not possess a constitutionally protected “property” interest in continued employment. Bishop v. Wood, 426 U.S. 341, 344, 48 L. Ed. 2d 684, 690 (1976). Under North Carolina law, an employee has a protected “property” interest in continued employment only if the employee can show a legitimate claim to continued employment under a contract, a state statute or a local ordinance. Nantz v. Employment Sec. Comm’n, 290 N.C. 473, 226 S.E.2d 340 (1976). The North Carolina General Assembly created, by enactment of the State Personnel Act, a constitutionally protected “property” interest in the continued employment of career State employees. N.C.G.S. § 126-35 provides, in pertinent part, that “[n]o career State employee subject to the State Personnel Act shall be discharged, suspended, or demoted for disciplinary reasons, except for just cause.” N.C.G.S. § 126-35(a) (1995). It is undisputed in the case sub judice that petitioner, as a career State employee, is entitled to the “just cause” protection of the State Personnel Act and is thereby imbued with a constitutionally protected “property” interest. Board of Regents, 408 U.S. at 577, 33 L. Ed. 2d at 561; Leiphart v. N.C. Sch. of the Arts, 80 N.C. App. 339, 348, 342 S.E.2d 914, 921, cert. denied, 318 N.C. 507, 349 S.E.2d 862 (1986). While the demonstration of a protected “property” interest is a condition precedent to procedural due process protection, the existence of the “property” interest does not resolve the matter before this Court. We must inquire further and determine exactly what procedure or “process” is due. The fundamental premise of procedural due process protection is notice and the opportunity to be heard. Cleveland Bd. of Educ. v Loudermill, 470 U.S. 532, 542, 84 L. Ed. 2d 494, 503 (1985). Moreover, the opportunity to be heard must be “at a meaningful time and in a meaningful manner.” Armstrong v. Manzo, 380 U.S. 545, 552, 14 L. Ed. 2d 62, 66 (1965). While the United States Supreme Court has consistently held that some form of hearing is required prior to a final deprivation of a protected “property” interest, the exact nature and mechanism of the required procedure will vary based upon the unique circumstances surrounding the controversy. Mathews, 424 U.S. at 333, 47 L. Ed. 2d at 32; Wolff v. McDonnell, 418 U.S. 539, 557-58, 41 L. Ed. 2d 935, 952 (1974). The United States Supreme Court has never required the allocation of a particular burden of proof in an employee termination dispute. In Lavine v. Milne, 424 U.S. 577, 47 L. Ed. 2d 249 (1976), the Supreme Court did recognize the important and potentially dispositive effect of the allocation of the burden of proof. However, in that decision, the Court also stated, “[o]utside the criminal law area, where special concerns attend, the locus of the burden of persuasion is normally not an issue of federal constitutional moment.” Id. at 585, 47 L. Ed. 2d at 256. Only in cases involving the deprivation of a fundamental right has the United States Supreme Court found a constitutionally protected right to a particular allocation of the burden of proof. See Santosky v. Kramer, 455 U.S. 745, 71 L. Ed. 2d 599 (1982) (termination of parental rights); Addington v. Texas, 441 U.S. 418, 60 L. Ed. 2d 323 (1979) (fundamental right to physical liberty associated with involuntary commitment to state hospital); Speiser v. Randall, 357 U.S. 513, 2 L. Ed. 2d 1460 (1958) (fundamental right to freedom of speech). Fundamental rights are those rights “deeply rooted in this Nation’s history” and “implicit in the concept of ordered liberty.” Washington v. Glucksberg, 521 U.S. 702, 721, 138 L. Ed. 2d 772, 787-88 (1997). The United States Supreme Court has held that an interest in continued employment is not a constitutionally protected fundamental right, but rather a “property” right subject to traditional procedural due process protections. Board of Regents, 408 U.S. at 576-78, 33 L. Ed. 2d at 560-61. In this case, petitioner has failed to identify the impingement of any fundamental right in his “just cause” termination claim. The United States Supreme Court, in Mathews v. Eldridge, 424 U.S. 319, 47 L. Ed. 2d 18, set forth a three-part balancing test to determine the appropriate procedures required to comply with procedural due process protection in any given situation. The Supreme Court in Mathews reiterated that procedural due process protection is a flexible, not fixed, concept governed by the unique circumstances and characteristics of the interest sought to be protected. The Court there identified the following three factors: first, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. Id. at 335, 47 L. Ed. 2d at 33. There is no dispute that the initial Mathews-Eldridge factor, the private interest affected by the official action, is of significant importance in the matter before this Court. The ability to obtain and retain employment is of utmost concern to individuals as they strive to provide support for themselves and their families, as well as in seeking to achieve their aspirations and goals. The United Stat

EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Appellant/Respondent v. WILLIAM PEACE, Appellee/Petitioner EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Appellee/Respondent v. WILLIAM H. PEACE, III, Appellant/Petitioner No. COA95-678 No. COA94-1283 (Filed 2 December 1997) 1. Administrative Law and Procedure § 9 (NCI4th); Labor and Employment § 120 (NCI4th)— Title VII retaliatory discharge claim — jurisdiction of OAH The Office of Administrative Hearings (OAH) had jurisdiction to hear an ESC employee’s claim for retaliatory discharge in violation of Title VII of the Civil Rights Act of 1964 and did not act ultra vires in adjudicating such claim. The OAH does not function as a court in violation of N.C. Const, art. IV, § 1 when making final agency decisions on Title VII charges deferred from the Equal Employment Opportunity Commission. N.C.G.S. § 7A-769. 2. Labor and Employment § 121 (NCI4th)— Title VII claim— burden of proof Plaintiff carries the initial burden of proof in Title VII retaliatory discharge cases. In order to make a prima facie showing of a Title VII retaliatory discharge, plaintiff must show that (1) he engaged in protected activity, (2) the employer took adverse employment action against plaintiff, and (3) a but for causal connection existed between the protected activity and the adverse action. If plaintiff presents a prima facie case of retaliation, defendant employer must articulate a legitimate nondiscriminatory reason for its action. If defendant employer shows a legitimate reason that overcomes the presumption of discrimination from plaintiffs prima facie showing, plaintiff then has to show that the reason was only a pretext for the retaliatory action. 3. Labor and Employment § 121 (NCI4th)— Title VII action— burden of proof The Office of Administrative Hearings erred in placing the initial burden on defendant employer to show an absence of retaliatory purpose in a Title VII retaliatory discharge case prior to plaintiff employee’s prima facie showing of a retaliatory discharge. 4. Public Officers and Employees § 66 (NCI4th)— state employee — continued employment — property interest— due process A state employee had a property interest in continued employment created by N.C.G.S. § 126-35 and protected by the Due Process Clause of the United States Constitution. 5. Public Officers and Employees § 66 (NCI4th)— state employee — dismissal for just cause — burden of proof The employer had the initial burden to produce evidence that a state employee was dismissed for “just cause,” and the employee must then come forward with evidence that his or her dismissal was without “just cause.” 6. Public Officers and Employees § 66 (NCI4th)— state employee — dismissal for just cause — burden on employee— due process Placing the burden of proof on the state employee in determining whether the employee was dismissed for “just cause” within the purview of N.C.G.S. § 126-35 does not pose a substantial threat of erroneous termination and thus does not violate due process. Judge Greene dissenting in part. Appeal by Employment Security Commission from order entered 12 August 1994 in case 93 CVS 10599 by Judge Narley L. Cashwell in Wake County Superior Court, affirming a final order of the Office of Administrative Hearings reinstating Peace as an Equal Employment Opportunity Commission Officer based on retaliatory discharge. Appeal by Peace from an order entered 13 March 1995 in case 94 CVS 11517 by Judge Wiley F. Bowen in Wake County Superior Court, which order concluded that “just cause” existed for terminating Peace and reversed the State Personnel Commission’s decision that Peace be reinstated. Both Peace appeals were thereafter consolidated and were originally heard in the Court of Appeals on 7 May 1996. See Employment Security Comm. v. Peace, 122 N.C. App. 313, 740 S.E.2d 63 (1996), disc, review allowed and remanded, 345 N.C. 640, 483 S.E.2d 706 (1997). Heard on grant of discretionary review in the Supreme Court on 11 June 1996. The cases sub judice were then remanded to this Court for reconsideration in light of the Supreme Court’s ruling in Soles v. The City of Raleigh Civil Service Comm., 345 N.C. 443, 480 S.E.2d 685, reh’g denied, 345 N.C. 761, 485 S.E.2d 299 (1997). Heard on remand in the Court of Appeals on 1 April 1997. Attorney General Michael F. Easley, by Chief Deputy Attorney General Andrew A. Vanore, Jr., and Assistant Attorney General Valerie Bateman, for North Carolina Department of Justice; and Chief Counsel T.S. Whitaker and Attorney Fred R. Gamin, for North Carolina Employment Security Commission, respondent appellant (No. COA94-1283), respondent appellee (No. COA95-678). Hilliard & Jones, by Thomas Hilliard, III, for petitioner appellant (No. COA95-678). William H. Peace, III, petitioner appellee (No. COA94-1283), pro se. SMITH, Judge. On 15 October 1985, William H. Peace, III (“Peace”), began his employment