We invite you to view Employment Law This Week – a weekly rundown of the latest news in the field. We look at the latest trends, important court decisions, and new developments that could impact your work.
This week’s episode includes:
Former Workers Violated Ex-Employer’s Trade Secret Rights
Financial Regulators Propose Banker Bonus Restrictions
D.C. Circuit: Musicians Are Employees
NLRB Alleges Misclassification Violates NLRA
In-House Tip of the Week
New regulations from the Ohio State Board of Pharmacy now require any prescriber who will possess, have custody or control of, or distribute dangerous drugs that are compounded or used for the purpose of compounding to be licensed as a Terminal Distributor of Dangerous Drugs (TDDD). This new requirement is particularly noteworthy for physicians, dentists, and others who have previously operated under the “sole proprietor” exemption from licensure as a TDDD. That exemption has been widely used in Ohio and has traditionally permitted practitioners who 1) operate as sole proprietor, sole shareholder of a corporation or professional association, or sole member of a limited liability company; and 2) are the sole authorized prescribers in the practice to be exempt from the TDDD licensure requirements. These new regulations narrow this exemption by now requiring that all prescribers who “compound” or use “compounded” drugs become licensed as a TDDD, even if those prescribers had previously qualified under the “sole proprietor” exemption.
The scope of what constitutes “compounding” is broad – likely broader than what is commonly believed. Ohio law defines “compounding” as the preparation, mixing, assembling, packaging, and labeling of one or more drugs and also includes the reconstitution of drugs in accordance with the manufacturer’s instructions.1 Under the new regulations, any “compounding” activity, possession, or administration of a compounded drug requires TDDD licensure, even by a previously exempt “sole proprietor.”
Additionally, these same new regulations impose new standards for compounding sterile products, non-sterile products, and hazardous drugs and more stringent rules governing purchase of compounded drugs from in-state pharmacies, out-of-state pharmacies, and outsourcing facilities.2 These regulations were imposed in order to bring Ohio into compliance with the 2013 Drug Quality and Security Act, a federal law passed in response to the deadly outbreak of fungal meningitis in 2012 that was linked to the New England Compounding Center.
© 2016 Dinsmore & Shohl LLP. All rights reserved.
1 Hazardous Drug Compounding by Prescribers
2 http://codes.ohio.gov/oac/4729-16
As first reported in our December 2013 newsletter, the first new generic top-level domains (gTLDs, the group of letters after the “dot” in a domain name) have launched their “Sunrise” registration periods. Please contact us or see our December 2013 newsletter for information as to what the Sunrise Period is, and how to become eligible to register a domain name under one of the new gTLDs during this period.
As of April 29, 2016, ICANN lists Sunrise periods as open for the following new gTLDs:
| .homes | .vip |
| .auto | .salon |
| .group | .store |
| .gmbh | .ltd |
| .promo | .tube |
| .stream | .med |
| .try | .redumbrella |
| .travelersinsurance | .stcgroup |
| .viva | .stc |
ICANN maintains an up-to-date list of all open Sunrise periods here. This list also provides the closing date of the Sunrise period. We will endeavor to provide information regarding new gTLD launches via this monthly newsletter, but please refer to the list on ICANN’s website for the most up-to-date information – as the list of approved/launched domains can change daily.
Because new gTLD options will be coming on the market over the next year, brand owners should review the list of new gTLDs (a full list can be found here) to identify those that are of interest.
© 2016 Sterne Kessler
Although the quote: “Where there is a will, there is a way” is meant to encourage perseverance, it also seems appropriate in the estate planning realm as a Last Will and Testament can guide surviving family members as to the disposition of assets after a person’s death. In the case of Prince, the quote is better modified to say: “Where there is no will, there is a messy road ahead.” As reported earlier this week, Prince’s sister filed an emergency petition asking the court to appoint a special administrator to oversee the initial stages of administering Prince’s estate. She did so because no Last Will and Testament could be located. The Court agreed and appointed Bremer Bank, National Association as the special administrator. The Court’s actions allow Bremer Bank to marshal or gather the assets and preserve such assets until a personal representative or executor can be appointed. In short, it appears that Prince failed to plan and the laws of Minnesota will now dictate what happens to his estate.
