Actually, the employer reset the password on the guys iCloud account (they claim, in cooperation with the FBI). Apple pointed this out because they believe that had the phone been plugged in on a known wifi network, that it would have attempted a new backup to the account. By changing the password on the iCloud account, the phone can no longer do backups as it would need to be unlocked in order to change it in the settings. Now, whether or not this would have worked only Apple knows, and would have only been known if the account password hadn't been reset. (ie, maybe he removed his home network from the phone and never plugged it in at work, or maybe his account was full, etc.. who knows).
The password that was reset had nothing to do with the phone itself.
The FBI is asking Apple to create a separate version of iOS that allows disabling the failed passcode entry countermeasures (slowing down, permanently locking) and allow passcode attempts via bluetooth or usb (so that they can brute force it rapidly).