Pennsylvania Litigation Blog : Pennsylvania Litigation Lawyer & Attorney : Barley Snyder Law Firm : Serving Lancaster, York, Reading, Hanover, Malvern

In January of this year we sent a Client Alert regarding proposed rule making by the National Labor Relations Board (“NLRB”) which, if adopted, would require employers to post a notice informing employees of their rights under the National Labor Relations Act (“NLRA”). The proposed rule has now become final. As we noted then, this is a move by the Obama Administration to ensure that all employees of businesses covered by the NLRA will be able to read about their rights to unionize on their employer’s bulletin board in a notice that must be posted at all times in the workplace. The notice, among other things, states that employees have the right to:

- Organize a union to negotiate with the employer concerning wages, hours and other terms and conditions of employment
- Form, join, or assist a union. 
- Discuss wages, benefits and terms and conditions of employment or union organizing with coworkers or union.
- Take action with one or more coworkers to improve working conditions by raising work related compalints directly with the employer or with a government agency and seek help from a union. 
- Strike and picket.
- Choose not to do any of these activities.
 

 

The poster also informs employees of their right to solicit during their non-work time, to be free of interrogation and discrimination related to union activities, and to wear union hats, buttons, tee shirts, and pins. It also informs employees that the employer cannot promise or grant benefits to discourage employees from unionizing, or spy on or videotape peaceful union activities.

 

On September 8, 2011, members of the United States Congress passed the Leahy-Smith America Invents Act (H.R. 1249) with a vote of 88-9, without amendment to the House bill passed in late June. The bill is awaiting signature by President Obama. Once the bill is awaiting a signature by President Obama, it will introduce sweeping patent reform, the most notable being a change from a first to invent system.  Some provisions become effective immediately while others will not take effect for at least one year after the date of enactment.  The following is a brief overview of some of the key provisions which may impact your business or practice.

These provisions will take effect immediately and are applicable to pending proceedings:

False Marking

Qui tam actions brought by affected private parties for false marking suits will be eliminated. Going forward, only the U.S. government can sue for statutory damages, although persons who have suffered a "competitive injury" from false marking can bring a civil action for damages "adequate to compensate for the injury."

A prior commercial use defense will be available against an infringement assertion based on a patent issued on or after the date of enactment. The defense is personal and can be raised if the defendants’ commercial use that would otherwise infringe a claimed invention occurred one year before the filing date of the application of the patent.

Failure to disclose the "best mode" in a patent will no longer be a basis for invalidating the patent or for ruling a patent unenforceable. This will be applicable to new cases only and will practically eliminate the best mode requirement for patent applicants.

Inter partes reexamination is replaced with inter partes review (IPR) proceedings that will be adjudicated by administrative patent judges. The old “substantial new question of patentability" standard for reexamination is changed in IPRs  to "a reasonable likelihood that the requestor would prevail" with respect to at least one of the challenged claims.

The new statute also prohibits the initiation of an IPR proceeding, if the petition is filed after the petitioner (or the real party in interest) has challenged validity in a declaratory judgment action. However, if the declaratory judgment action is filed after filing a petition for the IPR, the declaratory judgment action will be stayed, unless, for example, a counterclaim for patent infringement is initiated.  Additionally, to open an IPR, a petitioner must file a petition for an IPR proceeding within one year of a civil action asserting infringement.

 

The following provisions will take effect 10-days after enactment:

A 15-percent surcharge will be added to all patent-related fees, including patent maintenance fees.

The USPTO will be authorized to proceed with its "Track I" program for fee-based prioritized examination. That program was earlier proposed by the USPTO as reported in previous client alerts here and here, but not implemented because of budgetary constraints The fee to enter Track I will be $4,800 for large entities or $2,400 for small entities.

The following provisions will take effect 1-year after enactment:

Transition From a First to Invent System to a First to File System:

Under the current system, a patent is granted to the inventor who first invents the relevant invention. With the change in legislation, patents will be granted to the person who first files for a patent, regardless of whether he or she was first to invent the product. 

The shift to a first to file system changes the requirements for novelty, under a new §102 wherein patents, printed publications, public uses, sale of the invention that predate the patent application's effective filing date constitute prior art.  There will be one major exception though, wherein prior art does not include disclosures made by an applicant or obtained through the applicant 1 year or less before the effective filing date of the claimed invention.

