Parker Drilling Management Services, Ltd. v. Newton

Issues 

Under the Outer Continental Shelf Lands Act’s choice-of-law provision, does state law apply only where federal law does not address the issue; or, does state law also apply when it addresses the issue and it is not pre‑empted by, or inconsistent with, federal law?

Oral argument: 
April 16, 2019

The Supreme Court will determine whether state wage-and-hour laws may supplement existing federal wage-and-hour laws for disputes arising on the Outer Continental Shelf (“OCS”) of the United States. The Outer Continental Shelf Lands Act (“OCSLA”) provides that state law that is “applicable and not inconsistent” with federal law may apply to cases on the OCS. The Fifth and Ninth Circuits, however, are split as to whether the OCSLA requires state law to only be used as a gap-filling device when federal law is not on point, or if state law may be used even when it supplements or overlaps with existing federal law. Petitioner Parker Drilling Company, Ltd. (“Parker Drilling”) argues that the text and legislative history of the OCSLA, as well as Supreme Court precedent, requires state laws to only be used as a gap-filling device when federal law does not address the issue. Parker Drilling also contends that even if state law can be used to supplement existing federal law, California wage-and-hour laws cannot be used because they are inconsistent with federal wage-and-hour laws. Brian Newton (“Newton”) counters that the text of the OCSLA allows for a more expansive use of state law that also includes supplementing existing federal law, as long as there is no conflict. Newton further asserts that California wage‑and‑hour laws can be applied here because they are relevant and compatible with existing federal wage‑and‑hour laws. From a policy perspective, this case is important because it may have implications for offshore drilling employer‑employee relationships and the responsibilities of federal officials administering the OCSLA.

Questions as Framed for the Court by the Parties 

Whether, under the Outer Continental Shelf Lands Act, state law is borrowed as the applicable federal law only when there is a gap in the coverage of federal law, as the U.S. Court of Appeals for the Fifth Circuit has held, or whenever state law pertains to the subject matter of a lawsuit and is not pre‑empted by inconsistent federal law, as the U.S. Court of Appeals for the Ninth Circuit has held.

Facts 

Beginning in January 2013, Respondent Brian Newton (“Newton”) worked for Petitioner Parker Drilling Management Services (“Parker Drilling”) on drilling platforms for approximately two years. The platforms, located in the Santa Barbara Channel, were over three miles offshore and secured to the Outer Continental Shelf’s (“OCS”) seabed. Newton’s work consisted of fourteen‑day‑long shifts, during which he could not leave the platform, where Newton would alternate between being on duty and being on “controlled standby” every twelve hours. Parker Drilling only paid Newton for the time he was on duty, and Parker Drilling allegedly did not provide meal periods.

On February 17, 2015, Newton filed a putative class-action lawsuit against Parker Drilling in California State Court, alleging that Parker Drilling violated California’s wage-and-hour laws. Although Parker Drilling paid Newton at a higher rate for on-duty time than required by both California and federal minimum wage, Newton believed that California law required Parker Drilling to also pay him for hours spent on “controlled standby.” Newton alleged, among other claims, that Parker Drilling had violated California minimum wage, overtime, and meal period laws. Parker Drilling removed the lawsuit to the United States District Court for the Central District of California and filed a motion for judgment on the pleadings, arguing that the Outer Continental Shelf Lands Act (“OCSLA”) precluded Newton’s state-law claims for wage-and-hour violations occurring on the OCS.

The OCSLA governs claims arising on “devices permanently or temporarily attached to the seabed” of the OCS, such as Parker Drilling’s drilling platforms. Under the OCSLA’s choice‑of‑law provision, the adjoining state’s laws constitute federal law and apply to the OCS and any devices attached to its seabed, but only if the state law is “applicable and not inconsistent with . . . other Federal laws.”

The district court ruled in favor of Parker Drilling, concluding that the OCSLA choice-of-law provision only applies state law out of necessity when federal law fails to address an issue. It also determined that the Fair Labor Standards Act (“FLSA”), which sets federal wage-and-hour minimums, adequately covered the relevant issues, leaving no room for California’s more protective wage-and-hour laws to operate. In accepting Parker Drilling’s argument, the district court rejected Newton’s argument that under the OCSLA, the FLSA only sets minimum standards and California’s wage-and-hour laws may also apply concurrently.

