             IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA18-822

                               Filed: 18 June 2019

Office of Administrative Hearings, No. 17 OSP 07948

WENDY JOHNSON, Petitioner,

            v.

NORTH CAROLINA DEPARTMENT OF PUBLIC SAFETY, Respondent.


      Appeal by Petitioner from Final Decision and Amended Final Decision entered

21 May 2018 by Administrative Law Judge David F. Sutton in the Office of

Administrative Hearings. Heard in the Court of Appeals 30 January 2019.


      Pope McMillan, P.A., by Clark D. Tew, for petitioner-appellant.

      Attorney General Joshua H. Stein, by Assistant Attorney General Tamika L.
      Henderson, for respondent-appellee.


      MURPHY, Judge.


      This case requires us to consider whether the Administrative Law Judge

(“ALJ”) erred in applying the McDonnell Douglas burden-shifting framework, rather

than the Price Waterhouse mixed-motive burden-shifting framework, in determining

a claim of alleged discrimination on the basis of sex. We conclude the ALJ applied

the incorrect burden-shifting framework. While we reverse and remand for further

proceedings, we dismiss as moot Appellant’s argument that the ALJ erred in

concluding that NCDPS improperly denied her veteran’s preference.
                     JOHNSON V. N.C. DEP’T OF PUBLIC SAFETY

                                 Opinion of the Court



                                 BACKGROUND

      On 7 February 2017, the North Carolina Department of Public Safety

(“NCDPS”) internally announced that it was accepting applications for a vacant

Personnel Technician III position at the Western Foothills Regional Employment

Office (“WFREO”). The posting described the position as the salary administration

specialist and assistant manager of WFREO. It stated that applicants must possess

“[d]emonstrated knowledge and experience with using BEACON/SAP to include

report generation” and “with salary administration in NC state government” and

“[c]onsiderable knowledge of state personnel policies and procedures related to

recruitment, employment and salary administration.” At the time of the job posting,

the entire staff of WFREO was female.

      Appellant, Wendy Johnson (“Johnson”), was a female employed by NCDPS as

an Administrative Services Assistant V at Wilkes Correctional Center when she

applied for the position at WFREO. Johnson had a high school education and 150

months of experience in State government positions.          Several other NCDPS

employees applied for the position, and an independent “screener” narrowed the

applicant pool to seven individuals to be interviewed based on selective criteria,

including the candidates’ education and experience and related knowledge, skills,

abilities, and competencies. The interview pool consisted of two male and five female

candidates, Johnson included.



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                                    Opinion of the Court



      Lou Ann Avery (“Avery”), the manager of WFREO and the hiring manager for

the vacant position, interviewed the seven candidates with Larry Williamson

(“Williamson”), the Superintendent at Foothills Correctional Institution.     At the

interview, “each candidate was asked a series of ‘benchmarked’ questions. Three of

the nine questions were not truly ‘benchmarked’, but were accompanied by vague and

generalized instructions for scoring responses that left substantial room for

subjective interpretation by the interviewer in scoring those questions.” Johnson

received an overall interview score of “average.” Of the candidates interviewed, only

one candidate, a male, scored “above average.”

      Avery decided to offer the male (“John Doe”) the position and submitted her

“Request for Candidate Pre-Approval” to NCDPS. The Request stated the following

under “justification”:

             WFREO is recommending [John Doe] for the position of
             Personnel Tech III. Mr. [Doe] has a Bachelor’s degree and
             104 months experience above minimum in Human
             Resources, NCDPS and private sector. Mr. [Doe] brings
             experience in Beacon, Benefits, NeoGov, BobJ reports and
             supervisory. On February 22, 2017 we interviewed a total
             of 7 applicants. Three applicants scored Average, three
             scored Below Average, Mr. [Doe] was the only Above
             Average score. Promoting Mr. [Doe] to the WFREO will
             also add diversity to an all female staff.          I am
             recommending $42,159 salary for Mr. [Doe], a 10% increase
             from his current salary.