New Post Grant Review Proceedings and U.S. Patent and Trademark Office (USPTO) Practices:

This bill retains existing ex parte reexamination, adds preissuance submissions by third parties,  and adds post-grant review. Note also that the Act immediately expands post-grant inter partes reexamination renamed as inter partes review as described above

 

The inter partes review, or lawsuits where all parties are given reasonable opportunity to attend and be heard in hearings, will be implemented. Within inter partes review as part of the American Invents Act, there must be a showing that a party will likely prevail on the issue in question. Additionally, joinder of parties will be accommodated as well as multiple proceedings pursuant to new provisions. 

 

Changes to 35 U.S.C. § 135 will add derivation proceedings to replace current interference proceedings. Derivation proceedings determine whether the inventor named in an earlier-filed application derived the claimed invention from the inventor named in a later-filed application without authorization.

 

Several amendments were introduced before H.R. 1249 was passed, but failed.  One amendment would have ended "fee diversion”, while another amendment that would limit a new program to limit business method patents.

 

Once effective, the  America Invents Act will shape the practice of patent law and will greatly impact the filing and prosecution of patent applications, as well as patent litigation.  We will send further updates and details after the bill is signed into law and the USPTO begins implementation. 

The National Labor Relations Board (“NLRB”) recently issued two complaints against employers for terminating employees who criticized their working conditions on Facebook. 

 

These complaints come on the heels of the settlement of the NLRB’s first “Facebook firing” complaint last October against Connecticut-based American Medical Response, Inc. (“AMR”). In that case, an AMR supervisor denied an employee’s request for union assistance in responding to an investigatory review. The employee, an emergency medical technician, subsequently posted critical comments about the supervisor on Facebook, to which other employees responded supportively. AMR fired the employee pursuant to its social media policy, which prohibited employees from making “disparaging, discriminatory, or defamatory comments when discussing the Company or the employee’s superiors” and depicting the company “in any way” through pictures posted on the Internet. The NLRB alleged that the employee’s conduct was protected, concerted activity under Section 7 of the National Labor Relations Act (“Section 7”) and that AMR’s actions and social media policy were unlawful. 

 

By way of background, Section 7 protects an employee’s “right to . . . engage in . . . concerted activities for the purpose of . . . mutual aid or protection,” which includes discussing the terms and conditions of employment with co-workers. The AMR case settled privately before a hearing could be conducted, so employers were left without a bright line as to what point employee speech becomes protected speech.

 

Two recent complaints confirm that the AMR case was not an isolated incident, and that the NLRB is taking very seriously employees’ protected speech rights in social media. In a recent case in Illinois, In re Karl Knauz BMW, Case No. 13-CA-046452, the NLRB filed a complaint against a Chicago-based car dealership after it fired a salesman for criticizing the company on Facebook. The employee was displeased with the quality of food served at a customer event, which he and other sales representatives felt would hurt commissions. After posting to Facebook pictures of the allegedly sub-par food and comments disparaging the event, the dealership fired the employee. Similarly, in a recent case in New York, In re Hispanics United of Buffalo, Inc. Case No. 03-CA-027872, the NLRB issued a complaint against a Buffalo-area non-profit after it fired five employees for “concertedly complaining” on Facebook about their working conditions. One employee alleged in the Facebook post that some of her co-workers did not do enough to assist clients, prompting other employees to join the online discussion to complain about staffing and work load issues.

 

In all three complaints, the NLRB has contended that the employees’ conduct is protected speech under Section 7 as a discussion of his or her terms and conditions of employment. Moreover, the NLRB complaints target both the actual termination of the employees engaged in such activity, and the employers’ “overly broad” social media policies. More complaints will no doubt be issued in the near future. In fact, the NLRB’s general counsel recently indicated that each of the NLRB’s 52 regional offices has a pending social media case. Although it still remains unclear exactly where the line is between protected and unprotected online speech, a few things are clear from the NLRB complaints alone. First, employers should be aware that Section 7 protections apply to both union and nonunion employees alike--although the EMT from Connecticut was a union member, the car salesman from Illinois was not. In addition, a total ban on employees’ making critical comments about their supervisors or co-workers through social media is impermissible. NLRB rulings outside the social media context have invalidated policies that could “reasonably be construed by employees to bar employees from discussing with their coworkers complaints about their managers that affect working conditions.” KLS Claremont Resort, 344 NLRB 832, 836 (2005). The Board’s general counsel has suggested that social media policies are no different, characterizing online employee discussions as the 21st century equivalent of conversations at the office water cooler. 

