Lit Alerts—March 2023

Employment: Paid Time Off Is Not Part of an Employee’s Salary, Third Circuit Holds

The U.S. Court of Appeals for the Third Circuit affirmed partial summary judgment for an employer in a putative class action, holding paid time off (PTO) is a “fringe benefit” rather than part of an employee’s salary under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. In Higgins v. Bayada Home Health Care Inc., Bayada, a home healthcare company, employed the plaintiffs as salaried employees, meaning they were not entitled to overtime pay under the FLSA. However, Bayada also required employees to meet a weekly productivity quota, and if they failed to meet that quota, Bayada would deduct time from the employee’s available PTO to make up for the difference between time worked and the quota.

The FLSA states that salaried employees must receive their full salary every week regardless of hours worked, so an employer may not deduct from the employee’s base salary. Thus, because Bayada would deduct from PTO, the plaintiffs claimed they should not be classified as salaried employees (and should be entitled to overtime pay). The Third Circuit rejected this argument, holding “whereas salary is a fixed amount of compensation that an employee regularly receives, PTO, though having a monetary value, is more appropriately defined as a fringe benefit, which has no effect on the employee’s salary or wages, and which may be irregularly paid out[.]” The court continued that the term “salary,” as used in the FLSA, is “best understood as not including fringe benefits like PTO.” This means that companies, like Bayada, could deduct PTO from salaried employees without violating the FLSA, and Bayada did not violate the FLSA with its productivity quota system for salaried employees.

Patent: Apple Saved by Abstract Idea

This month, Judge Catherine D. Perry of the U.S. District Court for the Eastern District of Missouri granted Apple’s motion for summary judgment finding that the challenged claims in FaceToFace Biometrics Inc.’s patent were invalid because the claims recited “an abstract idea devoid of instructions or algorithms for accomplishing [the] claims steps.” In April 2022, FaceToFace filed its patent infringement suit against Apple alleging that Apple stole its facial recognition technology that allows users to speak through animations and emoji characters. Specifically, FaceToFace claimed that Apple infringed its patent by selling various versions of the Apple iPhone and iPad in the United States that gave users the ability to create and send “Memojis.” Memojis allow users to send an emoticon that captures the user’s facial expression and voice.

Apple’s primary defense was that the patent was invalid for failing to claim patentable subject matter. The court agreed. Using the Alice two-step framework, it first found that the asserted claims of the patent were directed to the abstract idea of sharing facial expressions and were carried out using functional steps without specific instructions or algorithms. Then the court held that nothing in the claims qualified as an “inventive concept” to transform the claims into patent eligible matters. Because the claimed steps could be accomplished by conventional methods carried out with generic computers, cameras, and messaging applications, FaceToFace’s patent involving “Expression Recognition in Messaging Systems” was deemed invalid.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.