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SEVENTH CIRCUIT SAYS NUCLEAR WORKERS SATISFY FLSA’S
ADMINISTRATIVE EXEMPTION
A group of nuclear power plant workers are exempt under the Fair Labor Standards Act's overtime requirements because they had discretion and independent judgment in their jobs despite working in a highly regulated industry, the U.S. Court of Appeals for the Seventh Circuit ruled June 2 (Kennedy v. Commonwealth Edison, 7th Cir., No. 03-2971, 6/2/05). Rejecting the overtime claims of 55 employees of Exelon Generation--formerly Commonwealth Edison--the Seventh Circuit said that working in a highly regulated industry like nuclear power does not mean that workers lack discretion and independent judgment in performing some tasks for the company. The court applied the overtime rules that existed prior to the 2004 revisions to Labor Department regulations implementing the act. The court rejected the workers' argument that because a nuclear power plant is an exceedingly regulated workplace--described by the workers as "procedure driven, routine, and strictly controlled"--there was no room for the workers to exercise independent judgment. "Taken to its logical limit, such a blanket rule would prevent any employee at ComEd from falling under the exemption," Judge Diane P. Wood said for the court. "While the plaintiffs' discretion may be channeled by the regulations that apply to this industry, that does not mean ComEd employees do not exercise independent judgment." The Seventh Circuit said that employees can be covered by the administrative exemption even when they are performing ministerial or routine tasks; thus, the fact that employees have to follow some regulations and rules in performing their jobs does not mean they are exercising no judgment. "Certainly no one would contend that a tax lawyer does not exercise discretion or independent judgment just because the Internal Revenue Code contains a highly regimented set of rules," Wood explained. Workers Were Once Nonexempt
The workers are employed at five nuclear power plants now operated by Exelon Generation, and they fall into five different groups: 42 are work planners; three are lead work planners; four are first line supervisors; three are supply analysts; and three are staff specialists. Work planners are "problem solvers" who prepare and create "work packages" to facilitate repair and inspection of equipment. They determine the amount of resources necessary to complete projects and research the problems to see how they have been resolved in the past, the court said. These projects are reviewed by lead work planners who serve as middlemen between the planners and company officials. Lead planners make sure work is completed on schedule and do additional problem solving to make sure tasks are completed. First line supervisors instruct and oversee the crew of workers that carries out the packages created by the planners. Their work requires understanding the package and making supervision decisions about who will work on the package and complete the tasks. Supply analysts locate replacement parts for needed repairs, which can often be a challenge given the complexity of nuclear power plants and the fact that parts may no longer be manufactured, the court said. Staffing specialists focus on keeping the plants compliant with the Nuclear Regulatory Commission's guidelines by coordinating training for employees, testing machinery to check for possible equipment failures, and making suggestions for improvements in the department's procedures and protocols. The plaintiffs were paid salaries ranging between $61,000 and $101,000 annually. They contended that before Jan. 1, 2000, the company treated them as hourly employees--paying them time and a half for hours worked in excess of 40 in a week. When ComEd modified its payroll policy to reflect changes in the newly deregulated electric marketplace, the employees said they were improperly classified as administrative employees, exempt from the FLSA's overtime compensation requirement. In 2003, the U.S. District Court for the Northern District of Illinois granted summary judgment for ComEd, finding that under the administrative exemption's "short test" the employees were exempt. (132 DLR A-1, 7/10/03). In an earlier ruling, the court had found that the fact that the employees' pay was docked for snow leave days did not make the salary basis test inapplicable to their case. (63 DLR A-8, 4/2/03). Primary Duties Administrative
In affirming summary judgment, the Seventh Circuit said that an examination of the primary duties of the workers demonstrates the duties are related to the management policies or general business operations of ComEd, underscoring the workers' status as administrative employees exempt from FLSA's overtime requirements. "The mere fact that their advice and planning relates directly to plant operations is not enough to make them, personally, the actual production employees," Wood stated. Referring to the regulations in 29 C.F.R. § 541.205(c), Wood added that the exemption was not limited just to workers who participate in management or operation of the entire business, but also includes "those 'whose work affects business operations to a substantial degree, even though their assignments are tasks related to the operation of a particular segment of the business.' " The court said the workers are part of the administrative operations of the business because their primary task was managing the work of others, noting that they perform no physical work, but instead guide others who implement the packages. Salary Basis Intact
The Seventh Circuit also found that despite some small deviations while the plants were shifting management structures, the employees were paid on a salary basis, one of the requirements for qualifying under the administrative exemption. The workers argued that because ComEd tracked employee time and sometimes paid the plaintiffs more than their listed salaries, the resulting upward fluctuations must mean that they were hourly workers. They also argued that they are not salaried employees because ComEd's "Snow Day Policy" subjects them to an impermissible reduction in pay. Wood, however, rejected those arguments, finding that the concerns raised by the employees were not the type of problems the FLSA was attempting to remedy. "DOL is concerned more with reductions in a salaried employee's wages that are correlated with the number of hours worked than it is with increases," Wood explained. "The situation would be different if the plaintiffs' salaries were so far below their actual compensation (calculated on an hourly basis) that the 'salary' was 'nothing more than an illusion,' but that is not the case here." On the Snow Day Policy, the Seventh Circuit said that requiring workers to take a vacation day or a day off without pay in the case of inclement weather did not result in an improper docking of pay. "Being given the choice to make up the time lost is not the same as having a policy that imposes deductions for failing to show up," Wood said. "The record indicates that even if an employee had chosen to take the day off without pay, ComEd would not have reduced her salary. Instead, ComEd would have issued a check in the same amount as always, but would have reduced the employee's number of personal leave days by one. The FLSA does not prohibit this type of non-monetary deduction." The court dismissed the suggestion that an employee's salary could be reduced if there were no personal days available, pointing to evidence that ComEd had never reduced an employee's salary on this basis. Additionally, the court said the few instances where employees pay was improperly docked occurred at a time when there was a management change and those instances did not reflect a policy that would justify a change in status. "Identifying a few random, isolated, and negligible deductions is not enough to show an actual practice or policy of treating as hourly the theoretically salaried," Wood concluded "Since ComEd has reimbursed the plaintiffs for these improper, but inadvertent, deductions, it may invoke the regulation's 'window of correction.' This means that these isolated instances of deductions do not create a genuine issue of fact about the proper characterization of the plaintiffs' positions." Judges Frank H. Easterbrook and Kenneth F. Ripple joined in the decision. Dorothy A. O'Brien and Marlita A. Greve of O'Brien & Greve in Davenport, Iowa, represented the employees. Douglas A. Graham of Exelon Business Services Co. in Chicago represented Exelon/ComEd.

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