Offshore Drilling Companies Can Rest Easy: Supreme Court Holds California Wage and Hour Law Inapplicable to Certain Rig Workers

On June 10, 2019, the United States Supreme Court unanimously ruled that state wage and hour laws do not apply to certain drilling rig employees working off the California coast.  The rig workers argued that California law required employers to pay them for off-work time spent on the platform, including time spent sleeping.  The Supreme Court disagreed.  In Parker Drilling Management Services, Ltd. v. Newton, the Court held that the Fair Labor Standards Act (FLSA), and not state law, applies to drilling platforms located in open waters governed by the Outer Continental Shelf Lands Act (OCSLA).  Because the FLSA addresses both standby and minimum wage claims raised by the workers, California law cannot be adopted as a surrogate federal law on the Outer Continental Shelf (OCS).

The plaintiff worked 14-day/12-hour shifts on a drilling platform located on the OCS, outside California’s territorial waters.  While his employer complied with federal law regarding the payment of standby time for the employees on its rig, it allegedly did not, however, comply with California’s minimum wage and standby laws.  The rig worker argued that the OCSLA required the application of the law of the adjacent state–California–because the act requires the application of state law that is not inconsistent with federal law.  The district court granted summary judgment for the employer, but the Ninth Circuit reversed the opinion, holding that California law applied and that state law covering standby time, which is more generous to employees, was not inconsistent with federal law.  

On appeal to the Supreme Court, the employer argued that the FLSA, and not state law, should apply to platforms on the OCS, just as federal law applies to federal enclaves on land.  During oral argument, the Justices questioned whether the FLSA’s savings clause, which is the mechanism that allows for the application of stricter state wage and hour laws, was intended to apply to a geographic area where the state has no sovereignty, such as the OCS.  The Justices also expressed concern that a ruling in favor of applying California law would conflict with 50 years of jurisprudence in the Fifth Circuit, which oversees 97% of the country’s OCS lease activity, adversely impacting the industry and labor that have relied on those decisions.

In a unanimous opinion rejecting the Ninth Circuit’s ruling, Justice Thomas wrote that the OCSLA treats the OCS as a federal enclave, and that federal law therefore applies.  The Court also reasoned that the OCLSA permits state law to be applied only when there is no federal law on point – in other words, state law was intended to serve as a gap-filler on the OCS – and held that in this case, federal law appropriately addressed the issue.  Justice Thomas further noted that unlike the traditional overlap of state and federal law, California has no jurisdiction over the OCS, and therefore it need not consider whether state law conflicts with federal law.  Because the plaintiff’s other claims were not fully reviewed by the Ninth Circuit, the Supreme Court remanded the case for the district court’s consideration of other issues.

While straight-forward in its holding, the Court’s opinion has widespread application, particularly to drilling operators and other companies operating on the OCS.  The Court’s opinion relieves employers of the burden of complying with California’s standby and minimum wage rules for employees on the OCS beyond California territorial waters.  The opinion also reinforces that the Fifth Circuit’s approach continues to apply in the Gulf of Mexico OCS as well as in Alaska and the Atlantic. 

Although this opinion provides some relief to companies operating on the OCS beyond state waters, it also confirms that state law continues to apply on the OCS when those laws are applicable and not inconsistent with other federal law.  Employers should therefore continue to carefully evaluate the employment laws in states adjacent to any work done on the OCS to ensure compliance with those laws when appropriate.  

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.