News
EMPLOYMENT NEWS: NLRB TAKES AIM AT EMPLOYEE REPAYMENT AGREEMENTS
On October 7, 2024, National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued Memorandum GC 25-01, titled "Remedying the Harmful Effects of Non-Compete and 'Stay-or-Pay' Provisions that Violate the National Labor Relations Act."
Among other topics, the NLRB memorandum addresses certain "stay-or-pay" agreements, which require employees to repay certain benefits or costs if they leave their employment within a certain set period. Common examples include agreements to reimburse the company for training costs, sign-on bonuses, relocation expenses, or educational benefits if the employee departs prematurely. According to the NLRB, such agreements may infringe upon employees' rights under Section 7 of the National Labor Relations Act (NLRA).
Employers should carefully review and, if necessary, revise these agreements to ensure compliance with the NLRA.
Key Concerns with "Stay-or-Pay" Provisions
The General Counsel views these provisions as problematic because they can deter employees from freely leaving a job, particularly when there are financial penalties for early departure. Employees may feel constrained from pursuing other employment opportunities or participating in union activities if they face financial consequences for leaving. The memorandum suggests that such provisions may act as coercive deterrents unless carefully structured to align with legitimate business needs.
Criteria for Lawful "Stay-or-Pay" Agreements
The memorandum sets out four specific conditions under which stay-or-pay provisions might avoid violating the NLRA:
Voluntary Agreement: Employees must enter into the agreement voluntarily, without feeling coerced. Employers should offer a choice, such as deferred payment options, to avoid making these provisions mandatory for employment. This helps avoid any suggestion that these provisions are merely tools to inhibit job mobility or union activity.
Reasonable Repayment Amount: "Reasonable" repayment must reflect actual costs incurred by the employer, rather than imposing excessive fees that could limit employee mobility. The NLRB is likely to look favorably upon provisions that include flexible repayment amounts or a declining balance based on how long the employee remains with the company.
Reasonable Duration: There is no defined "reasonable" stay period. Generally, the period during which an employee must remain employed to avoid repayment should align with the value of the benefit. For minor training costs, a shorter stay period is appropriate, while more substantial training investments may justify a longer timeframe.
No Repayment for Involuntary Termination: Employers should waive repayment for employees who are involuntarily terminated, especially those who are terminated without cause. Requiring repayment in these cases could be seen as punitive and may violate the spirit of fair employment practices.
Remedies for Non-Compliance
The memorandum emphasizes "make-whole" remedies for employees who suffer financial losses due to restrictive stay-or-pay provisions. This may include compensation for any wages or benefits the employee forfeited because of these agreements, as well as relief from any binding repayment obligations deemed unlawful. Employers who fail to comply with NLRB standards may face back pay awards, nullification of certain clauses, or other financial penalties.
Next Steps
The NLRB has granted employers “a sixty-day window from the date of issuance of this memorandum to cure any preexisting stay-or-play provisions that advance a legitimate business interest.” Employers should therefore review their existing stay-or-pay provisions to ensure compliance by the December 6, 2024, deadline. Suggested steps include:
Conduct an Audit: Review all stay-or-pay provisions to ensure compliance. Identify any that may appear overly restrictive or unjustified.
Amend Existing Agreements: Employers should amend any terms that may appear overly restrictive, unjustified, or coercive. Employers should consider adding clauses that waive repayment if the employee is terminated without cause and set fair repayment amounts.
Engage Legal Counsel: Given the complexity of these standards, employers should consult legal counsel to assess the enforceability and legality of these provisions.
If you have any questions about this topic or California employment law more generally, please contact our employment team
IP NEWS: FEDERAL CIRCUIT REVERSES MSJ WHERE PARTY FALSEY CLAIMED PRODUCT WAS PATENTED
In Crocs, Inc. v. Effervescent, Inc. et al., the U.S. Court of Appeals for the Federal Circuit reversed a district court's summary judgment favoring Crocs. Initially, Crocs sued Dawgs for patent infringement. Dawgs counterclaimed, alleging that Crocs falsely advertised its shoe material, "Croslite," as "patented," "proprietary," and "exclusive," thus violating Section 43(a)(1)(B) of the Lanham Act. The district court granted Crocs summary judgment, reasoning that, under the Supreme Court's decision in Dastar Corp. v. Twentieth Century Fox and the Federal Circuit's own Baden Sports v. Molten USA, such claims were about authorship and not actionable under the Lanham Act.