with respondent Employment Security Commission (“ESC”) as its Equal Employment Opportunity (“EEO”) officer. On 10 April 1991, an incident between Peace and a coworker ultimately led to Peace’s dismissal for alleged unacceptable personal conduct. The State Personnel Commission (“SPC”) adopted, inter alia, the following facts as recommended by the Administrative Law Judge (“ALJ”): During his 1985 orientation, Peace was informed that by paying $2.00 per month to the Personnel Office petty fund, he would be entitled to obtain an occasional cup of coffee from a pot located in the personnel file room. He paid the dues; however, his usual practice was to go to the agency’s cafeteria for morning coffee. Prior to 10 April 1991, no one informed Peace that his payment into the petty fund did not entitle him to obtain coffee from the personnel file room. Over the years, on an irregular basis, he obtained coffee from the petty fund coffee pot. At a staff meeting which Peace did not attend, a coffee fund of $3.40 per month was established for any interested participants. Peace was not made aware of a separate coffee fund, nor was he asked to join. On 10 April 1991, Peace got a cup of coffee from the personnel file room. As Peace was leaving the office with the coffee, an exchange took place with Ms. Catherine High, a supervisor in the personnel office, in which she told him that he should pay her for the coffee. Peace refused. Ms. High called Peace “despicable” and told him she hoped he was fired. She told Peace that if he got another cup of coffee and did not pay her, she would get a cup of coffee and scald him with it. Ms. High informed her supervisor and Mr. Gene Baker, who became Peace’s immediate supervisor as of 22 April 1991, of the incident. On the afternoon of 10 April 1991, Peace contacted the magistrate’s office regarding the incident with Ms. High. Peace was informed that, if he believed Ms. High was capable of carrying out her threat, he should take out a warrant against her. Peace spoke with Ms. High following his conversation with the magistrate’s office, at which time he gave her an opportunity to apologize. Ms. High did not apologize. Thereafter, Peace had the magistrate’s office issue summons against Ms. High charging her with communicating a threat. The charge was dismissed by the trial court as frivolous and Peace was ordered to pay court costs. Peace was not contacted by his superiors regarding the incident until he received a predismissal conference memorandum on 5 June 1991, from Gene Baker, his immediate supervisor. Following a 6 June dismissal conference, Peace was discharged for unacceptable personal conduct. In a 7 June letter, Ann Q. Duncan, Chairperson of ESC, explained that Peace was being dismissed for unacceptable conduct, including taking the coffee without paying Catherine High and filing criminal charges against High, which were found to be frivolous. Such conduct, said Duncan, caused Peace’s reputation as the EEO officer at ESC to be called into question and his respect among fellow employees diminished. Peace filed two appeals of the ESC decision to discharge him. The bases of his appeals were that ESC lacked “just cause” to dismiss him pursuant to N.C. Gen. Stat. § 126-35 (1991), and that he had been discharged in retaliation for having filed discrimination charges against ESC in 1989, for violation of Title VII, Section 704(a) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-3 (1988). Peace did not appeal upon a state claim of retaliatory discharge pursuant to N.C. Gen. Stat. § 126-36 (1987). Pursuant to N.C. Gen. Stat. § 7A-759 (1987), Peace’s charge of retaliatory discharge was investigated by the Civil Rights Division of the Office of Administrative Hearings. Through its investigation, the Office of Administrative Hearings (“OAH”) found reasonable cause to believe that a violation of Title VII had occurred. OAH presented Peace with three options. He could: (1) receive a right to sue letter; (2) commence a contested case hearing in OAH; or (3) do nothing. Peace chose to commence a contested case hearing with regard to the retaliatory discharge claim. He also filed a petition for contested case hearing pursuant to N.C. Gen. Stat. § 126-35 on his lack of “just cause” claim. Pursuant to an order of the Chief Administrative Law Judge of OAH, both cases were consolidated for hearing. A hearing was conducted by ALJ Sammie Chess on 12-14 July 1993. Pursuant to N.C. Gen. Stat. § 7A-759(e), an ALJ decision on the merits of a retaliatory discharge claim is a final agency decision binding on the parties absent a petition for judicial review. See N.C. Gen. Stat. § 150B-45 (1987). However, with regard to the N.C. Gen. Stat. § 126-35 lack of “just cause” claim, an ALJ issues a recommended decision to SPC, which then issues a final agency decision also subject to judicial review. N.C. Gen. Stat. § 126-37 (1991). AU Chess issued two separate decisions following the hearing. In his recommended decision