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U.S. Supreme Court Formally Adopts Fifth Circuit Standard and Precludes Application of State Wage and Hour Laws on the Outer Continental Shelf

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On June 10, 2019, the U.S. Supreme Court issued its decision in Parker Drilling Management Services, Ltd. v. Newton.  In that case, the Court resolved a “disagreement between the Fifth and Ninth Circuits” concerning the extent to which state law applies on the Outer Continental Shelf (OCS) and ruled that California state wage-and-hour laws do not apply on the OCS because the federal Fair Labor Standards Act of 1938 (FLSA) already addresses those issues.  While the Court’s holding may not be surprising to those familiar with the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq. (OCSLA), the Court’s detailed interpretation of OCSLA’s choice-of-law provision is not limited to state wage-and-hour laws and likely will be an important case in future OCSLA cases.

For context, Section 1333(a)(1) of the OCSLA extends the “Constitution and laws and civil and political jurisdiction of the United States” to the OCS and provides that federal law applies “to the same extent as if the [OCS] were an area of exclusive Federal jurisdiction located within a State.”  43 U.S.C.A. § 1333(a)(1).  Section 1333(a)(2)(A) further provides:

To the extent that they are applicable and not inconsistent with this subchapter or with other Federal laws and regulations of the Secretary now in effect or hereafter adopted, the civil and criminal laws of each adjacent State, now in effect or hereafter adopted, amended, or repealed are declared to be the law of the United States for that portion of the subsoil and seabed of the outer Continental Shelf, and artificial islands and fixed structures erected thereon, which would be within the area of the State if its boundaries were extended seaward to the outer margin of the outer Continental Shelf[.]  (Emphases added.)

The U.S. Supreme Court has routinely held that this OCSLA provision is “an explicit choice-of-law provision” and “supersede[s] the normal choice-of-law rules,” meaning parties may not contract around it even in private agreements.  Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 482–87 n.8 (1981).

In Parker Drilling, the plaintiff Brian Newton worked for Parker Drilling Management Services on drilling platforms off the California coast.  Parker Drilling paid Newton for his time on duty, but did not pay for his time on standby even though Newton could not leave the platform.  Newton filed a class action lawsuit in California state court, alleging violations of California state wage-and-hour laws, which—unlike FLSA—would have required Parker Drilling to pay him for his standby time and a minimum wage well above the federal level.  Because its platforms are subject to federal jurisdiction under the OCSLA, Parker Drilling removed the case to federal district court.

Relying on “the standard long applied by the Fifth Circuit,” first announced in Continental Oil Co. v. London Steam-Ship Owners’ Mutual Insurance Association, 417 F.2d 1030 (5th Cir. 1969), the district court granted Parker Drilling’s judgment on the pleadings because it determined the FSLA was “a comprehensive federal wage-and-hour scheme” that left no significant gap for California’s wage-and-hour laws to fill.  The Ninth Circuit vacated and remanded, holding that “no inconsistency exists between the FLSA and California wage-and-hour law because the FLSA saving clause ‘explicitly permits more protective state wage and hour laws.’”

The U.S. Supreme Court acknowledged upfront that the case presented “a close question of statutory interpretation.”  Nevertheless, relying upon the primacy of federal law on the OCS and the limited role of state law, the Court—in a unanimous opinion delivered by Justice Clarence Thomas—reversed the Ninth Circuit and held that state laws can be “applicable and not inconsistent” with federal law under § 1333(a)(2)(A) only if “federal law does not address the relevant issue.”  Put another way, the Court said, “to the extent federal law applies to a particular issue, state law is inapplicable.”  The Court did not apply traditional preemption principles, as urged by Newton, because the OCS is not, and never was, part of a State, so state law has never applied of its own force.  The Court emphasized that its interpretation is supported by the statute’s text, structure, and history, as well as its precedents.  In particular, the Court explained that extending state law writ large would render much of the OCSLA unnecessary and its interpretation is consistent with the federal-enclave model—a model that the OCSLA expressly invokes—and the historical development of the statute.

In accordance with the Fifth Circuit’s standard, the Court summed up the law as follows:  “All law on the OCS is federal, and state law serves a supporting role, to be adopted only where there is a gap in federal law’s coverage.”  Moving forward, the remaining question will be whether courts applying Parker Drilling find federal law does or does not address certain issues.  This is unlikely to be controversial where a comprehensive federal scheme like the FLSA applies, especially where the federal statute has already been described as comprehensive in caselaw.  However, it may present closer calls where the applicable federal statute is only partially on point or where federal common law has yet to describe the federal statute as comprehensive. 

The Court’s opinion can be found here.

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