The Federal Circuit disagreed, holding that falsely claiming a product feature is patented, and advertising it in a way that misleads consumers about the product's nature, characteristics, or qualities, does give rise to a Lanham Act claim. The court concluded that Dawgs adequately alleged that Crocs' misrepresentations affected consumer perception of the product's qualities. Accordingly, the court reversed the summary judgment and remanded the case for further proceedings.
See Crocs, Inc. v. Effervescent, Inc. et al., Case 2022-2160 (Fed. Cir. Oct. 3, 2024)
IP NEWS: FEDERAL CIRCUIT REVERSES PTAB DECISION CONCERNING “ANALOGOUS ART” OBVIOUSNESS
The Federal Circuit, in Sanofi-Aventis v. Mylan Pharms, reversed a Patent Trial and Appeal Board (PTAB) decision invalidating a patent as obvious in light of a reference which the PTAB had found “analogous art,” even though the patent challenger had not made that argument.
The “analogous arts” test is used to determine whether a reference is relevant for the purposes of an obviousness invalidity analysis. Under this two prong test, a reference is relevant if it is from the same field of endeavor as the invention at issue, or if it is reasonably pertinent to the problem the invention is trying to solve. In re Bigio, 381 F.3d 1320, 1325 (Fed. Cir. 2004).
Departing from prior opinions where the Federal Circuit affirmed PTAB “analogous art” decisions, regardless of who made the argument, here, the Court held that the patent challenger must explicitly argue that a prior art reference is analogous to the challenged patent. Here, the patent challenger only argued that the prior art was analogous to another cited prior art reference and therefore failed to meet the necessary burden.
The Federal Circuit explained that “[i]n evaluating whether a reference is analogous, we have consistently held that a patent challenger must compare the reference to the challenged patent. This conclusion is reinforced by the purpose of the analogous art test, which is to examine whether a reference can be considered as prior art to the challenged patent in the first place.”
See Sanofi-Aventis Deutschland GMBH v. Mylan Pharms Inc., Case 21-1981 (Fed. Cir. May 9, 2023)
EMPLOYMENT NEWS: CALIFORNIA IMPLEMENTS NEW COVID-19 SICK LEAVE LAW
On February 9, 2022, Governor Gavin Newsom signed Senate Bill 114 into law, which creates Labor Code Section 248.6 and provides qualified California workers with up to 80 hours of paid COVID-related sick leave. The new law applies to employers with 26 or more employees.
The new law, which goes into effect on February 19, 2022, is retroactive to January 1, 2022, and will remain in effect through September 30, 2022. It requires covered employers to provide paid sick leave to their full and part-time employees in several specified situations, including employees who are unable to work or telework for any of the following reasons:
the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
the employee is subject to quarantine or self-isolation, or is taking care of a family member subject to quarantine or self-isolation, under federal, state, or local COVID-19 guidance;
the employee has been advised by a medical provider to quarantine or self-isolate due to COVID-19;
the employee is attending appointments for themselves or a family member to receive COVID-19 vaccines or booster shots;
the employee is experiencing, or caring for a family member who is experiencing, symptoms related to a COVID-19 vaccine or booster; and
the employee is caring for a child whose school or place of care is closed or unavailable due to COVID-19.
The amount of paid sick leave that employers must provide under the new law depends on the circumstances, including the reason for the absence(s) and the full-time or part-time status of the employee. For example, full-time employees may receive up to 80 hours (comprised of two separate 40-hour banks used for different purposes), whereas part-time employee eligibility depends on different formulas that consider their tenure and the average number of hours worked.
Employers should also be aware of several important considerations. First, this law is a supplemental benefit that provides paid sick leave in addition to what is already guaranteed under existing laws, such as the Health Workplaces, Healthy Families Act of 2014. As such, employers cannot count paid sick leave used by employees to reduce eligibility under Section 248.6. Second, employers can require that employees provide test results demonstrating COVID-19 exposure, but employees alone determine how many qualifying hours they need to use. Third, employee classifications (e.g., exempt versus non-exempt) must also be considered when determining the rate of pay to provide during qualified leaves of absence.
This new law is complex and should be carefully reviewed before employers administer it in specific situations. If you have any questions about this update or how to apply these requirements in practice, please contact the firm’s employment law experts.
EMPLOYMENT NEWS: CALIFORNIA SUPREME COURT CONCLUDES THAT MEAL AND REST BREAK PREMIUMS MUST BE PAID AT THE EMPLOYEE’S “REGULAR RATE” OF PAY, NOT THE BASE HOURLY RATE
July 15 2021: The California Supreme Court ruled that an employee’s “regular rate of compensation” for the purposes of meal and rest break penalties includes all nondiscretionary payments, not just hourly wages. This decision will have significant impact on all employers in California because (1) going forward, employers cannot simply pay the employee’s base hourly rate for meal and rest break violations, and (2) this decision is retroactive.
