Court Opinion

ID: 9381448
Source: CourtListenerOpinion
Date Created: 2023-03-22 21:00:21.695633+00
Date Added: 2024-06-11T17:17:32.605851
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 22-1070

              MARTIN J. WALSH, Secretary of Labor,
               UNITED STATES DEPARTMENT OF LABOR,

                      Plaintiff, Appellant,

                               v.

                   UNITIL SERVICE CORPORATION,

                      Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF NEW HAMPSHIRE

        [Hon. Landya B. McCafferty, U.S. District Judge]

                             Before

                   Gelpí, Selya, and Thompson,
                         Circuit Judges.

     Dean A. Romhilt, Senior Attorney, United States Department of
Labor, with whom Seema Nanda, Solicitor of Labor, Jennifer S.
Brand, Associate Solicitor, and Rachel Goldberg, Counsel for
Appellate Litigation, were on brief, for appellant.
     William D. Pandolph, with whom Sulloway & Hollis, P.L.L.C.
was on brief, for appellee.

                         March 22, 2023
          GELPÍ, Circuit Judge.          Compliance with the Fair Labor

Standards Act's ("FLSA") overtime pay requirements is critical to

ensuring worker protections.      Before us, Appellant, the Department

of Labor ("DOL"), seeks overtime compensation under the FLSA for

hours worked in excess of forty hours per week for two categories

of   employees -- Dispatchers       and       Controllers -- employed      by

Appellee, Unitil Service Corporation ("Unitil Service").              Unitil

Service argues that these workers are exempt "administrative"

employees under federal law and as such are not entitled to

overtime payments.   The district court found that the employees'

"primary duty" was "directly related" to the general business

operations of Unitil Service's customers and concluded that the

employees were "administrative," exempt from the FLSA, and thus

not entitled to overtime pay.           Summary judgment was granted in

favor of Unitil Service.     The DOL filed a timely appeal.           For the

following reasons, we vacate the grant of summary judgment and

remand to the district court for further proceedings consistent

with this opinion.

I. Background

          Unitil   Service   is     a   New    Hampshire    corporation   and

wholly-owned    subsidiary     of       Unitil     Corporation      ("Unitil

Corporation"), a public utility holding company that owns local

and regional utility companies providing gas and/or electricity to

approximately   200,000   residential,        commercial,    and   industrial

                                  - 2 -
customers in New England.      Unitil Corporation and its subsidiaries

do not own power plants, generate electricity, or produce any

natural gas themselves.       Unitil Service provides "administrative

and professional services on a centralized basis" to Unitil Service

subsidiaries   ("Distribution     Operating      Companies"   or    "DOCs"),

"including regulatory, financial, accounting, human resources,

engineering,    operations,     technology,      energy    management        and

management services."    More specifically, Unitil Service operates,

monitors, and controls the electrical grid and gas pipelines that

distribute electricity and gas to the DOCs' end-user customers.

This includes operating centralized electric and gas control rooms

staffed by the Electric Distribution Dispatchers ("Dispatchers")

and Gas Controllers ("Controllers") at issue here.

     a. Duties of Dispatchers

          Dispatchers    are    employed    by    Unitil    Service     in     a

centralized    work   area    known   as   Central   Electric      Dispatch.

According to Unitil Service's general position description, their

duties include:

          Provid[ing] 24/7 monitoring and control of the
          electric    transmission   and    distribution
          systems for all [DOCs]; provid[ing] outage
          management response and reporting for all
          electric   [DOCs]; and perform[ing] tasks
          associated with compliance with regulatory
          requirements including but not limited to NERC
          (National Energy Regulatory Commission), MDPU
          (Massachusetts     Department    of     Public
          Utilities), NHPUC (New Hampshire Public
          Utilities Commission) that would include

                                  - 3 -
          reporting, emergency response, notifications
          and questions regarding the electric systems.
          Monitor[ing]   electric    [software   alarm]
          systems and tak[ing] necessary actions to
          respond to current system conditions.

          In total, approximately 60% of a Dispatcher's time is

spent "perform[ing] monitoring and control of electric systems and

emergency response"; 15% in "communications and notifications";

and 25% in "regulatory reporting compliance" and "documentation."

     b. Duties of Controllers

          Controllers are employed by Unitil Service in a similar

capacity but for gas DOCs.       Their position description reads:

          This    position    has    primary    oversight
          responsib[ility] for the operation and control
          of the Company's gas transmission distribution
          system; and the managing of pipeline and peak
          shaving supplies. The incumbent must ensure
          that the system is operated within the
          constraints of Federal, State and Company
          codes and standards as well tariff constraints
          for the receipt and control of the system
          supply. This position also provides training
          and   daily   guidance   to   subordinate   Gas
          Controllers       and       Field      Services
          Coordinator[s].