to SPC, AU Chess found that ESC had the burden of proving it had “just cause” to discharge petitioner. AU Chess concluded that ESC had failed to meet that burden and recommended Peace be reinstated. In his final decision regarding the retaliatory discharge claim pursuant to Title VII, AU Chess also placed the burden of proof on ESC and concluded that Peace’s discharge violated Section 704(a) of Title VII of the Civil Rights Act of 1964, in that his dismissal was retaliatory. Pursuant to that holding, ALJ Chess ordered petitioner reinstated. The ALJ’s recommended decision reinstating Peace for lack of “just cause” was adopted, with slight modification, by SPC. ESC appealed SPC’s final decision and the ALJ’s final decision separately, pursuant to N.C. Gen. Stat. § 150B-50 (1987). In a 13 August 1994 order, Judge Narley L. Cashwell upheld the final agency decision of the ALJ with regard to the retaliatory discharge claim in which Peace was ordered reinstated. In a 13 March 1995 order, Judge Wiley F. Bowen reversed the final decision of SPC and dismissed Peace’s petition challenging his dismissal on the “just cause” claim. ESC appeals Judge Cashwell’s order affirming the retaliatory discharge claim. Peace appeals Judge Bowen’s order reversing the SPC decision to reinstate him. The proper standard of review for the superior court “ ‘depends upon the particular issues presented on appeal.’ ” Act-Up Triangle v. Commission for Health Services of the State of North Carolina, 345 N.C. 699, 706, 483 S.E.2d 388, 392 (1997) (citation omitted). If petitioner asks: “ ‘(1) whether the agency’s decision was supported by the evidence or (2) whether the decision was arbitrary or capricious, then the reviewing court must apply the “whole record” test.’ ” Id. (quoting In re Appeal by McCrary, 112 N.C. App. 161, 165, 435 S.E.2d 359, 363 (1993). Under the whole record test, a reviewing court is required to examine all competent evidence in order to determine whether the agency decision is supported by substantial evidence. Id. The definition of substantial evidence includes “ ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Id. at 707, 483 S.E.2d at 393 (citation omitted). Furthermore, in making arbitrary or capricious determinations concerning the agency decision, the reviewing court “ ‘does not have authority to override decisions within agency discretion when that discretion is exercised in good faith and in accordance with law.’ ” Id. at 707, 483 S.E.2d at 393 (citation omitted). Appellate review of a superior court order concerning an agency decision requires an examination of the trial court’s order for any errors of law. Id. at 706, 483 S.E.2d at 392. The two tasks involved include: “ ‘(1) determining whether the trial court exercised the appropriate scope of review and, if appropriate, (2) deciding whether the court did so properly.’ ” Id. (citation omitted). The whole record test allows a reviewing court to determine whether an administrative decision has a rational basis in the evidence. Id. at 706-07, 483 S.E.2d at 392. As the reviewing court in the “just cause” case, we must take into account the specialized expertise of the staff of an administrative agency; in this case, the SPC. See High Rock Lake Assoc. v. Environmental Management Comm., 51 N.C. App. 275, 279, 276 S.E.2d 472, 475 (1981). While there is evidence in the record contrary to the Commission’s findings, neither this Court nor the superior court may substitute its judgment for that of the agency. After reviewing the record, we find substantial evidence to support the State Personnel Commission’s findings of fact. At the outset, we note that the actions of both Peace and High were inappropriate and childlike. As a result of both parties’ improper behavior and subsequent refusals to resolve their differences amicably as adults, this matter has involved years of litigation and, as yet, remains unresolved. If there was ever a case that could have been resolved by the parties and participants in an employment controversy and was not, then this must be that case. I. Title VII Retaliatory Discharge Claim A. The Jurisdiction of OAH in Title VII Cases As a preliminary matter, we address ESC’s argument that the trial court erred in failing to find OAH did not have jurisdiction to hear Peace’s Title VII retaliatory discharge claim, and also in failing to find OAH acted ultra vires by adjudicating such claim. ESC contends that only courts, and not administrative agencies, have jurisdiction to hear Title VII cases, and if OAH is authorized to hear Title VII claims, then it is functioning as a court in violation of N.C. Const. art. IV, § 1. N.C. Const. art. IV, § 1 provides: The judicial power of the State shall, except as provided in Section 3 of this Article, be vested in a Court for the Trial of Impeachments and in a General Court of Justice. The General Assembly shall have no power to deprive the judicial department of any power or jurisdiction that rightfully pertains