And what does this all mean? Dying without a Last Will and Testament or a revocable living trust means that a person is intestate and the laws of the state in which they resided at death will spell out who is to receive the assets of the estate. In Prince’s case, since he had no spouse or surviving children or parents, his siblings, both full and half siblings, are the beneficiaries of his estate under Minnesota law. Thus, the law of unintended consequences may now apply as Prince may not have wanted his siblings to become the beneficiaries. He may have wanted to include charity or friends perhaps even other relatives. But, without a Last Will and Testament or revocable living trust, we will never know what his wishes may have been.
It will also be interesting to see how the administration of Prince’s estate unfolds. A number of questions will have to be asked and answered, including, but not limited to: Who will end up being the personal representative or executor? What debts does the singer have? How will the estate tax be paid (both at the Federal and state level since Minnesota has an estate tax)? What assets will each beneficiary ultimately receive? Will an agreement be reached amongst the beneficiaries regarding the management and distribution of the assets? Unfortunately, the process that has begun will be lengthy, likely expensive and may result in the dismantling of a legacy if the process devolves into an ugly court battle. All of which could have been avoided or at least minimized had Prince simply planned.
On Wednesday April 27th, the Senate Commerce Committee passed a bill meant to increase government involvement in the development of the “Internet of Things” (IoT).
By a voice vote, the committee approved the Developing Innovation and Growing the Internet of Things (DIGIT) Act, sponsored by Sen. Deb Fischer (R-Neb.), Sen. Kelly Ayotte (R-N.H.), Sen. Cory Booker (D-N.J.), and Sen. Brian Schatz (D-Hawaii). The bill would require the establishment of a working group tasked with identifying proposals meant to facilitate IoT growth. The working group would include representatives from the Transportation Department, the Commerce Department, the Federal Trade Commission, the Federal Communications Commission, Office of Science and Technology Policy, and the National Science Foundation. Separately, the Commerce Department recently issued a Request For Public Comment seeking comment on the role of government in fostering the advancement of IoT.
The bill also sets up a steering committee that will include industry stakeholders. Both the working group and the steering committee will examine a range of IoT issues, including the regulatory challenges that may limit the growth of IoT and the availability of wireless spectrum for IoT devices. The committee also approved several minor amendments to the bill, which, among other things, expanded the government agencies involved in the working group.
In a case of first impression regarding whether communications between a non-lawyer patent agent and a client are legally privileged, a split panel of the US Court of Appeals for the Federal Circuit held that a patent-agent privilege is warranted on a limited basis where an agent is engaged in the congressionally endorsed, authorized practice of law. In Re Queen’s University at Kingston, PARTEQ Research and Development, Case No. 2015-145 (Fed. Cir., Mar. 7, 2016) (O’Malley, J) (Reyna, J, dissenting).
The opinion followed the plaintiffs’ petition for mandamus. At the district court, the petitioners withheld documents reflecting communications between the plaintiffs’ employees and the non-lawyer patent agents who prosecuted the patents-in-suit based on an alleged patent-agent privilege. The district court overruled objections to the magistrate’s order granting defendants’ motion to compel production over the alleged privilege, but agreed to stay the discovery order pending a writ of mandamus. Applying Federal Circuit law, the Court found that mandamus was warranted to decide the issue of first impression, which had split the lower courts.
The Federal Circuit first recognized that “Rule 501 of the Federal Rules of Evidence authorizes federal courts to define new privileges by interpreting ‘common law principles.’” Finding that the respondents did not argue that a patent-agent privilege was foreclosed by the US Constitution, any federal statute or any rule prescribed by the Supreme Court of the United States, the Court turned to reason and experience, as directed by Rule 501, in order to determine whether recognizing a privilege was now appropriate. The majority concluded that it was, holding that the unique roles of patent agents, the congressional recognition of their authority to act, the Supreme Court’s characterization of their activities as the practice of law, and the current realities of patent litigation warranted an independent patent-agent privilege.
