Sometime in 2021, the most important benchmark for setting interest rates on commercial (and many variable rate residential) loans will be eliminated. Trillions of dollars of such loans are governed by LIBOR, which is short for the London interbank offered rate. LIBOR is determined on a daily basis and is the interest rate that London banks would use to borrow amongst themselves. There is a separate LIBOR rate determined for different time periods (e.g., a 30 day LIBOR rate, 1 year LIBOR rate, etc.). A lender making a variable rate loan based upon LIBOR will determine its interest rate by adding an agreed-upon spread to the applicable LIBOR rate on a particular date. For example, the interest rate may be equal to the 30-day LIBOR rate in effect on the first business day of each month plus a spread of 5%. The advantage of this method of calculation is that the LIBOR rate is publicly disclosed on a daily basis and the corresponding interest rate under the loan is easily calculated.
Unfortunately, LIBOR has proven to be susceptible to manipulation. In response, bank regulators have called for the index to be eliminated. Given its pervasive use in capital markets, regulators determined that the rate cannot be abruptly replaced. Accordingly, regulators have given the industry a long lead time to establish alternative indices, however, that lead time will be coming to an end in 2021. To date, there is no consensus as to what index will become the predominant replacement for LIBOR.
New loans initiated today are still using a LIBOR benchmark. However, for loans which have a maturity date beyond the 2021 LIBOR phase out, there is a question as to what benchmark will be substituted by lenders. Most loan documents contain generic language to the effect that if LIBOR can no longer be determined, that the lender has the discretion to pick a substitute index. However, it is important for borrowers to make sure that there are limits on the lender’s method of replacing LIBOR. While it should be relatively easy for lenders to pick a replacement index that is relatively stable and easily determined, there needs to be some consideration as to how that index compares to the corresponding LIBOR rate. For example, if the replacement index is 0.25% higher than the LIBOR in effect as of the transition, it is important that the spread be adjusted so that the corresponding interest rate under the loan will be equivalent to the rate established by LIBOR. Otherwise, a borrower could face an increased interest rate solely on account of the change in index.
Although the elimination of LIBOR is still some two years away, it is important for borrowers and lenders to address its implications in new loans with a maturity date that extends beyond the elimination of LIBOR. Similarly, existing loans may have language that attempts to address the issue; however, those provisions may not have received much attention when the parties negotiated the loan documents. As such, it is important for lenders and borrowers to review outstanding loan documents to determine if the language addressing the absence of LIBOR will lead to a fair and adequate substitute index and method for determining variable interest rates.
For further information regarding the consequences of the elimination of LIBOR and commercial lending in general, please contact:
Jeffrey M. Galkin: firstname.lastname@example.org or 312-368-0100.
In approximately a dozen states and a number of smaller municipalities across the U.S., including Illinois and Chicago, initiatives have been introduced that would allow state and local governments to dictate how restaurants (and retailers) schedule their employees. Some view this approach as interfering with employers’ rights to control the workplace while others view it as a necessary tool to protect the rights of the food industry and other retail workers. The impetus for the new rules – often referred to as predictive scheduling laws – emanates from the fact that workers often have very little ability to make adjustments to their work schedules in order to meet their responsibilities outside of work. And unpredictable and unstable work schedules have been fairly well documented in the food service and preparation industries, as well as in retail and commercial building cleaning occupations.
Predictive scheduling laws and proposals generally include certain common provisions: (i) advance posting of schedules, (ii) employer penalties for unexpected schedule changes, (iii) record-keeping requirements, and (iv) prohibitions on requiring employees to find replacements for scheduled shifts if they are unable to work. In Congress, the pending Schedules That Work Act would require that schedules be provided in writing two weeks in advance with penalties for changes made with less than 24 hours’ notice. As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.
“On-call” or “predictive scheduling” activists argue that retail employers too often use scheduling practices that directly interfere with employees’ personal lives and ability to plan around their work hours, while others believe government intervention in the scheduling of employees through a one-size-fits-all approach intrudes on the employer-employee relationship and creates unnecessary mandates on how a business should operate. Many in the food service industry are concerned that predictive scheduling legislation will impede employers’ need to adapt to changing conditions in a store, particularly small independently owned businesses that have limited staff and resources and may not be able to afford the penalties related to violations. Some employees have also voiced concern that they could lose some of the flexibility that attracted them to the food service industry in the first place.
Following are a few common components of predictive scheduling legislation.
