Another way to remove oil is to use absorbent pads or socks. These float on top of the water and attract only oil. Place them in the inlet chamber to trap the oils before they get a chance to migrate. Check the pads often so they don't get saturated. These pads can be wrung out and reused if handled properly.
Absorbents are available at most chemical and safety supply stores.
Sludges are caked-on grease and oily dirt that build up on the bottom of the separator. They are expensive to dispose of and difficult to clean out. This can be very helpful to businesses cleaning muddy equipment. Install before the separator. The sludge should be collected in a drum and tested to determine proper disposal methods.