to it as a co-ordinate department of the government, nor shall it establish or authorize any courts other than as permitted by this Article. N.C. Const. art. IV, § 3 permits the General Assembly to vest in administrative agencies established pursuant to N.C. Const. art. Ill, § 11 as part of the executive branch, such judicial powers as are reasonably necessary to accomplish the purposes for which the agencies were created, and also directs that appeals from such agencies shall be to the General Court of Justice. Title VII authorizes the Equal Employment Opportunity Commission (“EEOC”) to enter into worksharing agreements with state and local agencies charged with the administration of state fair employment practices laws in order to fulfill its duty of preventing unlawful employment practices. 42 U.S.C. 2000e-8(b) (1988). When an alleged unlawful employment practice occurs in a state that has a law prohibiting the alleged practice and has established a state or local authority to grant or seek relief from such practice, Title VII provides that “ ‘no charge may be filed [with the EEOC]... by the person aggrieved before the expiration of sixty days after proceedings have been commenced under the State or local law, unless such proceedings have been earlier terminated.’ ” Davis v. North Carolina Dept. of Correction, 48 F.3d 134, 137 (4th Cir. 1995) (quoting 42 U.S.C. 2000e-5(c) (1988)). Thus, where state law protects against the kind of discrimination alleged, Title VII requires that plaintiffs resort to state and local remedies before seeking relief under federal law. Id. N.C. Gen. Stat § 7A-759 designates OAH as the State’s deferral agency for cases deferred by the EEOC as provided in 42 U.S.C. 2000e-5. N.C. Gen. Stat. § 7A-759(e) provides that orders entered by an ALJ after a contested case hearing on the merits of a deferred charge is a final agency decision binding on the parties, and that an ALJ may order whatever remedial action is necessary to give full relief consistent with the requirements of federal statutes and regulations. However, an ALJ’s decision with respect to a deferred charge is not a judicial decision, but rather a final agency decision. This becomes apparent upon an evaluation of the rationale for the creation of OAH. According to the Administrative Procedure Act as originally adopted, 1973 N.C. Sess. Laws ch. 1331, § 150-30(a), the presiding officers for administrative hearings were designated by either an agency itself or by statute. In an effort to obtain nonbiased hearing officers with specialized knowledge of the issues presented, the General Assembly created OAH, an independent, quasi-judicial agency in order to “provide a source of independent hearing officers to preside in administrative cases and thereby prevent the commingling of legislative, executive, and judicial functions in the administrative process.” N.C. Gen. Stat. § 7A-750 (1985). Thus, because OAH was established as part of the executive branch pursuant to N.C. Const. art. III, § 11, it is not a court, and does not function as such when making final agency decisions on charges deferred from EEOC. See also Utilities Commission v. Finishing Plant, 264 N.C. 416, 422, 142 S.E.2d 8, 12 (1965) (“Administrative agencies . . . are distinguished from courts. They are not constituent parts of the General Court of Justice.”) To support its argument that only courts, and not administrative agencies, have the authority to hear Title VII claims, ESC cites footnote four in Yellow Freight System, Inc. v. Donnelly, 494 U.S. 820, 108 L. Ed. 2d 834 (1990). This footnote points out that Congress opted for judicial, rather than administrative enforcement of Title VII claims. Id. at 825, 108 L. Ed. 2d 840 n.4. However, this footnote precisely states Congress “preferred that the ultimate determination of discrimination rest with the Federal judiciary,” and not EEOC. Id. The Court does not attempt to say that state administrative agencies have no authority to hear Title VII claims. In fact, the Court, when discussing the 60-day delay found in 42 U.S.C. 2000e-5(c), says that such delay “is designed to give state administrative agencies an opportunity to invoke state rules of law.” Yellow Freight System, Inc., 494 U.S. at 825, 108 L. Ed. 2d at 841. In light of this language and the plain language of Title VII, we conclude the trial court did not err in failing to find that OAH did not have jurisdiction to hear Peace’s Title VII claim, or that OAH acted ultra vires by adjudicating such claim. A. Burden of Proof in Title VII Cases According to the North Carolina Supreme Court, the claimant carries the initial burden of proof in Title VII cases. See North Carolina Department of Correction v. Gibson, 308 N.C. 131, 137, 301 S.E.2d 78, 87 (1983). In addition, a prima facie showing of retaliatory discharge requires a plaintiff to show: (1) he engaged in some protected activity, such as filing an EEO complaint; (2) the employer took adverse employment action aga