I received an answer from Labtec today and it seems to have fixed the problem. Their solution is below. Hopefully this may help someone else.
To resolve this issue, uninstall the Labtec software from the Add/Remove Programs utility in the Control Panel and test the keyboard with Windows native drivers.
If the issue persists, please try the following troubleshooting steps:
1. Remove the batteries from the keyboard and press keys on the keyboard repeatedly (as if typing) for approximately two minutes. This will clear out the capacitors.
2. Press the Connect button on the receiver.
3. Press the Connect button on the mouse. NOTE: You may need a pencil tip or other small tip to press the connect button.
4. Press the Connect button on the receiver.
5. Insert the fresh set of batteries back into the keyboard.
6. Press the Connect button on the keyboard.