Under existing California law, if a non-exempt employee is not provided with a compliant meal or rest break, the employee is owed one additional hour of “premium pay.” Labor Code section 226.7(b) requires that this payment be made at the employee’s “regular rate of compensation.” The prevailing practice – which the California Court of Appeal and several federal district courts had previously found proper – has been to pay this “premium pay” at the employee’s base hourly rate.
However, the California Supreme Court in Ferra v. Loews Hollywood Hotel, LLC held that the “regular rate of compensation” for meal and rest period premium pay is synonymous with the “regular rate of pay” that is used as the basis of calculating overtime pay. An employee’s “regular rate” can be higher than the base hourly rate because it factors in all nondiscretionary payments for work in a pay period like most bonuses, commissions, incentive pay, shift differentials, and other wages. The Court held that paying the premium pay at this higher rate is consistent with the purpose behind the wage and hour laws to be protective of employees. The Court further held that its decision applies retroactively.
Accordingly, employers should immediately update their payroll practices to ensure that any premiums for meal or rest break violations are paid at employees’ regular rate of pay, and consider making retroactive payments to true up previous premium payments. Potential claims for back wages and penalties could reach back up to four years.
See Ferra v. Loews Hollywood Hotel, LLC, No. S259172 (Los Angeles County Sup. Ct.)
COMMUNITY OUTREACH: CLEAN THE COAST, APRIL 22, 2021
We consider ourselves lucky to be located mere blocks from the Pacific Ocean and given that ethics are a vital part of our profession, we do our best to carry these values outside of the office too. Please join us on April 22 at Moonlight Beach in Encinitas, as we celebrate Earth Day by helping keep our local coast and beaches beautiful. Gloves, bags, and masks will be provided.
If interested, please reach out to taylor@kzllp.com by April 20.
FIRM PRESS: TEAM SUCCESSFUL IN GETTING PTAB TO DENY INSTITUTION OF CBM PETITIONS, MARCH 18, 2021
The Patent Trial and Appeal Board (PTAB) refused to review two currency trading patents that Gain Capital Holdings Inc. has been accused of infringing.
The PTAB said it wasn’t convinced that the online trading platform operator was likely to show the OANDA patents are invalid. Gain Capital had argued that the patents’ claims are directed to nothing more than an abstract idea.
Read more on Bloomberg News.
FIRM PRESS: FORMER KIRKLAND PARTNER JOINS KONING ZOLLAR, SEPTEMBER 16, 2019
Koning Zollar LLP is excited to announce the addition of Shaun Paisley as a partner in its litigation practice. A former partner at the leading international law firm Kirkland & Ellis LLP, Shaun represents a wide range of industries in high-stakes matters, including contract disputes, employment class actions, and fraud cases. Shaun also has extensive appellate experience, having briefed and won appeals before the U.S. Supreme Court, several federal Courts of Appeals, the California Supreme Court, and the California Court of Appeal. Most notably, in DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015), Shaun successfully represented DIRECTV in its appeal to the U.S. Supreme Court concerning the enforceability of arbitration agreements. “Shaun is a fantastic addition.” said Blake Zollar. “He brings a wealth of experience and further strengthens our complex business litigation practice.”
Shaun founded his own litigation practice, Paisley Law, after relocating to Connecticut in 2017. Shaun will now head up Koning Zollar's first East Coast location in New Haven. “We’re thrilled to have Shaun join the firm,” said Drew Koning, “and we’re excited that Shaun will be opening our first East Coast office to better serve our diverse client base." "I'm delighted to join the talented team of lawyers at Koning Zollar," Shaun said. "I'm looking forward to helping the firm grow its already-thriving California litigation practice and to expand its presence to the East Coast."
FIRM PRESS: DENNIS CHILDS JOINS KONING ZOLLAR, APRIL 29, 2019
Koning Zollar LLP is excited to announce the addition of Dennis Childs to its employment law practice. A former partner at the international law firm Cooley LLP, Dennis represents a wide range of industries with their employment-law needs.
“We’re thrilled to have Dennis join the firm,” said Drew Koning. “As we continue to grow, we’re always looking to add top talent to our various litigation and counseling specialties.”
“Dennis is a fantastic addition,” said Blake Zollar, who also practices employment law at Koning Zollar. “I had the good fortune of working closely with Dennis for many years, so I know firsthand what he brings to the table. With his breadth of experience, unparalleled judgment, and practical business sense, we’re excited to welcome him to our growing team.”