As a result, approximately 60% of a Controller's time is spent

monitoring   and   controlling    gas   pipeline   systems,   supporting

"processes related to market requirements" for DOCs, and providing

"general control, confirmation, scheduling, balancing and live gas

operations"; 30% interpreting, organizing, and executing complex

assignments, assisting with training and coordination of work for

subordinate Controllers, estimating personnel needs, scheduling

                                   - 4 -
and assigning work, and managing complex projects; and 10% serving

as "[b]ack up to [the] Field Services Coordinator as needed."

                 Generally speaking, both Dispatchers and Controllers

monitor their respective systems for automated alerts or other

developments and respond accordingly to keep electricity or gas

flowing safely.1           While they do not actively control the flow of

electricity or gas, they do determine whether alerts warrant

responses such as shutting off or re-routing the flow of gas or

electricity, dispatching service crews, or communicating with

local authorities and other divisions within the company.                    Each

role       has   a   manual   that   covers     standard   responses    to   most

situations, and each role has supervisors who are available to

address major issues. Both Dispatchers and Controllers can respond

independently         to    some   situations    and   deviate   from   certain

procedures, although the extent of their decision-making authority

and the frequency with which situations require this purported

exercise of discretion are points of dispute. Both groups reported

working, on occasion, substantially over forty hours per week.

II. Procedural History

                 Following a DOL investigation into the Dispatchers' and

Controllers' work, the DOL filed suit in the District Court for

       We note that we group Dispatchers and Controllers here
       1

because the nature of their work is similar save for one monitoring
gas and the other electricity.

                                       - 5 -
the District of New Hampshire against Unitil Service alleging

violation of the FLSA's requirement that employees be paid overtime

unless    they   are   exempt.     29 U.S.C.      §§ 206-207,   213.     Each

party submitted a motion for summary judgment and the district

court -- applying the summary judgment standard -- concluded that

Dispatchers and Controllers are exempt from overtime requirements

because they are "administrative" employees under the FLSA.              U.S.

Dep't of Lab. v. Unitil Serv. Corp., 573 F. Supp. 3d 566, 580

(D.N.H. 2021).     This appeal followed.

III. Discussion

            On   appeal,   the     DOL   argues     that   Dispatchers   and

Controllers do not satisfy the FLSA's administrative exemption and

thus are entitled to overtime pay.          More specifically, the DOL

argues that the district court did not properly evaluate the job

duties of both categories of workers under the second prong of the

administrative exemption         of the FLSA's regulations, discussed

infra.2    Rather than relying on and analogizing to the relevant

regulation's list of functional areas that can be (but are not

necessarily) administrative, as the district court did, see id. at

578, 580 (relying on 29 C.F.R. § 541.201(b)), the DOL posits that

     2 The DOL also argues that the district court misapplied the
third   prong   of  the   administrative  exemption   test -- the
requirement that an employee's "primary duty include[] the
exercise of discretion and independent judgment with respect to
matters of significance." 29 C.F.R. § 541.200(a)(3).

                                    - 6 -
the district court should have instead engaged in a "relational"

analysis      to   assess    whether   the   Dispatchers'    and   Controllers'

primary duties are "directly related to the management or general

business operations" of either their employer (Unitil Service) or

their employer's customers (the DOCs), 29 C.F.R. § 541.200(a)(2).

We agree, acknowledge that our circuit's precedent on this issue

is limited, commend the district court for attempting to parse out

our     limited    jurisprudence,      clarify      the   application    of   the

"relational" analysis test, vacate the grant of summary judgment

for Unitil Service, and remand to the district court to apply the

test we now outline.

      a. Standard of Review

              This case comes before us at the summary judgment stage.

Thus,    we   review   the    issues   de    novo   and   draw   all   reasonable

inferences in favor of the nonmovant -- here, the DOL.                   Cash v.

Cycle Craft Co., 508 F.3d 680, 682 (1st Cir. 2007).                      "Summary

judgment is appropriate only when the record 'show[s] that there

is no genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.'"                Id. (quoting

Fed. R. Civ. P. 56(c)).

      b. The FLSA

              The FLSA requires that covered employers pay certain

employees an overtime premium "at a rate not less than one and

one-half times the regular rate at which [they are] employed."

