1st Circuit Court of Appeals clarifies law governing administrative exemption consistent with US Department of Labor

Date of action:                       March 22, 2023

Type of action:                      Order

Names of defendants:         Unitil Service Corp.

Background:                          On June 28, 2019, the U.S. Department of Labor filed suit against Unitil Service Corp. in the U.S. District Court for the District of New Hampshire, claiming that Unitil Service had misclassified two categories of employees – Electrical Distribution Dispatchers and Gas Controllers – as exempt from the overtime protections of the Fair Labor Standards Act and seeking back wages for those employees. Both the department and Unitil Service moved for summary judgment.

On Nov. 17, 2021, the district court entered summary judgment in favor of Unitil Service on the administrative exemption issue, concluding that the dispatchers and controllers were exempt from the FLSA’s overtime requirements. The department appealed that decision to the U.S. Court of Appeals for the 1st Circuit, arguing in part that the district court should have applied a relational analysis under the second prong of the administrative exemption test, analyzing the relationship between the employees’ primary duty and the general business operations of the employer and, if applicable, the employer’s customers.

Resolution:                             On Jan. 11, 2023, a panel of the 1st Circuit vacated the district court’s decision, stating that “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 [the administrative exemption].” In its decision, the panel applied a two-part “relational” test which asked two questions: “(1) whether the employee’s role relates to ‘running or servicing the business,’ and if so, (2) what the scope or ‘generality’ of the employee’s role is.” Unitil Service then filed a petition for rehearing, which the 1st Circuit panel granted.

On March 22, 2023, the 1st Circuit panel issued a revised opinion, which again vacated the district court’s grant of summary judgment to Unitil Service and removed the second question in the now-withdrawn opinion regarding the “generality” of the employees’ role. The 1st Circuit remanded the case back to the district court for further proceedings.

Court:                                     U.S. Court of Appeals for the 1st Circuit

Docket Number:                    No. 22-1070

Quotes:                                   “The 1st Circuit’s decision clarifies the law governing when employees are administratively exempt from the Fair Labor Standards Act’s minimum wage and overtime protections. This clarification aligns with how the U.S. Department of Labor has litigated administrative exemption cases within the jurisdiction of the 1st Circuit,” said Regional Solicitor Maia S. Fisher in Boston. “Employers should know that the department takes very seriously whether employees are misclassified as exempt under the FLSA and, as shown by this case, will aggressively litigate to ensure that workers receive the wages that they are owed.”