If a character is knocked out when the first encounter ends, are they still knocked out at the start of the second encounter, or do they get a free stand up?

As stated in the rulebook, perform the following steps between encounters:

Remove all fatigue from hero sheets.

Restore heroic feats by flipping hero sheets if necessary.

KO heroes perform a free stand up. Heroes keep all other damage and conditions.

OL keeps his current hand

Stand up for free. Pág. 18 on the rules book.