Newton appealed to the United States Court of Appeals for the Ninth Circuit. Reviewing the district court’s decision de novo, the Ninth Circuit vacated the decision, holding that the plain language of the OCSLA’s choice-of-law provision does not require a gap in federal law for state law to apply—rather, state law applies if it is “applicable and not inconsistent” with any federal law on point. The Ninth Circuit further ruled that California’s wage-and-hour laws were “applicable and not inconsistent with the FLSA” and remanded the case back to the district court.

Parker Drilling petitioned for a writ of certiorari, which the United States Supreme Court granted on January 11, 2019.

Analysis 

PROPER INTERPRETATION OF THE OCSLA

Parker Drilling argues that when Congress enacted OCSLA, Congress intended for federal law to supply all law on the OCS. Furthermore, Parker Drilling contends that Congress was aware that there would inevitability be gaps in federal law. Parker Drilling asserts that Congress resolved this issue by providing that the relevant law of the state adjacent to the OCS would be adopted as the federal law governing the issue, and it would be carried out by federal officials. Thus, Parker Drilling maintains that the OCS’s only law is federal law and that state law should only be used to fill in gaps left by federal law. Parker Drilling argues that applying state law to the OCS in any other manner conflicts with the OCSLA’s text and legislative history, as well as Supreme Court precedent.

First, Parker Drilling contends that a plain language reading of many the OCSLA’s provisions demonstrate that state law never applies on the OCS. Parker Drilling asserts that 43 U.S.C. § 1333(a)(1) puts the OCS on equal legal footing with federal territories located within a state. Thus, Parker Drilling maintains that state law can only be used for gap‑filling purposes because state law is only used for such purposes in these federal territories. Parker Drilling further argues that § 1333(a)(2)(A) further supports this interpretation because even when state law is utilized, it is not converted to federal law automatically, but rather, only to the extent that it is not offensive to federal law. Lastly, Parker Drilling contends that § 1333(a)(3) reveals that even though state law may occasionally be used in a gap‑filling capacity, Congress never intended for states to exercise their sovereign power over the OCS.

Next, Parker Drilling maintains that the OCSLA’s legislative history also indicates that state law only serves a gap‑filling role on the OCS. Parker Drilling notes that speakers at legislative hearings regarding the OCSLA urged the Senate Committee to apply state law instead of maritime law—which the original draft proposed using—when there were gaps in federal law, resulting in the current language of § 1333(a). Parker Drilling also cites the OCSLA’s accompanying Senate Report, which notes that state law will apply and be adopted as federal law “in the absence of such applicable Federal law or adequate regulation [by the Secretary of the Interior],” and comments made by Senator Cordon—the Committee Chair—noting that the Committee declined to extend adjacent states’ laws to the OCS because the OSC is beyond the power of any state and exclusively under federal control.

Finally, Parker Drilling argues that Supreme Court precedent in OCS cases supports limiting state law to a gap‑filling role. Specifically, Parker Drilling contends that the Court has previously held that § 1333(a) mandates exclusively applying federal law when there is no gap in federal law, and that state law applies only after determining that federal law does not address the relevant subject matter. Parker Drilling maintains that there is no reason to depart from this understanding, especially because Congress has amended §§ 1333(a)(1) and (a)(2)(A) without altering the Supreme Court’s interpretation.

Newton counters that a plain reading of § 1333(a), as well as the OCSLA’s statutory scheme and purpose, supports the use of state law on the OCS in more than just a gap‑filling role. Newton first argues that interpreting § 1333(a) requires that the ordinary meaning of “applicable” be used because the OCSLA does not define “applicable.” Citing Webster’s Universal Dictionary and Black’s Law Dictionary, Newton contends that the ordinary definition of “applicable” is something that is “relevant, suitable, or fit.” In this context, Newton asserts that state law is considered federal law on the OCS when it addresses the relevant subject matter, including state law that overlaps and expands on existing federal law. Newton maintains that interpreting “applicable” to mean “necessary,” as Parker Drilling advocates for, would make the phrase “not inconsistent” unnecessary language, violating statutory-construction principles.

