There is one major exception - the California Independent System Operator faces an overtime bill that could easily exceed $15 million. This liability stems not from the revised rule, but from settlement of a class-action lawsuit brought by some transmission dispatchers for overtime hours that have piled up since October 1997.

The Labor Department's so-called "FairPay" rules took effect August 23 to clarify that an exemption from overtime pay will henceforth be determined by a specific test of job duties, without regard for job titles that might suggest the worker is subject to exemption as an executive, administrator, professional, or outside sales employee.

To a large degree, the test turns on how much autonomy the employee has in making decisions, applying creativity or imagination to the task at hand, or whether he or she supervises others. The main component of the traditional test is whether an employee exercises "discretion and independent judgment" in the course of work - as distinguished from mere application of knowledge or skills.

The last major revision of the Federal Labor Standards Act occurred in 1949, but the nature of employment in a post-industrial world has changed dramatically, necessitating at least a clarification of the overtime rule.

The U.S. government claims that the revisions are equally protective, "if not more protective," of workers' overtime eligibility than under the old regulations. While about 100,000 workers are expected to lose rights to overtime pay, says the Labor Department, as many as 1.3 million more will gain eligibility. Labor unions, however, contend that the change will cut pay for up to 6 million employees who have come to rely on overtime to make ends meet. That's a debate that won’t be settled anytime soon.

The California case, by contrast, will have a very definite impact on a discrete group of workers, about 170 grid controllers, generation dispatchers, and other shift workers who have toiled in the windowless "fishbowl" control room within California ISO's Folsom headquarters and at the emergency backup center in Alhambra.

And while the case turns on an interpretation of state laws, its outcome is already being viewed with concern by utilities and grid operators around the country.

The suit was originally filed in 1999 by Mark Hardie, a control room employee who alleged that he and many other California ISO employees had been misclassified as overtime exempt [Hardie v. California ISO; Superior Court Los Angeles County; No. BC220829].

Hardie's attorneys, the Los Angeles firm of Arias, Ozzello & Gignac, followed two strategies: filing for class-action certification on behalf of several different categories of employees, while separately pursuing a representative action under the state's Business and Professions Code Section 17,200, the "unfair practices" code. Only the transmission controllers' class action gathered enough plaintiffs to proceed, more than 40 as required by law, but the overall class action was decertified in 2002 because not enough control room employees (including generation dispatchers and several other job titles) opted into the class. Hardie continued as plaintiffs' representative for employees under the Section 17,200 complaint, although the court deferred that case while taking on the transmission dispatchers' suit.

Overtime was something of a way of life at California ISO from its very beginnings. While gearing up for the start of operations - first scheduled for January 1, 1998, but postponed by necessity to April 1 - employees seemed to take up residence in meeting rooms, at their desks, or workstations. Several I had interviewed during my research for writing the Soul of the Grid corporate history of the California ISO even pointed out the places on an office floor or under a desk where they would curl up to catch a few hours of sleep during the start-up crunch.

During the first two years of operations, when the newly restructured wholesale and retail electricity markets appeared to be running smoothly, the working day extended well into the night for many employees and most managers. "Nobody had a life," recalled Beth Emery, the California ISO's former general council, who is now general manager of the San Antonio, Texas, municipal electric utility. She recounted a story of missing out on a family dinner outing, because after yet another emergency meeting, she had forgotten what restaurant she was supposed to go to. Her young son brushed aside her apologies. "But, Mom, this is perfect. You're never around. You show up late, and you completely forget where you’re supposed to be."

And then, the California energy crisis hit in May 2000, turning the next year and a half into one long, mostly miserable, working day for everyone at the ISO. Several marriages suffered divorce - a casualty of the energy crisis that has not been openly discussed in media reports or regulatory findings.

All through this time, the California ISO human resources department had considered control-room operators to be exempt from overtime eligibility. "Our attorneys' judgment at the time was that the level of decisions [controllers] have to make would make them exempt employees," said HR manager Jerry Fry.

After a trial last year, Superior Court Judge Anthony Mohr decided otherwise, finding that under California's employment laws, the task of monitoring the grid is not an exempt position. Fry explained it this way: "California standards say that 51 percent of hours in a day must be spent doing exempt-level work. The standard is 25 to 30 percent in most of the rest of the country."

California is one of 17 states where overtime rules differ from the federal regulations. According to legal experts, courts will generally find that the state standards prevail if they are tougher than federal rules.

This is how the court’s ruling may be used in other states. ISOs and control-area operator utilities around the country also classify transmission dispatchers as administrative employees, exempt from overtime. Judge Mohr, however, held, "Transmission dispatchers are not managers . . . a transmission dispatcher does not perform tasks directly related to management policies or general business operations of Cal-ISO or its customers. At best, a TD carries out the ISO's daily production affairs."

Though not determinative in his finding that dispatchers are more like production line workers than administrators, the judge described the way California ISO managers often refer to control-room employees: "The guys on the floor."

Mohr dismissed ISO arguments that dispatchers extensively use discretion and independent judgment, citing evidence and testimony that showed how constrained they are by formal protocols and written manuals. "Procedures TDs must follow include such details as what words to say in a simple conversation . . . and exactly how to prepare log entries," the judge noted. Witnesses could recall specific instances when a dispatcher failed to follow the procedures, he added. "This establishes that for most of their workday, TDs do not exercise independent judgment or discretion. Those occasions when it happens are significant enough to be etched into memory."

That ruling, finalized this past January, led to a more global settlement in which other control room employees will be able to share. The plaintiffs' attorneys are reluctant to discuss the terms of settlement, but indicated that a notice of the settlement will be distributed to affected workers by September 3. The court earlier this month approved the settlement on a preliminary basis, setting October 29 for a hearing on final approval.

The Bottom Line: Currently California ISO has set aside $15.7 million to cover the overtime claims and legal costs, although it is uncertain exactly how many workers will benefit from the settlement or how much each will receive. "Now we have to go back and figure out how to compensate them," said Jerry Fry.

Arthur O'Donnell is the Editorial Director - Newsletters for Energy Central. The Business Electric is found exclusively on Energy Central.

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