Dennis is regularly named among the best in his fields of practice by various publications, including Southern California Super Lawyers (Labor & Employment), the San Diego Daily Transcript’s “Top San Diego County Attorneys” (Employment & Labor), and San Diego Magazine (Top Lawyers).
IP NEWS: FEDERAL CIRCUIT AFFIRMS PTAB DECISION THAT DICE PLAY IS AN ABSTRACT IDEA
The Federal Circuit affirmed the Patent Trial and Appeal Board’s (“PTAB”) denial of a patent application (13/078,196) on eligibility grounds holding that the claimed method of game play is an abstract idea and the special markings on the dice represent unpatentable printed matter.
See In Re: Marco Guldenaar Holding B.V.., 2017-2465 (Fed. Cir. Dec. 28, 2018, Order)
Former San Diego-based Cooley LLP litigators, Drew Koning and Blake Zollar, have come together to form Koning Zollar LLP, an Encinitas-headquartered litigation boutique that focuses on commercial, employment and intellectual property disputes.
With two decades of combined experience, Koning and Zollar have represented clients such as Amazon, Apple, Google and Qualcomm, according to a press release.
Prior to becoming an attorney, Koning was an engineer in New York and London. Zollar worked as a business litigator on a wide variety of matters including fraud, breach of contract and wage and hour class actions.
Summer is almost over, but the stream of California lawyers leaving Big Law for more modest pursuits has continued with several lawyers launching their own outfits.
Most recently, a pair of former Cooley litigators formed a new firm in Southern California called Koning Zollar, while a former Jackson Lewis partner has restarted her own shop in Alameda.
Andrew “Drew” Koning and Blake Zollar, two ex-senior associates at Cooley in San Diego, officially launched their own litigation boutique last month in nearby Encinitas. The two-partner firm handles complex commercial, employment and intellectual property disputes.
IP NEWS: FEDERAL CIRCUIT REVERSES PTAB PRECEDENT ON IPR TIME BAR EXCEPTION
The Federal Circuit overruled the Patent Trial and Appeal Board’s (“PTAB”) long-standing practice of accepting certain inter partes review (“IPR”) petitions outside of Section 315(b) of Title 35's one-year time bar window. The PTAB had held that, where the underlying district court action was dismissed without prejudice, service of the complaint does not trigger the one-year time bar. The Federal Circuit reversed and found that service of the complaint triggers the one-year time bar, even if the action is later dismissed voluntarily without prejudice.
See Click-to-Call Tech., LP v. Ingenio, Inc. et al., 2015-1242 (Fed. Cir. Aug. 16, 2018, Order)
EMPLOYMENT NEWS: JURY AWARDS $18.6 MILLION TO EMPLOYEE WHO CLAIMED WRONGFUL TERMINATION BASED ON ARREST RECORD
A San Diego jury awarded a former Allstate employee over $18 million for firing him following his arrest for domestic violence and possession of drug paraphernalia. The charges were ultimately dismissed as part of a plea deal where the former employee was ordered to attend anger-management courses. His attorneys argued that the firing violated California law barring employers from asking about or considering arrests that don't result in conviction in making adverse-employment decisions. The jury awarded the ex-employee $2.6 million in actual damages and nearly $16 million in punitive damages. Allstate has appealed the decision.
See Tilkey v. Allstate Insurance Co., No. 37-2016-00015545-CU-OE-CTL (San Diego Sup. Ct.)
IP NEWS: RULE 11 SANCTIONS OF $222,937 AWARDED AGAINST PLAINTIFF AND PLAINTIFF’S ATTORNEYS
A Californian District Court granted defendant's motions for attorney fees under 35 U.S.C. § 285 and for sanctions under Rule 11 and awarded $222,937 jointly and severally against plaintiff and plaintiff's attorneys. The court stated that "the conduct of both [plaintiff] and its lawyers in this litigation was plainly irresponsible and frivolous. . . . [E]ven though [defendant] gave [plaintiff] a [defendant] engineer's declaration, an invitation to inspect the source code at [its] offices, and the bill of materials for an accused device, [plaintiff] and its lawyers did not amend their infringement contentions (or even inspect the source code until much later). Instead, [plaintiff] boldly continued to assert its implausible (and, as the unrebutted evidence at summary judgment showed, impossible) theories of infringement. . . . Moreover, [plaintiff] failed to conduct an adequate investigation into the plausibility of its claims by refusing to do a teardown of the devices -- even after being informed that the devices did not contain or use the sensors as [plaintiff] alleged."
See Smart Wearable Tech. Inc. v. Fitbit, Inc., 3-17-cv-05068 (CAND June 27, 2018, Order)