(emphasis added). Lisa Murray (“Murray”) at NCDPS approved Avery’s Request

without making any alterations to the justification.


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                                  Opinion of the Court



      After Johnson was informed that she was not selected for the position, she

spoke with Natalie Crookston (“Crookston”), another applicant for the position who

was not selected. Crookston stated she had spoken with Avery, who “implied in the

conversation” that Doe was selected for the position because he was a male. Johnson

subsequently filed a Petition for a Contested Case Hearing in the Office of

Administrative Hearings (“OAH”), alleging discrimination based on sex and failure

to receive priority consideration for veteran’s preference. The matter was heard

before an ALJ in Catawba County, who concluded, “Petitioner failed to carry her

burden to demonstrate by a preponderance of the evidence that the Respondent’s

hiring decision was discriminatory.” The ALJ also concluded “Petitioner failed to

meet her burden of proof that Respondent failed to properly apply the Veterans’

Preference in violation of [N.C.G.S.] § 126-82.” Johnson appeals.

                                     ANALYSIS

                      A. Discrimination on the Basis of Sex

      Johnson argues the ALJ erred in applying the McDonnell Douglas burden-

shifting framework rather than the Price Waterhouse framework. We agree.

1. Standard of Review

      N.C.G.S. § 150B-51(b) provides the applicable standards of review in appeals

of final decisions by an administrative tribunal:

             (b) The court reviewing a final decision may affirm the
             decision or remand the case for further proceedings. It may


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                                  Opinion of the Court



             also reverse or modify the decision if the substantial rights
             of the petitioners may have been prejudiced because the
             findings, inferences, conclusions, or decisions are:

                   (1) In violation of constitutional provisions;

                   (2) In excess of the statutory authority or jurisdiction
                   of the agency or administrative law judge;

                   (3) Made upon unlawful procedure;

                   (4) Affected by other error of law;

                   (5) Unsupported by substantial evidence admissible
                   . . . in view of the entire record as submitted; or

                   (6) Arbitrary, capricious, or an abuse of discretion.

N.C.G.S. § 150B-51(b) (2017).

      “Where the asserted error falls under subsections 150B-51(b)(5) and (6), we

apply the whole record standard of review.” Whitehurst v. East Carolina Univ., ___

N.C. App. ___, ___, 811 S.E.2d 626, 631 (2018). Under this standard, we “examine all

the record evidence—that which detracts from the agency’s findings and conclusions

as well as that which tends to support them—to determine whether there is

substantial evidence to justify the agency’s decisions.       Substantial evidence is

relevant evidence a reasonable mind might accept as adequate to support a

conclusion.” Id. (citations and internal quotation marks omitted).

      “We conduct a de novo review of an asserted error of law falling under

subsections 150B-51(b)(1)-(4) . . . .” Id. at ___, 811 S.E.2d at 631. “Under a de novo



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                                   Opinion of the Court



review, the court considers the matter anew and freely substitutes its own judgment

for that of the ALJ.” Id. (citation and internal quotations marks omitted).

2. Legal Frameworks

      Under N.C.G.S. § 126-34.02, “[a]n applicant for State employment, a State

employee, or former State employee may allege discrimination or harassment based

on . . . sex . . . if the employee believes that he or she has been discriminated against

in his or her application for employment . . . .” N.C.G.S. § 126-34.02(b)(1) (2017).

“[W]e look to federal decisions for guidance in establishing evidentiary standards and

principles of law to be applied in discrimination cases.” N.C. Dep’t. of Correction v.

Gibson, 308 N.C. 131, 136, 301 S.E.2d 78, 82 (1983).

      There are multiple avenues by which a petitioner may establish a causal

connection between an adverse employment action and a discriminatory motive on

the basis of sex. Newberne v. Dep’t of Crime Control and Public Safety, 359 N.C. 782,

790, 618 S.E.2d 201, 207 (2005). A petitioner may rely on direct evidence of a single

discriminatory motive, such as an “employer’s admission that it took adverse action

against the plaintiff solely because of the” plaintiff’s sex or protected characteristic.