- Employee Scheduling Requests. Giving employees the right to make scheduling requests without employer retaliation. Employers would be required to consider scheduling requests from all employees and provide a response. In some instances (for healthcare issues for example), the employer would be required to grant the request unless there is a bona fide business reason not to do so—e.g., an inability to reorganize work among existing staff or the insufficiency of work during the periods the employee proposes to work.
- Shift Scheduling Changes. Requiring employers to pay employees for a minimum of four hours of work or the minimum number of hours in the scheduled shifts, whichever is fewer, when an employee is sent home from work early without being permitted to work his or her scheduled shift. In addition, if an employee is required to call in less than 24 hours before the start of a potential shift to learn whether he or she is scheduled to work, an employer could be required to pay the employee a premium, equivalent to one hour of pay.
- Split shift pay. If an employee is required to work a shift with nonconsecutive hours with a break of more than one hour between work periods, an employer could be required to pay the employee a premium for that shift, equivalent to one hour of pay.
- Advance notice of schedules. When an employee is hired, an employer could be required to disclose the minimum number of hours an employee will be scheduled to work. If, that minimum number changes, the employer could be required to give the employee two weeks’ notice of the new minimum hours before the change goes into effect. In addition, employers can be required to give employees their work schedules two weeks in advance and, if an employer makes changes to this work schedule with notice of only 24 hours or less, the employer could be required to pay the employee a premium, equivalent to one hour of pay.
In order to handle predictive scheduling mandates, business owners should explore software options and even retaining outside vendors that provide scheduling and labor management solutions. A lack of training or understanding of predictive scheduling can be detrimental to a business’ bottom line since scheduling practices can have a dramatic impact on labor costs.
For further information regarding this topic, please contact:
Jonathan M. Weis at email@example.com or 312-368-0100.
February 17, 2018 is fast approaching. Anyone who is anyone in the toy industry will be at Javits Convention Center showcasing the latest and greatest in toy innovation. All businesses in the toy industry are putting the final touches on their displays and their presentations. Is a meeting with the company’s lawyer on the pre-show checklist? If not, why not?
Consulting with the Company’s lawyer may save a company tens, even hundreds of thousands of dollars. The following is a short discussion of some of the items that should be on every toy company’s “To-Do” list prior to attending Day One of the New York Toy Fair.
- Intellectual Property.
At the very least, the company should consider applying for a trademark registration for the name of the company and its products. Unfortunately, the number one thing most companies forget or ignore until there is a legal battle ensuing is to properly protect the Company’s intellectual property, such as its name and the names of its products. Trademarks for product names are fairly inexpensive to search and protect, and yet, may cost a company dearly if those names were to become the subject of a cease and desist letter and resulting federal court infringement litigation. We defended a toy manufacturer in a trademark infringement lawsuit that allegedly infringed a competitor’s trademark. After two years and in excess of $50,000 in legal fees (pretty inexpensive in trademark dispute litigation) the matter was resolved. Consulting with counsel and filing the appropriate trademark applications could have avoided the huge waste of time and expense.
Another form of legal protection often overlooked is copyright for the toy’s design. If the design meets the requirements of a sculptural work, such as a plush toy design, then copyright can be a powerful tool in locking out your competition from the use of designs that are “substantially similar”. Prior to any trade show, toy companies must identify and protect its intellectual property, or risk the very goodwill of the company. Intellectual property can give a company significant value.
- Privacy and Security.
Toy companies, like all companies, must take steps to protect the data of the company, minimize the risk of a breach, and put in place technological and legal measures designed to decrease liability in the event a breach does occur. A comprehensive privacy program including but not limited to updated privacy notices, terms and conditions, internal policies, incident response plans and insurance coverage all geared toward reducing risk of legal liability is imperative if the company is to survive. If the toys being showcased are “smart” or “connected” toys, privacy and security issues involving the Internet of Things will be at the forefront of manufacturers’, retailers’, and consumers’ minds. Retailers seeking to avoid liability undoubtedly will have questions as to how the software works, what, if any, personally identifiable data is collected, how is it being stored, retained and destroyed. Additionally, if a third party vendor will be used to provide software for a smart or connected toy, the company must seek counsel knowledgeable in privacy and security in order to reduce legal risk to the company that may result from the use of such software.
- Labeling / Advertising.
Federal law requires product packaging and certain advertisements for toys and games intended for use by children 12 years of age and under to display cautionary statements regarding choking and other hazards. Safety related labeling and advertising for toys generally depends upon the category of toy and the age of the child for which the toy is intended. It is imperative that toy companies be familiar with these laws and engage counsel who is familiar.
For more information, please contact:
(312) 368-0100 or firstname.lastname@example.org.