Argument analysis: Justices worry about extending California wage-and-hours laws to offshore drilling platforms

On Tuesday, the Supreme Court heard oral argument in Parker Drilling Management Service, Ltd. v. Newton, a case about whether workers employed on drilling platforms more than three miles off the coast of California are entitled to the protections of California’s more worker-friendly wage-and-hours law or whether a federal statute, the Outer Continental Shelf Lands Act, limits them to the benefits required by the Fair Labor Standards Act. The justices seemed intrigued (and occasionally frustrated) by the unfamiliar subject matter of the case and offered spirited challenges to the arguments offered by both sides. Ultimately, however, it appeared that the majority of the justices had little appetite for opening up offshore drilling platforms to broader state regulation.

Under the terms of the OCSLA, although federal law applies exclusively to structures attached to the seabed of the outer continental shelf, “the civil and criminal laws” of adjacent states are incorporated into the governing federal law “[t]o the extent that they are applicable and not inconsistent with” federal law. Prior decisions of the United States Court of Appeals for the 5th Circuit and scattered language in Supreme Court opinions and in the statute’s legislative history have suggested that—this seemingly broad language notwithstanding—state law only becomes relevant when federal law creates a substantive or remedial gap that needs to be filled. In the case at hand, a panel of the U.S. Court of Appeals for the 9th Circuit took an alternative approach that hewed more closely to the statute’s broad language and crafted an expansive rule for applying state law on the outer shelf.

Arguing for the employer, Parker Drilling, Paul Clement urged the court to affirmatively endorse an approach that relegates state law to the sidelines unless federal law leaves a gap that needs to be filled, insisting that such a result is mandated both by the structure and purpose of the OCSLA and by the statute’s invocation of general background principles governing the law of federal “enclaves” (federal territory within states such as national parks and military bases).  Clement asked the justices to reject the 9th Circuit’s alternative approach because that approach would effectively make state substantive law applicable on the outer shelf to the same extent that it is applicable within the states, a result that would be anomalous and problematic given Congress’ decision to establish exclusive federal control over this territory.

Throughout his argument, Clement was challenged by Justice Sonia Sotomayor, who found it difficult to reconcile a requirement that there must be a gap in federal law with the broader language of the statute. In response, Clement consistently maintained that his was the natural and best reading of the statutory language when read in the context of the other provisions of the OCSLA and of other laws dealing with federal enclaves. He emphasized the structural, historical and policy reasons supporting a very limited application of state law on the outer shelf.

Much of Clement’s argument time was spent in colloquies with the court’s more liberal justices about a variety of subjects on which the justices genuinely seemed to want—or even need—more information. For example, Justice Elena Kagan expressed frustration about the degree to which the parties and the sources they cite offer very different pictures about the role state law traditionally plays in federal enclaves. Echoing this concern, Justice Ruth Bader Ginsburg seemed troubled by the lack of a definitive answer even to the question whether the California wage-and-hours laws at issue in this case apply to federal enclaves within California. Similarly, Sotomayor and Kagan pressed for additional information about the scope of a provision of the OCSLA that accords the Secretary of the Interior the authority to promulgate regulations regarding “leases” on the outer continental shelf, a provision that the employee, Brian Newton, reads broadly and relies on to explain why the 9th Circuit’s approach does not upset primary federal authority on the outer shelf. In the closing minutes of Clement’s argument, Kagan opened another window for discussion when she suggested that the 5th Circuit’s cases were more complicated and more consistent with the 9th Circuit’s approach than Parker Drilling and the United States suggest, an assertion that Clement disputed but did not have time to address fully.

Arguing for the United States as a friend of the court supporting Parker Drilling, Christopher Michel echoed Clement’s argument that the statute’s structure, particularly its heavy emphasis on exclusive federal control over the outer continental shelf, and its unbroken history of interpretation preclude the 9th Circuit’s approach. He was aided to some extent by a series of fairly oblique questions by Chief Justice John Roberts that underscored the practical difficulties and peculiarities of having federal officials enforce state wage-and-hours laws. Michel did create some distance between the government’s position and that of Parker Drilling on some of the background issues in the case—suggesting that state law has a somewhat broader role in most federal enclaves than the petitioner argues and reading the Secretary of the Interior’s authority to promulgate regulations under the OCSLA more broadly than Clement, though not broadly enough to encompass the issuance of wage-and-hours regulations.

Perhaps the most significant moment in Michel’s argument was his brief answer to a factual question from Justice Stephen Breyer asking what percentage of OCSLA cases arise in the 5th Circuit. Breyer’s question revealed concern about the degree to which a decision endorsing the 9th Circuit’s approach might disturb settled expectations. Michel’s answer—a staggering 97%–seemed to reinforce Breyer’s concern.

Representing Newton, David Frederick argued that the 9th Circuit’s approach to the statute was truer to its language while still maintaining a proper federal/state balance. As he painted the statutory scheme, fairly standard pre-emption principles govern the default applicability of state law rules on the outer continental shelf, but the Secretary of the Interior has broad authority to negotiate around state rules or pre-empt them by regulation if they interfere with the orderly or efficient operation of activities on the shelf. Though Frederick was able to point to several areas in which negotiation or agreement has been the norm, this argument never got much traction with the justices.

Led by Roberts and Justice Brett Kavanaugh, the court’s more conservative members (who had largely been silent up until this point) asked a series of questions challenging the 9th Circuit’s reading of the statutory language as acontextual and wondering about a series of anomalies that might be created by having two different systems of wage-and-hours laws incorporated into federal law. Late in the argument, Justice Samuel Alito summarized this line of questioning by asking why Congress would have gone to the trouble of crafting the unique language in the statute and emphasizing federal sovereignty if the outer continental shelf were going to be treated as if it were effectively part of the neighboring states for pre-emption purposes.

At one point late in the argument, Justice Neil Gorsuch and Alito suggested that the California rules in question in this case might not apply even under traditional pre-emption principles because the FLSA’s savings clause acts only to protect state laws that impose a higher minimum wage, not state laws that interpret a working hour more broadly than federal law. Although this argument at first blush seems narrower than Clement’s and the government’s, as it accepts for the sake of argument Newton’s reading of the OCSLA, its ramifications would actually be much broader, because it would seemingly extend to conflicts between FLSA and state law even within traditional state borders. Though there was no indication that this argument resonated with the other justices, it is worth watching to see if any justices pursue it in their opinions.

Perhaps most troublingly for Newton, some of the concerns raised by the court’s more conservative members were echoed by Ginsburg, Breyer and Kagan, all of whom appeared to be genuinely struggling with this case. Although each of these justices seemed to acknowledge that the 9th Circuit’s approach was at least as plausible as the gap-filling approach from a pure textual standpoint, they each voiced significant countervailing qualms. As mentioned before, Breyer seemed worried about the reliance interests of companies operating in the geographical boundaries of the 5th Circuit, while Ginsburg questioned whether traditional pre-emption principles are appropriate in areas in which the states have never been sovereign, and Kagan followed Alito in wondering why Congress would have applied standard pre-emption rules in such a roundabout way. Based on the tenor and substance of these justices’ questions, their votes remain very much in doubt, while there is little reason to think that any of the court’s five more conservative members are entertaining a vote to affirm. A decision is expected by the end of June.

Editor’s Note: Analysis based on transcript of oral argument.