Id. (citation, alterations, and internal quotation marks omitted). Recognizing that

such evidence is rare, the U.S. Supreme Court created a second avenue by which a

plaintiff may establish a claim of sex discrimination based on circumstantial

evidence. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 36 L. Ed. 2d 668,



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                                  Opinion of the Court



677-78 (1973); Newberne, 359 N.C. at 790, 618 S.E.2d at 207. The McDonnell Douglas

framework created a burden-shifting scheme:

             Under the McDonnell Douglas/Burdine proof scheme, once
             a plaintiff establishes a prima facie case of unlawful
             [discrimination], the burden shifts to the defendant to
             articulate a lawful reason for the employment action at
             issue. If the defendant meets this burden of production,
             the burden shifts back to the plaintiff to demonstrate that
             the defendant’s proffered explanation is pretextual. The
             ultimate burden of persuasion rests at all times with the
             plaintiff.

Newberne, 359 N.C. at 791, 618 S.E.2d at 207-08 (citations omitted).

      A successful claim under the McDonnell Douglas framework assumes a single

discriminatory motive and that any preferred legitimate motive is pretextual. Yet,

there are situations where an employment decision is the result of both legitimate

and discriminatory motives. This third avenue of proof is widely referred to as a

“mixed-motive” case, first recognized by the U.S. Supreme Court in Price Waterhouse

v. Hopkins, 490 U.S. 228, 104 L. Ed. 2d 268 (1989). The plurality opinion created a

new burden-shifting framework for mixed-motive cases where, “once a plaintiff . . .

shows that gender played a motivating part in an employment decision, the defendant

may avoid a finding of liability only by proving that it would have made the same

decision even if it had not allowed gender to play such a role.” Id. at 244-45, 104 L.

Ed. 2d at 284. Justice O’Connor concurred, stating, “In my view, in order to justify

shifting the burden on the issue of causation to the defendant, a disparate treatment



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                                   Opinion of the Court



plaintiff must show by direct evidence that an illegitimate criterion was a substantial

factor in the decision.” Id. at 276, 104 L. Ed. 2d. at 304 (O’Connor, J., concurring).

      Congress subsequently codified and, on multiple occasions, modified the

mixed-motive framework. Under the Civil Rights Act of 1991:

             a plaintiff succeeds on a mixed-motive claim if she
             demonstrates that . . . sex . . . was a motivating factor for
             any employment practice, even though other factors also
             motivated the practice. Once such a showing has been
             made, the employer cannot escape liability. However,
             through use of a limited affirmative defense, if an employer
             can demonstrate that it would have taken the same action
             in the absence of the impermissible motivating factor, it
             can restrict a plaintiff’s damages to injunctive and
             declaratory relief, and attorney’s fees and costs.

Diamond v. Colonial Life Acc. Ins. Co., 416 F.3d 310, 317 (4th Cir. 2005) (citations

and internal quotation marks omitted). Yet, courts were still divided as to whether

direct evidence of discrimination was required for a plaintiff to pursue a mixed-motive

theory, with many relying on Justice O’Connor’s concurrence in Price Waterhouse.

Desert Palace, Inc. v. Costa, 539 U.S. 90, 95, 156 L. Ed. 2d. 84, 91 (2003). In Desert

Palace, based on a plain reading of 42 U.S.C. § 2000e-2(m), the U.S. Supreme Court

held that “direct evidence of discrimination is not required in mixed-motive cases[.]”

Desert Palace, 539 U.S. at 101-02, 156 L. Ed. 2d at 96.

