Argument preview: The interplay of state and federal law on the outer continental shelf

On April 16, the Supreme Court will hear argument in a case that raises familiar questions of federalism and statutory interpretation as applied in an unusual setting, to a platform anchored to the seabed more than three miles off the California coast. More specifically, Parker Drilling Management Service, Ltd. V. Newton requires the court to parse the Outer Continental Shelf Lands Act to determine whether California wage-and-hour law pertains to workers employed on such platforms.

Understanding the dispute requires a dollop of history. During the first half of the 20th century, individual states and the federal government agitated for control over the submerged coastal lands bordering each state. These disputes, which had been spurred by the possibility that such lands would be mined for rich natural-resource deposits and might even eventually serve as the home to significant populations, were settled by the OCSLA and companion legislation that ceded control of coastal lands within three nautical miles of the coasts (and slightly different measures in the Gulf of Mexico) to the states and subjected the remainder of the “continental shelf” within United States jurisdiction to exclusive federal control. With a bit of hyperbole, the leading contemporaneous law review article on the new act (written by future Secretary of State Warren Christopher) was entitled “The Outer Continental Shelf Lands Act: Key to a New Frontier.”

The OCSLA expressly defines the law that applies in the “outer continental shelf,” the area under exclusive federal control. Under 43 U.S.C. § 1333(a)(1), “[t]he Constitution and laws and civil and political jurisdiction of the United States” apply on the outer continental shelf “to the same extent as if the [shelf] were an area of exclusive Federal jurisdiction located within a State.” Recognizing that federal law does not compose a complete code of criminal and civil regulation, this general rule is supplemented by the proviso that “[t]o the extent that they are applicable and not inconsistent with” federal law, “the civil and criminal laws” of each adjacent state (other than its tax laws) are considered to be part of federal law for the purpose of regulating activity in the outer continental shelf.

The Supreme Court has interpreted this provision several times but has never had an opportunity to interpret the crucial language of Section 1333(a)(2)(A) and to establish the scope of state law’s role on the outer shelf. As the parties’ briefs in this case demonstrate, in the context of this statute, “applicable” and “not inconsistent with” are amenable to vastly different interpretations with concomitantly divergent consequences for the balance of federal and state regulatory authority over individuals working on the continental shelf.

The respondent in this case, Brian Newton, worked for two years on a drilling platform operated by Parker Drilling and located in the Santa Barbara Channel. Like most of the employees on the platform, he worked on the platform for 14 consecutive days and then rotated off for 14 days. When on the platform, he worked a 12-hour shift and then spent the next 12 hours on the platform, sleeping or resting, but available to be called back into service if necessary. Under prevailing interpretations of the Fair Labor Standards Act, employees in these situations need only be compensated for the parts of the day they were actually working. In early 2015, however, California courts clarified California wage-and-hour laws to establish that employees in similar situations have broader rights to compensation for periods of “controlled standby” than they do under federal law. In light of that decision, Newton filed a putative class action seeking compensation for all the hours he spent on the platform.

The district court granted summary judgment for the employer, relying on the broader structure of the OCSLA and language from scattered appellate opinions to hold that the act only incorporates state law when it is necessary to do so to fill a significant gap in federal law. A U.S. Court of Appeals for the 9th Circuit panel reversed, holding to the contrary that the plain language of the statutory scheme extends state law to the outer continental shelf whenever such law is relevant to resolving a dispute and federal law does not preclude the coexistence of state rights and remedies. Parker Drilling sought and obtained certiorari, emphasizing an alleged conflict with the U.S. Court of Appeals for the 5th Circuit, the potential for states to create mischief if given broader authority to regulate offshore drilling, and the financial costs to the oil industry if the 9th Circuit’s interpretation prevails.

In their briefs, the parties elaborate upon but largely repeat the dueling perspectives of the lower courts. Parker Drilling argues both that California wage-and-hour law is not “applicable” to this dispute within the meaning of the act and that, for similar reasons, California wage-and-hour law is inconsistent with federal law given the OCSLA’s broad goals of establishing federal sovereignty over and a generally uniform set of federal rules for the outer continental shelf. In Parker Drilling’s view, the language of the relevant sections needs to be interpreted in light of Congress’ then-controversial decision to apply federal law rather than state law to the outer continental shelf. Parker Drilling argues that Congress’ choice to apply federal law was part of a larger decision to manage these resource-rich territories exclusively at the federal level and without significant state regulatory interference. That approach, which Parker Drilling maintains is manifest in the plain language of the choice of law provisions, is reinforced by other provisions of the act, most notably neighboring sections that specifically indicate that even where state law is borrowed it will be administered exclusively by federal officials and will not give rise to any claims of state “jurisdiction” over the outer shelf.

Given that framing, Parker Drilling asserts that state law never applies on its own terms on the outer continental shelf and only becomes relevant when federal law provides no rule of decision to regulate particular activities or transactions there. In support of that reading, Parker Drilling draws upon selected language from the OCSLA’s legislative history and prior Supreme Court opinions emphasizing that gap-filling role. Because state law only applies as a gap filler, it is not “applicable” unless such a gap exists. Similarly, because state law is never applicable on its own terms but is only incorporated into federal law under rare circumstances, different state regulatory standards on issues already discussed by federal law are “inconsistent” within the meaning of the statute even if they would pass muster under normal pre-emption principles.

The federal government, intervening as a friend of the court in support of the company, largely echoes Parker Drilling’s claims, putting special emphasis on the degree to which the statute invokes background principles about the law regulating federal enclaves (federal territory, such as military bases, located within states) and warning the Supreme Court about possible adverse consequences for that area of law if they rule for Newton.

Unsurprisingly, Newton offers a very different reading of the statute. Hewing closely to the 9th Circuit’s reasoning, he argues that OCSLA’s plain language allows a much broader role for state law in regulating activity in the outer continental shelf. Although he acknowledges that some of the legislative history and some language in prior court opinions emphasize the importance of state law in filling gaps in federal law on outer shelf, he both cites countervailing evidence that suggests a somewhat broader role for state law and argues that those sources are insufficient to import a gap-filling requirement into the statute when its plain language adopts a much broader rule. According to Newton, state law is “applicable” if it meets standard dictionary definitions of that word, such as “relevant,” “suitable,” or “fit.”

With regard to the requirement that state law only applies if it is “not inconsistent with” federal law, Newton suggests that the proper approach is to look to normal pre-emption principles and to the specific provisions of the relevant federal laws to determine whether federal law precludes the application of state law. In this case, because the FLSA contains a specific savings clause that affirmatively authorizes states to impose more stringent wage-and-hour laws, such laws are “not inconsistent with” federal law. As Newton frames the issue, his approach not only hews more closely to the relevant language but also better accords with prevailing federalism norms.

Both parties’ merits briefs succeed in raising serious questions about the other’s approach. On the one hand, Newton’s heavy emphasis on the plain language of the statute puts Parker Drilling on the defensive and may present problems for some justices otherwise sympathetic to the company’s claims. On the other hand, Parker Drilling’s approach — while not required by prior decisions of the court — is likely more consistent with the legislative and judicial history of the statute thus far, which might raise for some justices serious questions about settled expectations and disruptive economic consequences.