 

Thus, employers should clearly indicate in their policies that any restrictions on social media usage should not be construed as limiting an employee’s right to discuss his or her terms and conditions of employment with co-workers regardless of whether the workplace is unionized. Employers should also take care when disciplining employees for online chatter that relates--even tenuously--to their terms and conditions of employment, including comments that criticize or even insult company superiors. Employers do not need to tolerate speech that defames or harasses co-workers or supervisors for purely personal reasons. Nor do they have to accept speech that disparages company products or reveals confidential information. However, where online dialogue addresses employees’ working conditions, and is or has the potential to be joined by other employees, the NLRB will likely view this as protected speech.

As Congress and state governments look to fill holes created by lowered revenue, they are taking aim at companies using “independent contractors” by increasing regulations and targeting entities such as the trucking industry.  In addition to increased regulation, class action lawsuits by “independent contractors” alleging they should be classified as employees have proliferated. In fact, class actions brought by “independent contractors” rose 50% in 2010. Despite this complex atmosphere, companies using independent contractors can take steps to avoid costly fines and legal fees resulting from misclassification.

 

In April, three Democratic senators introduced the Payroll Fraud Prevention Act (PFPA), a watered-down version of the Employee Misclassification Prevention Act (EMPA), a bill that died in committee last year. Unlike the EMPA, the PFPA does not impose new recordkeeping requirements on companies, but like the EMPA, the new bill seeks to impose fines of up to $5,000 per misclassified employee. Even for smaller employers, these fines can add up quickly and additional penalties for willful behavior can worsen the impact. If this bill passes, companies would be required to inform independent contractors of their status and direct them to the Department of Labor website for filing misclassification complaints.

 

Even without the PFPA enacted, federal regulators like the IRS have increasingly turned the spotlight on companies that use independent contractors. The IRS announced it will audit over 6,000 randomly selected businesses during the next three years to detect misclassification. The Teamsters and other labor groups have seen the increased regulation as an opportunity to encourage misclassified independent contractors to unionize.

 

In addition, as reported previously, on top of the increased federal regulation, Pennsylvania recently adopted the Construction Work place Misclassification Act (CWMA) which requires that independent contractors meet a three-part test to maintain their classification. The test requires an independent contractor to [1] have a written contract to perform services, [2] be free from control or direction over the performance of such services, and [3] be customarily engaged in an independently established trade. Violations of this law can lead to fines of up to $2,500 per employee and criminal prosecution. While this act only affects the construction industry, acts like the CWMA appear to be the growing trend nationwide (e.g., New York passed a similar law in 2010).

 

With respect to the litigation front, several trucking companies are presently facing class action suits resulting in costly settlements and legal fees. In one recent example, truck drivers in Washington and Oregon received a $2.25 million settlement after claiming 3P Delivery had misclassified them as independent contractors. Among the allegations were that 3P Delivery required drivers to fill out applications, disallowed substitute drivers, and controlled the workload of the drivers. Further, in February 2011, truck drivers classified as independent contractors filed a class action suit against Sears alleging that Sears controlled how the drivers completed their work and required them to purchase or lease trucks with the Sears logo and wear a Sears uniform.

 

Moreover, for companies in search of “quick fixes,” simply having independent contractors sign an agreement acknowledging their status is not the definitive or determining factor in resolving the issue. In the 2010 case of Narayan v. EGL, Inc., the Ninth Circuit Court of Appeals determined that truck drivers who had signed acknowledgements were not actually independent contractors based on the amount of control the company exercised over them.

 

Despite increasing complexity, the independent contractor classification is still a viable option and continues to be the best option for many companies. However, in order to avoid litigation, it is vital to adhere to the requirements set forth in the regulations and the advice and recommendation of counsel. Specifically, the most important principle is that the independent contractor, and not the company, has the right to control the manner and means by which the work is performed. To that end, companies must recognize that the DOL will look beyond the actual agreement to the substance of these relationships. If your relationship with independent contractors seems inconsistent with any of principles set forth above, it may be time to restructure the relationship to steer clear of potential litigation.