Once upon a time there use to be a bug in the system that allowed elite, regardless of level, to upgrade to F assuming there was space when the person checked in. This occurred at the "Do you want to check for an elite upgrade" screen and if the customer checked yes than the upgrade would be processed without regards to status (again assuming there was an seat open in the upgrade bucket.) IIRC CO said they addressed this particular bug but perhapses it is cropping up again.

mkahanek, can you offer any more details as to what happened? Was your co-worker on a full Y ticket, did he use miles to upgrade, etc.