It doesn't seem like a bug, but rather just something that is obviously not intended.

It is using a known and intended way to generate the LB bar (by saving people when they are low) by taking advantage of a lack of a gear prior to pulling so that they are all low when the fight begins, which is a fairly logical train of thought someone could have if they were trying to exploit it and probably why it was discovered.

It is difficult to see what the solution should be. Perhaps we should just not be allowed to change gear in duties. Gear switching was an issue causing "item level cheese" in the alliance raid roulette and now that is resolved, it's being abused yet again. Maybe if we get loot in duties we should just have to upgrade after the duty is over. Or dungeons could be exempt.