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29 U.S.C.    § 207(a).       Employees    "in   a    bona    fide   executive,

administrative, or professional capacity[,] . . . as such terms

are defined and delimited from time to time by regulations of the

Secretary," however, are exempt from these provisions, and thus

not   entitled   to   overtime    payment.      Id. § 213(a)(1)      (emphasis

added).     The Secretary's regulations define those working in an

"administrative" capacity to include those employees:

            (1) Compensated on a salary or fee basis
            pursuant to § 541.600 at a rate of not less
            than $684 per week . . . exclusive of board,
            lodging or other facilities;
            (2) Whose primary duty is the performance of
            office or non-manual work directly related to
            the management or general business operations
            of the employer or the employer's customers;
            and
            (3) Whose primary duty includes the exercise
            of discretion and independent judgment with
            respect to matters of significance.

29 C.F.R. § 541.200.      Thus, to fall under the exemption, each of

the three prongs must be satisfied and the employer bears the

burden of establishing each prong.           See Reich v. John Alden Life

Ins. Co., 126 F.3d 1, 7-8 (1st Cir. 1997).          The DOL has promulgated

additional regulations that define certain of the terms in the

second and third prongs.          See, e.g., 29 C.F.R. §§ 541.201-202;

541.700.      The   regulations    also   describe    relevant      factors   to

consider in determining whether those same prongs are satisfied.

Id. §§ 541.201-202.      And the regulations further include a list of

hypothetical     employees    (with   corresponding         hypothetical      job

                                    - 8 -
descriptions)     meant      to   illustrate     circumstances      in    which   an

employee may or may not qualify for the administrative exemption.

Id. § 541.203.

            Before us, the parties do not dispute that the first

prong -- the     sufficient        compensation      requirement -- is          met.

Instead, the dispute turns on whether the remaining two prongs

were satisfied.        Because we vacate on the second prong, see id.

§ 541.200(a)(2),        we   do   not    address     the   third    prong -- the

discretion-and-independent-judgment prong.

       c. The Second Prong

            For present purposes, whether both classes of employees

can be properly characterized as "administrative" employees -- and

thus   exempt    from    overtime    payment -- turns       on     whether     their

"primary duty is the performance of office or non-manual work

directly related to the management or general business operations

of the employer or the employer's customers."                      Id. (emphases

added).

            Certain of the terms used in 29 C.F.R. § 541.200(a)(2)

are    defined   and    explained       in   other   sections      of    the   DOL's

regulations.     "Primary duty" is defined to mean "the principal,

main, major or most important duty that the employee performs,"

and generally means that the employee spends at least 50% of his

or her time performing the duty.             Id. § 541.700.     And although the

regulations do not define the phrase "directly related to the

                                        - 9 -
management or general business operations," they do make clear

that the phrase "refers to the type of work performed by the

employee."     Id. § 541.201(a).         They also make clear that an

employee will qualify as "administrative" under the second prong

only if he or she "perform[s] work directly related to assisting

with the running or servicing of the business, as distinguished,

for example, from working on a manufacturing production line or

selling a product in a retail or service establishment."                  Id.

(emphasis added).          And separately, the regulations state that

"[w]ork   directly    related     to   management    or   general   business

operations" can include, "but is not limited to, work in functional

areas   such   as   tax;    finance;   accounting;   budgeting;     auditing;

insurance; quality control; purchasing; procurement; advertising;

marketing; research; safety and health; personnel management;

human   resources;    employee     benefits;   labor      relations;   public

relations[;] government relations; computer network, internet and

database administration; legal and regulatory compliance; and

similar activities."        Id. § 541.201(b) (outlining a non-exhaustive

list of examples of "[w]ork directly related to management or

general business operations").

           Our jurisprudence interpreting and applying the second

prong is limited.     We clarify here, however, that the analysis is

indeed -- as described by the DOL -- a "relational" one.                   At

bottom, the analysis asks whether the employee's primary duty is

                                    - 10 -
"directly     related"   to   the    "management     or   general   business

operations of the employer."          Id. § 541.200(a)(2).      It is thus

necessary to clearly identify the primary duty of the employee(s)

in question, and to determine whether that duty is directly related

to "running or servicing of the business."           Id. § 541.201(a).