The Federal Circuit relied on the Supreme Court’s prior assertion that the preparation and prosecution of patent applications for others constitutes the practice of law. Further, the majority found that Congress had delegated to the commissioner of patents oversight authority concerning lawyers, agents or other persons representing applicants or other parties before the US Patent and Trademark Office (PTO), and that the commissioner had, in fact, allowed both lawyers and agents to practice before the PTO.
In further support, the majority panel cited both the Supreme Court’s recognition of Congress’s delegation of supervisory authority to the commissioner of patents for lawyers and agents alike, and related legislative history acknowledging the practitioners’ equivalent professional rights before the PTO. The majority found that a client has a reasonable expectation that all communications relating to obtaining legal advice on patentability and legal services in preparing a patent application will be kept privileged, and that denying privilege to agents would frustrate Congress’s intent to provide clients a choice between agent and lawyer. As a result, the majority found that a patent-agent privilege is coextensive with the rights Congress affords to patent agents, and serves the same important public interests as the attorney-client privilege.
The Court also noted that the new privilege’s scope is necessarily limited to communications with non-lawyer patent agents when those agents are acting within their authorized practice of law before the PTO. The Court found that the Code of Federal Regulations (CFR) sets forth the acts permitted by non-lawyer agents and helps to define the scope of communications covered under the privilege. For example, communications are due the privilege if made in furtherance of the performance of tasks specifically set forth in the CFR, or “are reasonably necessary and incident to the preparation and prosecution of patent applications or other proceedings before the [PTO] involving a patent application or patent in which the practitioner is authorized to participate.” The Court stressed that it is the burden of the person asserting the privilege to justify its applicability. The Court also cited examples of non-privileged communications, including those with a patent agent who offers an opinion on the validity of another party’s patent in contemplation of litigation or the sale or purchase of a patent, or on infringement.
In dissent, Judge Reyna argued that the public’s need for open discovery outweighed the need for the privilege. The dissent also argued against the new privilege with the following reasoning:
The privilege may adversely affect an agent’s duty of candor.
Agent communications are already routinely protected because of lawyer involvement.
Patent agents and clients are able to destroy written communications through implementation of document-destruction policies.
Determining the scope of the privilege is complicated and uncertain.
Congress and the Supreme Court have recognized a difference between agents and lawyers.
Evidence suggests that Congress did not intend that agents have a privilege.
No state has created an agent-client privilege.
The Judicial Conference Advisory Committee has not recommended creating the privilege.
Lawyers hold the privilege because of their professional status.
The Supreme Court has never held that patent agents practice law; it has merely recognized that the Florida Supreme Court has done so under Florida law.
Congress has never believed that patent agents practice law.
The Federal Circuit remanded the issue to the district court to determine whether the patent-agent privilege applied.
John C. Low, PhD
© 2016 McDermott Will & Emery
On April 27, 2016, the U.S. House of Representatives approved the Defend Trade Secrets Act, S. 1890, by a vote of 410-2. The Senate approved an identical bill 87-0 on April 4, 2016. President Obama is expected to sign the DTSA into law in short order. Once effective, the DTSA will create a federal, civil cause of action for trade secret misappropriation for any act that “occurs on or after the date of the enactment” of the law. In addition to providing plaintiffs an opportunity to obtain injunctive relief and monetary damages, the DTSA will further allow for ex parteseizures of misappropriated trade secrets.
The DTSA borrows from the Uniform Trade Secret Act (the “UTSA”). For example, the DTSA’s misappropriation, improper means, and three-year limitations provisions are all copied from the UTSA. At the same time, the DTSA does not preempt state trade secret law or other sections of the U.S. code pertaining to trade secret misappropriation. Finally, the DTSA directs government officials to report on exterritorial trade secret misappropriation.
The DTSA’s seizure provision is a notable addition vis-à-vis the UTSA. It allows courts to issue an ex parte order to seize property as “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” To obtain such an order, a party must meet eight distinct prerequisites—including showing that a temporary restraining order is inadequate, that immediate and irreparable injury will occur if the seizure is not approved, and that the harm to the applicant outweighs the legitimate interests of any party from whom material is seized. The party seeking an ex parte seizure order must post security and is subject to a claim for any damage caused by a wrongful seizure. The raft of requirements intentionally set a high bar to issuance of an ex parte seizure order. It is a powerful tool, but also susceptible to abuse absent strict controls. The DTSA’s ex parte seizure requirements strike the right balance between need and caution.
