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Federal appeals court clarifies standard in FLSA overtime case

An employer should not have been granted summary judgment on claims for unpaid overtime because a lower court failed to use relational analysis to determine whether claimants were “administrative” employees exempt from the federal Fair Labor Standards Act, the 1st U.S. Circuit Court of Appeals has decided in reversing judgment.

The U.S. Department of Labor commenced an action in New Hampshire federal court for unpaid overtime on behalf of dispatchers and controllers of Unitil Service Corp., a subsidiary of public utility holding company Unitil Corp.

A federal trial court judge granted Unitil Service’s motion for summary judgment, concluding the employees’ “primary duty” was “directly related” to the general business operations of Unitil’s customers. Accordingly, the judge found that the employees were “administrative” and, therefore, exempt from the FLSA’s overtime requirements.

The DOL argued that the court had to employ “relational analysis” in determining whether an employee met the “primary duty” element stated in the governing regulations.

The panel in Unitil agreed.

“Accordingly, because the district court did not apply a ‘relational’ analysis comparing the business purpose of Unitil Service and/or its customers to the primary duty of the Dispatchers and Controllers, it was improvident to grant summary judgment to Unitil Service,” Circuit Judge Gustavo A. Gelpi wrote for the unanimous panel. “Unitil Service has not demonstrated that the Dispatchers’ and Controllers’ primary duty consists of work ‘directly related to the management or general business operations’ of its customers.”

DOL chalks up win

In its appellate brief, DOL attorneys wrote that the “analysis is plainly relational, and a court must analyze the relationship between the employee’s primary duty and the general business operations of the employer and (if applicable) the employer’s customers.”

In the defendant’s brief, attorney William D. Pandolph argued that the DOL was on the wrong track in demanding application of a relational standard.

“The DOL does not dispute that Dispatchers and Controllers perform only office or non-manual work. The DOL also does not dispute Unitil Service’s contention as to the primary duties of Dispatchers and Controllers,” Pandolph wrote. “Rather, the DOL maintains that these primary duties are not directly related to the management or general business operations of Unitil Service or its customers. As a matter of law, the DOL is mistaken.”

According to Pandolph, the company’s dispatchers and controllers plainly qualify as administrative employees because “the vast majority of their duties involve quality control, safety and health, and regulatory compliance, in addition to other duties that support the general operations of Unitil and its subsidiaries.”

DOL enforcement action

According to court records, Unitil Corp. owns regional utility companies providing gas and electricity to approximately 200,000 residential, commercial and industrial customers in New England. Defendant Unitil Service provides administrative services to certain subsidiaries described as “Distribution Operating Companies.”

One of the defendant’s main functions is operating the electrical grids and gas pipelines that distribute energy to the DOCs’ customers. The services are provided from centralized control rooms staffed by the “Electric Distribution Dispatchers” and “Gas Controllers.”

The company describes the duties of dispatchers as providing “24/7 monitoring and control of the electric transmission and distribution systems for all [DOCs].” Likewise, controllers are described as having “primary oversight responsib[ility] for the operation and control of the Company’s gas transmission distribution system.”

Both controllers and dispatchers also are responsible for ensuring that operations are conducted in compliance with local, state and federal laws and regulations.

In 2019, the DOL sued Unitil Service, alleging the company violated the FLSA by classifying controllers and dispatchers as administrative employees exempt from overtime requirements.