            Our precedents and those from other circuits illustrate

that, in conducting this analysis, it is often useful to identify

and articulate the business purpose of the employer and (if

necessary) the employer's customers.              By "business purpose" we

mean the production or provision of "the very product or service

that the" employer or its customers "offers to the public."              John

Alden, 126 F.3d at 9; see Bigger v. Facebook, Inc., 947 F.3d 1043,

1053   (7th    Cir.   2020)   (referring     to    same   concept   as   "the

enterprise's core function" or "central revenue generator"); Dewan

v. M-I, L.L.C., 858 F.3d 331, 336 (5th Cir. 2017) (referring to

"the commodity or commodities, whether goods or services, that the

enterprise exists to produce and market" (quoting Dalheim v. KDFW-

TV, 918 F.2d 1220, 1230 (5th Cir. 1990))); Bothell v. Phase

Metrics, Inc., 299 F.3d 1120, 1127 (9th Cir. 2002) (referring to

"the goods and services which constitute the business' marketplace

offerings").    Having done so, one may then compare the employee's

primary duty to the business purpose of the employer and/or the

employer's customers to determine whether the employee's primary

duty directly relates to the business purpose or, conversely, is

                                    - 11 -
directly related to the "running or servicing of the business."

29 C.F.R. § 541.201(a).

             Put    slightly    differently,        the    "relational"        analysis

considers whether an employee's primary duties are "ancillary" to

the    business's     "principal    production          activity"    or    "principal

function."     See John Alden, 126 F.3d at 10; Hines v. State Room,

Inc., 665 F.3d 235, 242 (1st Cir. 2011) (considering whether the

employees'    duty     was     ancillary     to    the    business's       "principal

function"); Cash, 508 F.3d at 684-86 (not mentioning "ancillary"

test   but   evaluating      relationship       between     employee      duties   and

business purposes).          John Alden provides a clear example of this

mode of analysis.         There, we concluded that "the activities of the

marketing representatives [at issue] [we]re clearly ancillary to

John Alden's principal production                 activity -- the creation of

insurance     policies -- and          therefore          could     be     considered

administrative       'servicing'    within        the   meaning     of"   an    earlier

version of the regulation at issue.                 John Alden, 126 F.3d at 10

(likening marketing representatives' activities to "'representing

the    company'     and    'promoting       sales'" -- examples           of   "exempt

administrative work").

             This analytical framework has its roots in what has

sometimes    been     referred    to   as    the    "administrative-production

dichotomy."        See id. at 9-10.         That dichotomy can be useful in

assessing whether the second prong of the administrative exemption

                                       - 12 -
has been satisfied, but the dichotomy itself is not dispositive

and should be employed "only to the extent it clarifies the"

broader question of whether an employee's work is directly related

to the running or servicing of the business.               Bothell, 299 F.3d at

1127; see Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 123 (4th

Cir. 2015) (explaining "that while production-type work is not

administrative,       not       all      non-production-type           work       is

administrative" (emphases in original)); see also Schaefer v. Ind.

Mich. Power Co., 358 F.3d 394, 402-03 (6th Cir. 2004); Defining

and   Delimiting    the     Exemptions    for    Executive,       Administrative,

Professional, Outside Sales and Computer Employees, 69 Fed. Reg.

22122, 22141 (April 23, 2004) (codified at 29 C.F.R. pt. 541).

           i. Dispatchers and Controllers

           Having explained the "relational" analysis test, we now

turn to the case of Dispatchers and Controllers.                   As an initial

matter, we note that areas like the energy sector -- where power

is the product, but transmission and certain other services are

inextricably      linked -- and        separately     incorporated       services

corporations (common in industries like healthcare, insurance, and

utilities) can create confusion on how to apply this analysis.

           Turning to the facts before us, we ask whether Unitil

Service   has     conclusively        shown    that   the    Dispatchers'        and

Controllers'      primary     duties     are    "directly     related       to   the

management   or    general     business       operations    of"    either    Unitil

                                      - 13 -
Service (the employer) or the DOCs (the employer's customers).

See   29 C.F.R.     § 541.200(a)(2).              If   the     Dispatchers'   and

Controllers' primary duties relate to Unitil Service's business

purpose, in that they produce the product or provide the service

that the company is in business to provide, the second prong is

not satisfied.     Id.

            We divide our inquiry into two parts. To begin, we first

assess whether the Dispatchers' and Controllers' primary duties

directly relate to the management or general business operations

of Unitil Service.         The district court found that the primary

duties of the Dispatchers and Controllers are to provide the very

services that Unitil Service is in the business of providing.                 The

district court's finding in this regard is unassailable.                   Unitil

Service's    is   in     the    business     of   providing     operational   and

administrative services to its subsidiaries.                 The primary duties

of the Dispatchers and Controllers are to provide these various

services -- to operate and monitor their respective electrical

grids and gas pipelines for the DOCs -- and thus are the very

services that Unitil Service is in business to provide.                   Because

the Dispatchers' and Controllers' primary duties relate to Unitil

Service's business purpose, their work for Unitil Service -- at

least when considered in direct relation to Unitil Service's

business    purpose -- does            not   satisfy     the     second   prong.

