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High court salary ruling seen having broader impact

Offshore drilling rig

The implications of a ruling in which the U.S. Supreme Court refused to extend California’s wage-and-hour law to offshore drilling rigs extend beyond the employment realm to environmental and other laws, experts say.

In Parker Drilling Management Services Ltd. v. Brian Newton, the high court unanimously ruled on June 10 that the 1953 Outer Continental Shelf Lands Act extends federal law to the Outer Continental Shelf’s subsoil and seabed and all its attachments, meaning an oil rig worker was not entitled to salary for time he spent on standby despite state law.

Mr. Newton worked for Houston-based Parker, which filed for bankruptcy protection in December, on drilling platforms off California’s coast, with 14-day shifts involving 12 hours per day on duty and 12 hours per day on standby, during which he could not leave the platform, according to the decision delivered by Justice Clarence Thomas. Although he was paid “well above” the California and federal minimum wages for his time on duty, he was not paid for his standby time, according to the ruling.

Mr. Newton filed a class action in California state court alleging violations of several California wage-and-hour laws and related state court claims, including California’s minimum wage and overtime laws, which would have required Parker to compensate him for the time he spent on standby. Parker removed the case to U.S. District Court in Los Angeles.

The disagreement between the litigants centered on whether California laws applied.

The District Court ruled the federal Fair Labor Standards Act, not California state law, applied based on a precedent established by the 5th U.S. Circuit Court of Appeals in New Orleans, and ruled in Parker’s favor. But the 9th U.S. Circuit Court of Appeals in San Francisco vacated the lower court’s ruling and remanded the case, ruling state law was applicable.

The Supreme Court agreed with the District Court. “Although this is a close question of statutory integration, on the whole we find Parker’s approach more persuasive,” said the ruling.

“Under Newton’s interpretation, state law would apply unless pre-empted by federal law, meaning that the OCS would be treated essentially the same as the adjacent State. But that interpretation would render much of the OCSLA unnecessary,” said the ruling.

Under the standard the decision is now adopting, “if a federal law addresses the issue at hand, then state law is not adopted as federal law on the OCS.”

In this case, federal law already addresses the issue of whether Mr. Newton is entitled to overtime, and California law does not apply, leaving “no significant gap for state law to fill,” the ruling said.

Attorneys in the case did not respond to requests for comment.

The vast majority of oil workers work in the Gulf of Mexico, and so would come under the jurisdiction of the 5th Circuit, whose doctrine is already consistent with the Supreme Court’s Parker ruling, according to experts.

It impacts a “pretty narrow segment” of the oil industry, “but it’s very important to that narrow segment,” said Chuck Webber, a partner with Faegre Baker Daniels LLP in Minneapolis.

The ruling’s major impact “is to maintain consistency” because it affirms the 5th Circuit, said Hyland Hunt, of Deutsch Hunt PLLC in Washington, which submitted an amicus brief in the case on behalf of the U.S. Chamber of Commerce.

Under California law, time beyond eight hours a day is paid on a time-and-a-half basis, so a contrary ruling would have been considerably expensive, said Michael Kelly, a partner with Squire Patton Boggs in San Francisco.

“It’s a significant decision with regards to the extent of state law onto the outer continental shelf, which is typically defined as beyond the territorial waters of the state,” said David B. Jordan, a shareholder with Littler Mendelson P.C. in Houston.

“It remains to be seen how courts interpret the Supreme Court’s instructions as to what state laws are consistent or not consistent with applicable federal law on the continental shelf,” he said.

However, Mr. Jordan added, “I think that the decision will continue to be explored by the plaintiffs’ bar in states like California and Alaska, and other Pacific states where they have very specific state employment laws.”

But the ruling “is bigger than employment law cases because there are a variety of laws that could apply,” including environmental, “which are ripe for exploration through litigation,” said Mr. Jordan. “The Supreme Court did not narrow their conclusion to just labor laws,” he said.

The decision “is going to apply to things beyond employment law,” including environmental law, said James N. Markels, a senior associate with Jackson & Campbell P.C. in Washington.

“It’s certainly possible that absent this ruling, plaintiffs could have argued that some state environmental laws could have applied,” said Ms. Hunt.

“That’s one of the things that was brought up in the case. If the court had ruled otherwise, there could have been the potential for states opposed to offshore drilling to adopt new laws” that would have made it economically infeasible or difficult, she said.

H. Allan Black, a partner with Winston & Strawn LLP, said, “We’re on the verge of a tremendous expansion” of renewable wind energy generation offshore of New England, New York and California, which will require workers for maintenance and installation, and the ruling’s potential reach includes these projects.

However, not only is the ruling specific to the oil industry, it is specific to the 9th Circuit and to a “fairly narrow” federal enclave doctrine, which “makes it difficult to determine its impact,” said Ryan R. Jones, an associate with Fisher & Phillips LLP in Seattle.


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