Further, Newton argues that his definition of “applicable” is compatible with the OCSLA’s statutory scheme and purpose. Specifically, Newton contends that interpreting the term “applicable” according to its ordinary meaning is the only interpretation allowing for a consistent and logical understanding of each OCSLA provision. For example, Newton asserts that if Congress had intended for state law to merely fill in gaps in federal law, it would have been unnecessary for § 1333(a)(2)(A) to provide that state tax laws are inapplicable to the OCS because federal tax laws existed before the OCSLA was enacted. Furthermore, Newton maintains that if Congress wanted state law to only be used to fill gaps in federal law, it would have explicitly said so in the OCSLA because it has done so in other similar pieces of legislation, like the Assimilated Crimes Act. Additionally, Newton argues that while the Court has not yet considered how the term “applicable” should be understood for OCSLA purposes, other Supreme Court precedent should inform this analysis. Newton contends that the Court has consistently used the ordinary meaning of “applicable” in these cases and that this definition should also be used in the OCSLA context.

Finally, Newton asserts that the phrase “not inconsistent” should also be given its ordinary meaning. Again, citing Webster’s Universal Dictionary and Black’s Law Dictionary, Newton maintains that “inconsistent” should be defined as “incompatible or contradictory.” In the OCSLA context, Newton argues that state law is adopted as federal law unless it is incompatible with existing federal law—even if there is overlap in subject matter. Newton contends that the Court has previously applied the ordinary meaning of “not inconsistent” to determine whether a state’s law was inconsistent with federal law.

COMPATIBILITY OF CALIFORNIA LAW WITH THE FLSA

Parker Drilling argues that even if state law served more than a gap‑filling role, California wage‑and-hour laws do not apply to the OCS because it conflicts with the FLSA’s federal wage-and-hour law. For example, Parker Drilling points to the difference between the federal minimum wage, $7.25, and California’s minimum wage, $12.00. Parker Drilling contends that this inconsistency is especially clear in the context of the OCSLA because California’s minimum wage-law would be adopted as federal law, and it is logically impossible for one sovereign to establish two different minimum‑wage laws. Furthermore, Parker Drilling also asserts that California’s rules on sleep and off-duty time are inconsistent with the relevant federal rules. Parker Drilling maintains that because Newton never alleged that Parker Drilling violated the FLSA and, Newton filed his claims solely under California law, it demonstrates that California’s rules are incompatible with the federal rules. Parker Drilling notes that under federal law, Newton worked 84 hours in a standard work week, but under California law, Newton worked 168 hours in a standard work week. This inconsistency, Parker Drilling asserts, demonstrates a fundamental discrepancy between federal law and California law. Finally, Parker Drilling argues that the FLSA savings clause—which provides that if state and federal law conflict, the more protective law may be used—only applies when there is an inconsistency, and thus, can never be triggered under the OCSLA because state law may never be used when it is inconsistent with federal law.

Newton counters that California wage-and-hour laws do apply to the OCS because they are “applicable” in this context—they relate to the issue at hand and are consistent with the FLSA. First, Newton argues that California’s wage-and-hour laws are applicable on the OCS because California has previously applied its wage-and-hour laws offshore. Next, Newton contends that although California’s wage-and-hour laws are more protective than their federal equivalents, this fact does not render California law incompatible or inconsistent with federal law in this case because the FLSA savings clause explicitly provides that state wage‑and‑hour laws that go beyond federal standards override the FLSA. Newton asserts that Department of Labor (“DOL”) regulations provide room for States to enact higher standards that are not overridden or nullified by the FLSA and that this view was espoused by the DOL in a recent opinion. Thus, Newton argues that the FLSA’s savings clause applies in this case and requires that Parker Drilling comply with the higher standards set forth in California’s wage-and-hour laws. Finally, Newton contends that the Court’s prior interpretation of the FLSA savings clause demonstrates that there is no inconsistency between California wage-and-hour laws and the FLSA. In that case, Newton asserts that the logic of that case, where the Court held that two federal wage-and-hour laws setting different minimum wage standards for federal contractors were not inconsistent because it was possible to comply with both, applies with equal force in this case.