Consequently,     the    only    way    Unitil    Service -- which    bears   the

                                       - 14 -
burden of establishing that an employee falls under the FLSA's

"administrative" exemption -- can satisfy the second prong is to

show that the Dispatchers' and Controllers' primary duties are

directly related to the management or general business operations

of the DOCs (the employer's customers).

              To determine whether Unitil Service can satisfy the

second prong in this regard, we turn to whether the Dispatchers'

and   Controllers'    primary   duties     relate     to   the   "running    or

servicing" of the DOCs. The district court assessed this question,

but it did not do so through the lens of the "relational" analysis.

In other words, the court did not compare the primary duties of

the Dispatchers and Controllers to the DOCs' business purposes to

determine whether the employees' duties are directly related to

the   DOCs'    business   purposes    as   opposed    to     general   business

operations.      Instead, the district court looked to the list of

functional areas in Section 541.201(b) that can be, but are not

necessarily,     administrative      depending   on    the    duties    of   the

employees.     Unitil Serv. Corp., 573 F. Supp. 3d at 578.             The court

concluded that, because the Dispatchers' and Controllers' primary

duties were analogous to the functional areas of "regulatory

compliance," "quality control," and "health and safety," their

work satisfied the requirements of the second prong.                   Id.; see

also 29 C.F.R. § 541.201(b) (listing examples of the functional

areas related to "management or general business operations").

                                  - 15 -
               But simply analogizing the Dispatchers' and Controllers'

duties to the functional areas outlined in 29 C.F.R. § 541.201(b)

was insufficient.          As the DOL points out, although the position

description       for    Dispatchers    includes    "tasks    associated   with

compliance with regulatory requirements," the record, including

the "principal accountabilities" section of the job description,

does    not    indicate    that   either   Dispatchers   or    Controllers   do

anything beyond engaging in their daily operational duties "within

the limits of the applicable Federal, State and Company codes and

standards."       The same is true for engaging in work subject to

certain       compliance    and   safety   standards.        Further,   neither

Dispatchers nor Controllers play a role in testing or evaluating

the DOCs' distribution or pipeline systems outside of the day-to-

day monitoring of these systems.            Dispatchers and Controllers do

not design or plan the systems, nor do they analyze how they work

or how they can be improved.           See Renfro v. Indiana Michigan Power

Co., 370 F.3d 512, 518 (6th Cir. 2004) (finding that because the

"planners" at issue "creat[ed] plans for maintaining equipment and

systems in the nuclear plant," their work was "ancillary" to the

power    company's       "principal    production   activity    of   generating

electricity").          Accordingly, while analogizing to the functional

areas may be useful in some cases, here, these analogies fail to

capture all that is encompassed by the "relational" analysis.

                                       - 16 -
              Moreover, Unitil Service's organizational makeup reveals

that the company has entirely separate departments for the very

functional areas outlined above.              These include departments for

"Business Continuity & Compliance" (employing a number of health

and    safety     compliance       specialists),        "Financial      Services"

(employing      auditors     and   lawyers),      and   "Regulatory     Services"

(employing      regulatory    analysts).         That   the   Dispatchers'     and

Controllers' duties may, in a limited or superficial way implicate

health, safety, and quality control tasks, does not mean that this

was their "primary duty."

              Unitil Service would have us look to an unpublished case

on which the district court relied, Zelenika v. Commonwealth Edison

Co., No. 09 C 2946, 2012 WL 3005375 (N.D. Ill. July 23, 2012).

Zelenika involved "dispatchers" whose job was to "monitor [an

electric utility's] power distribution system, oversee service to

the system, and respond to customer complaints and power outages."

Id. at *2.      The court determined that the employer satisfied the

second prong by analogizing to the functional areas in Section

541.201(b) rather than engaging in a "relational" analysis between

the primary duty of the role and the business of the utility.                  See

id. at *13.     However, as discussed supra, it is not enough to look

only at the list of job functions under Section 541.201(b). Courts

must   also     consider     whether    the     employee's    primary   duty   is

contributing to the "running or servicing of the business."

                                       - 17 -
IV. Conclusion

            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.      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 such that the employees fall under

the second prong of 29 C.F.R. § 541.200.           We leave it to the trier

of fact to apply the "relational" analysis required by the second

prong of the test.     At this stage, genuine issues of material fact

remain unresolved.       Accordingly, we vacate the decision of the

district court granting summary judgment to Unitil Service and

remand for further proceedings consistent with this opinion.                No

costs are awarded.

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