The DTSA provides district courts with “original jurisdiction of civil actions brought under” the DTSA. The DTSA does not contain any specific venue provisions and therefore an aggrieved party must look to the general venue statute for civil actions in deciding choice of venue in a federal district court. In addition, plaintiffs may be able to bring a claim alleging a violation of Section 337 of the Tariff Act of 1930 in the U.S. International Trade Commission, depending on the circumstances. Plaintiffs deciding upon a venue in which to bring a DTSA claim should analyze differences between the DTSA and any potential state law or other federal claim.
The DTSA explicitly applies to “interstate or foreign commerce.” While the DTSA does not expand upon “foreign commerce” in any meaningful way, Section 4 of the DTSA requires various governmental officials to report on trade secret misappropriation experienced by U.S. companies that occurs abroad. In particular, one year after the DTSA is enacted, and every two years thereafter, the Attorney General, the Intellectual Property Enforcement Coordinator, and the Director of the USPTO must submit a report to the House and Senate Judiciary Committees pertaining to trade secret theft occurring abroad.
The DTSA is an important development in U.S. law, as it provides the first-ever federal law providing a private civil claim for trade secret misappropriation. The rationale for the DTSA is the belief by Congress, the Obama Administration, and stakeholders that the current patchwork of state laws is inadequate to address trade secret misappropriation and the concomitant damage it causes to trade secrets rights holders and to the U.S. economy. Time will tell whether the law achieves its intended purposes.
© Copyright 2016 Squire Patton Boggs (US) LLP
In a 6-to-2 decision, the Supreme Court ruled that when a public employer demotes an employee in order to prevent the employee from exercising his free-speech rights, the employee may challenge that action as a violation of the First Amendment and §1983, even if the employer was mistaken about the employee’s behavior. The Court found that the government’s motive is what matters and that the constitutional violation of discouraging employees from engaging in protected political activity and speech is the same regardless of whether or not the employer was mistaken about the employee’s political involvement. Heffernan v. City of Paterson, 578 U.S. ___ (2016).
Jeffrey Heffernan was a police officer in Paterson, N.J., a twenty-year veteran of the force. After being promoted to detective in 2005, he was assigned to the office of the chief of police. In April 2006, the city was in the middle of a mayoral election where the incumbent had the support of Heffernan’s supervisors, but the challenger was a former Paterson police chief and friend of Heffernan. Heffernan could not even vote in the election as he did not live in the city but his mother did.
One afternoon, while off duty, Heffernan went, at his mother’s request, to the challenger’s campaign office to get a new yard sign for his mother’s yard. Other members of the police force saw him with the sign. The following day, Heffernan’s supervisors demoted him to patrol officer and assigned him to a walking patrol post. They demoted him as punishment for what they thought was his “overt involvement” in the challenger’s campaign, even though that belief was mistaken. Heffernan was not involved in the campaign but merely picked up the sign to help his bedridden mother.
Heffernan sued, alleging his demotion violated the First Amendment. He asserted that his supervisors demoted him because they thought he engaged in constitutionally protected speech, even though they were mistaken about his actions. The district court and Third Circuit Court of Appeals rejected his claim, holding that a free-speech retaliation claim under §1983 lies only when the government retaliated against an employee who actually exercised his First Amendment rights, not on the mistaken perception that he exercised protected rights.
Generally, the First Amendment prohibits government officials from dismissing or demoting an employee because that employee engaged in constitutionally protected political activity or speech. Heffernan argued that the government’s motive in taking an adverse employment action is the key to a public employee’s retaliation claim. He alleged that as long as a government employer believed that the employee was engaged in protected activity and took adverse action because of that belief, the employer violated the First Amendment.
The Supreme Court agreed. Writing for the majority, Justice Breyer stated that “the government’s reason for demoting Heffernan is what counts here.” The Court ruled that when a government employer demotes an employee because it wants to prevent the employee from engaging in political activity protected by the First Amendment, the employee is entitled to challenge that unlawful action under the First Amendment and §1983, even if the employer is acting upon a factual mistake regarding the employee’s behavior. The Court stated that the employer’s mistake does not diminish the risk of harm to the demoted employee or to others who fear similar adverse consequences of engaging in protected activity.