Discussion 

IMPACT ON EMPLOYER-EMPLOYEE RELATIONSHIPS

The United States, in support of Parker Drilling, argues that applying California wage-and-hour laws under the OCSLA’s choice-of-law provision will disrupt employer‑employee business relations on the OCS. Specifically, the United States asserts that applying California law will cause drilling employers to either double their labor costs, reduce employee wages, or restructure employee work schedules. Freeport-McMoRan Oil and Gas LLC, et al. (“Freeport”), also in support of Parker Drilling, maintains that employers and employees on the OCS have long negotiated compensation and benefit agreements—typically more favorable than those in non-OCS industries—with a shared belief that state wage-and-hour laws did not apply under the OCSLA. Additionally, Freeport contends that applying state law to the unique work environment of the OCS would make these work arrangements impractical. Furthermore, Freeport argues that applying state wage-and-hour laws on the OCS will subject employers and employees to inconsistent obligations depending on the adjacent state. The Chamber of Commerce of the United States (“Chamber of Commerce”), also in support of Parker Drilling, asserts that even the definition of “employee” under state law could dramatically affect employers’ obligations. Such differences in state laws, the Chamber of Commerce maintains, will significantly disrupt company-wide offshore compensation arrangements. Lastly, Freeport and the Chamber of Commerce both contend that the possibility of retroactive liability under state wage-and-hour laws could result in a windfall to employees, despite employers’ compliance with the FLSA.

Newton counters that OCS drilling companies also maintain onshore operations, which are both physically and operationally linked to the companies’ offshore operations, and that applying the same legal standards to both operations would increase cohesion. Newton further argues that applying the same wage-and-hour standards to offshore and onshore operations benefits both employers and employees because it will allow employers to develop work schedules that promote both operational efficiency and worker safety. Moreover, Newton contends that employers would benefit from not having to keep separate financial records for offshore and onshore employees, while employees would benefit from the familiarity of California law. Newton also asserts that applying California wage-and-hour laws to the OCS would not require existing compensation agreements to be rewritten. According to Newton, compensation agreements on the OCS already apply California’s laws, including Parker Drilling’s agreements. Additionally, Newton maintains that California’s Wage Order 16 provides for both an alternative work week for offshore drilling-activities and a safe harbor from certain state wage-and-hour requirements for collectively-bargained compensation agreements that will ensure that current employer‑employee agreements are not disrupted. Newton further counters that making companies comply with different laws from different states when they already operate in multiple states is nothing new. In fact, Newton asserts, Parker Drilling already must comply with state wage-and-hour laws for its onshore operations, and thus, is already subject to different minimum standards across its company. FinallyNewton maintains that fears of increased lawsuits are overstated because onshore companies deal with similar concerns, and changes to California’s wage‑and-hour laws have not negatively impacted those companies by creating windfalls for workers or vast retroactive liability.

EFFECT ON THE ADMINISTRATIVE BURDEN OF ENFORCING THE LAW

The United States contends that using state law in more than a gap-filling role would require that the DOL learn and enforce many states’ complex wage-and-hour laws that provide for higher standards than the FLSA. The United States further asserts that numerous federal laws applicable to the OCS and administered by federal agencies have saving clauses like the one in the FLSA, which could result in the widespread application of state laws to the OCS. Such a result, the United States argues, would increase the complexity and administrative burden of the OCS’s federal regulation. Additionally, the Chamber of Commerce maintains that federal regulation of the OCS is further complicated by the fact that regulatory ambiguities would have to be resolved using different interpretation rules depending on the state. Freeport contends that applying state law in this manner under the OCSLA would create a practical enforcement problem for federal officials, who will not be familiar with the vast array of differing state laws, thus increasing the administrative burden of enforcing the laws applicable to the OCS.

Newton responds that failing to apply state law in more than a gap-filling role would disrupt established understandings of how state laws are applied on federal enclaves. For example, Newton explains that in national parks and forests, both federal and state laws related to hunting are enforced by federal officials. Newton asserts that requiring the federal law to have a significant gap before state hunting laws could apply would turn a simple question of what state laws are applicable into a complex inquiry into the federal laws first. Further, Newton contends that there are multiple situations in which federal agencies are charged with enforcing state laws and that the OCSLA even contains provisions that ease some of the difficulties of federal administration of state laws. For instance, Newton notes that the OCSLA permits the Secretary of the Interior to either displace state laws by issuing inconsistent regulations or enter into agreements with states to help enforce the applicable federal and state laws. Thus, Newton argues that applying state law in this manner under the OCSLA would not greatly increase the administrative burden of enforcing the laws applicable to the OCS.

Edited by 

Acknowledgments 

Additional Resources