      It is elementary that, while “we look to federal decisions for guidance in

establishing evidentiary standards and principles of law to be applied in

discrimination cases[,]” those decisions are not binding authority. See N.C. Dep’t of


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                     JOHNSON V. N.C. DEP’T OF PUBLIC SAFETY

                                 Opinion of the Court



Corr. v. Gibson, 308 N.C. 131, 136, 301 S.E.2d 78, 82 (1983). Our courts have not

directly addressed the evidentiary showing required for a plaintiff alleging

discrimination on the basis of sex to succeed on a mixed-motive theory. However, our

Supreme Court addressed the proper mixed-motive framework for an unlawful

retaliation claim under the Whistleblower Act in Newberne. The Court engaged in a

similar analysis of the various avenues a plaintiff may use to establish a causal

connection between protected activity and adverse employment action:

            Therefore, claims brought under the Whistleblower Act
            should be adjudicated according to the following
            procedures. First, the plaintiff must endeavor to establish
            a prima facie case of retaliation under the statute. The
            plaintiff should include any available direct evidence that
            the adverse employment action was retaliatory along with
            circumstantial evidence to that effect.        Second, the
            defendant should present its case, including its evidence as
            to legitimate reasons for the employment decision. Third,
            once all the evidence has been received, the court should
            determine whether the McDonnell Douglas or Price
            Waterhouse framework properly applies to the evidence
            before it. If the plaintiff has demonstrated that he or she
            engaged in a protected activity and the defendant took
            adverse action against the plaintiff in his or her
            employment, and if the plaintiff has further established by
            direct evidence that the protected conduct was a
            substantial or motivating factor in the adverse
            employment action, then the defendant bears the burden
            to show that its legitimate reason, standing alone, would
            have induced it to make the same decision. If, however, the
            plaintiff has failed to satisfy the Price Waterhouse
            threshold, the case should be decided under the principles
            enunciated in McDonnell Douglas and Burdine, with the
            plaintiff bearing the burden of persuasion on the ultimate
            issue whether the employment action was taken for


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                                  Opinion of the Court



             retaliatory purposes.

Newberne, 359 N.C. at 794, 618 S.E.2d at 209-10 (citations, alterations, and internal

quotation marks omitted) (emphasis in original). In a footnote, our Supreme Court

acknowledged that Justice O’Connor’s concurrence and the direct evidence

requirement has since been abrogated as acknowledged in Desert Palace, but

nevertheless states this abrogation “applies only to claims brought under Title VII of

the Civil Rights Act of 1964.” Id. at 793-94, 618 S.E.2d at 209, n.4.

      Given that sex is a protected characteristic analogous to the protected activity

under the Whistleblower Act, Newberne requires us to apply its framework to claims

of discrimination on the basis of sex under N.C.G.S. § 126-34.02.

3. Discussion

      The ALJ made the following conclusions in its Final Decision:

             17. Petitioner has easily established the first three prongs
             of a prima facie case of sex discrimination for failure to
             promote. She belongs to a protected class, she applied for
             the Tech III position, and the Department doesn’t dispute
             that Petitioner was qualified for the position. It is less
             clear that Petitioner was rejected under circumstances
             giving rise to an inference of unlawful discrimination.
             Nonetheless, the undersigned will proceed as though
             Petitioner satisfied all four elements of a prima facie case
             of sex discrimination.

             ...

             20. The Department has articulated a legitimate, non-
             discriminatory basis for not selecting Petitioner for the
             promotion. Specifically, [Doe] was the most qualified


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                                  Opinion of the Court



             candidate. [Doe] had more education (a bachelor’s degree
             as compared to Petitioner’s High School diploma), more
             supervisory experience, and was rated higher on the
             interview.

Having determined, or at least assumed, that Johnson established a prima facie case

of discrimination on the basis of sex and that NCDPS introduced evidence of a

legitimate, nondiscriminatory reason for the employment action, the ALJ next

determined whether Johnson offered direct evidence that sex was a substantial or

motivating factor in the employment action.