The Court left the door open, however, for government employers to adopt a neutral policy that prohibits police officers from overt involvement in any political campaign. Whether a specific neutral policy meets constitutional muster is a question the Court left for another day.
The Court’s ruling means that a public employer can be held liable for violating an employee’s constitutional rights even where the employee admits he wasn’t exercising those rights. The public employer’s desire or motive to keep the employee from engaging in protected political activity is enough to give the employee a viable claim for damages under §1983 regardless of whether the employee engaged in any activity protected by the Constitution.
Last Thursday, Uber settled two closely-watched class actions contesting Uber’s classification of approximately 385,000 drivers in California and Massachusetts as independent contractors as opposed to employees. While the plaintiffs viewed the settlement as a victory, so likely did Uber, as it allows Uber to continue to pursue an on-demand independent contractor service business model. The court, however, still needs to approve the settlement and whether it will do so is not clear.
As part of the proposed settlement, Uber agreed to pay $84 million to the drivers. If Uber holds an initial public offering and its valuation goes above $93.75 billion within one year, Uber will pay an additional $16 million to the drivers bringing the total settlement to $100 million. After reducing the pot to account for attorneys’ fees and other costs, the individual payments, based on the number of miles driven by each driver, range from nominal amounts up to $8,000, although the majority of class members may just walk away with less than $100. Uber further agreed to revise its termination practices so that drivers must generally be given warnings and explanations before Uber can deactivate them from its software application. Drivers will also be able to appeal terminations and will enjoy a more driver-friendly tipping policy.
Many consider $84 million, or even $100 million, a well-spent business expense for Uber, who potentially had to spend hundreds of millions, if not billions, of dollars to reclassify its drivers and comply with the requirements of minimum wage, overtime, workers compensation, anti-discrimination, benefits, sick leave, and other federal, state and local laws that apply to employees.
But Uber is not out of the woods yet. First, as mentioned earlier, the court must approve the settlement and there is no guarantee that it will. Just a few weeks earlier, a California judge rejected a proposed settlement of similar litigation between Uber’s competitor, Lyft, and its drivers in part because it “short-changed” those drivers. Under that settlement, Lyft drivers would have received an average of $56. Second, Uber is settling lawsuits with its former and existing drivers in California and Massachusetts, but lawsuits in other states remain outstanding and new ones could be on the way. Stay tuned for further developments.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
In a recent New York District Court decision in Official Comm. Of Unsecured Creditors of Arcapita Bank B.S.C. v. Bahr, Islamic Bank, 2016 U.S. Dist Lexis 42635 (S.D.N.Y. 2016), the court considered whether the use of a correspondent bank account provides a sufficient basis to exercise personal jurisdiction over a foreign bank. There, the Bahraini banks set the terms of investment placements and designated New York correspondent bank accounts to receiver the funds. The banks then actively directed the funds at issue into the New York accounts.
The Committee’s cause of action for the avoidance of preferential transfers arose from the use of the correspondent bank accounts. Hence, the heart of the claim was the receipt of the transferred funds in the New York correspondent bank accounts. The Bahraini banks deliberately chose to receive funds in US dollars and designated the correspondent bank accounts in New York to receive the funds. This deliberate choice made the exercise of jurisdiction constitutional. “Where, as here, the defendant’s in-forum activity reflects its ‘purposeful availment’ of the privilege of carrying on its activities here, the defendant has established minimum contacts sufficient to confer a court with jurisdiction over it, even if the effects of the defendant’s conduct are felt entirely outside of the United States.”
Thus, if a foreign party deliberately choses to use the US banking system to effectuate a transaction and a cause of action arises from that transaction, the foreign party can be forced to defend itself in the US courts.
![Trade Secrets, Banker Bonuses, Worker Misclassification – Employment Law This Week – Episode 25 [VIDEO]](https://i0.wp.com/nationallawforum.com/wp-content/uploads/2016/05/employer-employee-dictionary-definition.jpg?resize=800%2C510&ssl=1)