      “In saying that [sex] played a motivating part in an employment decision, we

mean that, if we asked the employer at the moment of the decision what its reasons

were and if we received a truthful response, one of those reasons would be” the sex of

applicant or employee. Price Waterhouse, 490 U.S. at 250, 104 L. Ed. 2d. at 287-88.

Direct evidence of sex as a motiving factor “has been defined as evidence of conduct

or statements that both reflect directly the alleged [discriminatory] attitude and that

bear directly on the contested employment decision.” Newberne, 359 N.C. at 792, 618

S.E.2d at 208-09 (citation, alteration, and internal quotation marks omitted).

Moreover, “direct evidence does not include stray remarks in the workplace,

statements by nondecisionmakers, or statements by decisionmakers unrelated to the

decisional process itself.” Id.




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                                  Opinion of the Court



      The ALJ concluded that Johnson failed to produce direct evidence that sex was

a motivating factor in the employment action, making the Price Waterhouse mixed-

motive framework inapplicable:

             30. Petitioner argues that she produced direct evidence of
             discrimination which would require the undersigned to
             employ the discrimination analysis set forth in Justice
             O’Connor’s concurrence in Price Waterhouse v. Hopkins,
             instead of the McDonnell Douglas “burden shifting”
             analysis. . . .

             31. Petitioner relies on Avery’s notation in the request for
             candidate pre-approval that “promoting Mr. [Doe] to the
             WFREO will also add diversity to an all female staff” as
             direct evidence of discrimination. Avery’s comment is not
             direct evidence of discrimination. To show discrimination
             by direct evidence, a plaintiff typically must show
             discriminatory motivation on the part of the decision
             maker involved in the adverse employment action. As
             discussed above, Avery was motivated to hire [Doe]
             because he was the most qualified candidate. Avery did not
             deny Petitioner the promotion because of her sex, nor did
             Avery promote [Doe] because of his sex.

We agree with Johnson that Conclusion of Law #31 was made in error.

      The undisputed statement made by Avery that Doe “will also add diversity to

an all female staff” is necessarily premised upon Doe’s sex.       That is, Doe adds

diversity to an all-female staff because he is a male. Avery’s use and reference to

Doe’s sex in the justification for hire, taken at face value, exhibit her view that his

sex as a male was a benefit – a benefit that Johnson, as a female, could not offer

simply by the nature of her sex. While gender may certainly “play a role in an



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                                   Opinion of the Court



employment decision in the benign sense that these are human characteristics of

which decisionmakers are aware and about which they may comment in a perfectly

neutral and nondiscriminatory fashion[,]” this is not that situation.             Price

Waterhouse, 490 U.S. at 277, 104 L. Ed. 2d. at 305 (O’Connor, J., concurring). NCDPS

argues that “Johnson’s contention that the reference to diversity alone constituted

direct evidence of discriminatory motive is misplaced[,]” and cites several federal

district court cases addressing diversity policies in support of this argument. See

Bernstein v. St. Paul Cos., Inc., 134 F. Supp. 2d 730, 739 n. 12 (D. Md. 2001); Reed v.

Agilent Techs., Inc., 174 F. Supp. 2d 176, 185 (D. Del. 2001). These cases, however,

are inapposite. This is not a challenge to an entity’s diversity policy or the existence

of a general policy promoting diversity awareness – it is a challenge to a specific

hiring decision.

      Additionally, Avery’s statement bore directly on the contested employment

action and was not made by an individual unrelated to the decisionmaking process.

It strains credulity to argue that Avery’s statement, made on an official employment

document listing the “JUSTIFICATION” for hire, does not bear directly on the

contested employment action – which candidate to hire. The ALJ found that “Avery

was the decision maker in the hiring process for the Tech III position.” Her statement

regarding Doe adding diversity to an all-female staff was made in Avery’s “Request

for Candidate Pre-Approval.”       Murray then adopted Avery’s recommendation,



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                                       Opinion of the Court



including the justification, wholesale and without making any alterations. This

remark was also not made outside of the decisionmaking process.

       For these reasons, the ALJ erred in concluding that this evidence was not

direct evidence and thus erred in failing to apply the Price Waterhouse mixed-motive

framework.1 The State argues that “assuming, arguendo, that the evidence presented

by Johnson is properly characterized as direct evidence, the virtual entirety of the

remaining evidence presented below demonstrated that the Department would have

made the same hiring decision regardless of [Doe’s] gender.” It contends, “under

either analytical framework, Johnson’s discrimination claim failed as a matter of law

and the evidence supported a finding that no sex discrimination occurred.” It is

beyond our role as an appellate court to reweigh evidence under a fundamentally

different burden-shifting framework. See Fuller v. Phipps, 67 F.3d 1137, 1141 (4th

Cir. 1995) (“Employment discrimination law recognizes an important distinction

between mixed-motive and pretext cases. The distinction is critical, because plaintiffs

enjoy more favorable standards of liability in mixed-motive cases . . . .”), overruled in

part by Desert Palace, Inc. v. Costa, 539 U.S. 90, 156 L. Ed. 2d 84 (2003). This is

solely the role of the ALJ. As such, our holding goes no further than to reverse and




       1   Johnson challenges numerous Findings of Fact, arguing these challenged findings “led [the
ALJ] to conclude that Price Waterhouse did not apply to this case.” We have concluded that, based
upon the undisputed statement in the justification for the recommendation to hire Doe, the ALJ erred
in failing to apply Price Waterhouse and that a new determination under that framework is required.
We need not address these additional Findings of Fact.

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                                    Opinion of the Court



remand for the ALJ to apply the correct framework, reweigh the evidence accordingly,

and issue a new Final Decision.

                               B. Veteran’s Preference

      Johnson also contends the trial court erred in concluding that she failed to

meet her burden of proof that NCDPS failed to properly apply a veterans’ preference.

We disagree.

      N.C.G.S. § 126-80 states:

               It shall be the policy of the State of North Carolina that, in
               appreciation for their service to this State and this country
               during a period of war, and in recognition of the time and
               advantage lost toward the pursuit of a civilian career,
               veterans shall be granted preference in employment for
               positions subject to the provisions of this Chapter with
               every State department, agency, and institution.

N.C.G.S. § 126-80 (2017). It is the applicant’s burden to “submit a DD Form 214,

Certificate of Release or Discharge from Active Duty, along with a State Application

for Employment . . . to the appointing authority.”          25 N.C.A.C. 1H.1102.   The

appointing authority is then “responsible for verifying eligibility and may request

additional documentation as is necessary to ascertain eligibility.” Id. The veterans’

preference applies in limited circumstances when an applicant is applying for a

promotion:

               (d) For promotion, reassignment and horizontal transfer,
               after applying the preference to veterans who are current
               State employees as explained under Subparagraph (a)(1)
               or (2) of this Rule, the eligible veteran receives no further


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                                 Opinion of the Court



            preference and competes with all other applicants who
            have substantially equal qualifications.

25 N.C.A.C. 1H.1104(d).

      We need not reach the question of whether the ALJ erred in concluding that

Johnson failed to meet her burden that NCDPS improperly applied the veterans’

preference. Johnson concedes that, even if we were to assume the preference was

improperly applied, that failure was harmless in her case, as she was granted an

interview and competed with all other applicants with substantially equal

qualifications. We dismiss this argument as moot.

                                 CONCLUSION

      Johnson presented direct evidence that sex was a substantial and motivating

factor in the adverse employment action taken against her. Accordingly, the ALJ

erred in failing to apply the Price Waterhouse burden-shifting framework, and we

reverse and remand for further proceedings under the proper framework. Johnson’s

argument that NCDPS failed to properly apply the veteran’s preference is dismissed.

      REVERSED AND REMANDED IN PART; DISMISSED IN PART.

      Judges DILLON and ARROWOOD concur.




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