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Davis & Gilbert Wins Favorable Ruling on Behalf of Bernard Hodes Group, Inc.

New York, June 12, 2008 – Earlier this week, the New York Court of Appeals defined what constitutes the payment of a commission to a worker, favoring the argument made on behalf of Bernard Hodes Group, Inc. by Howard J. Rubin, a Davis & Gilbert partner.  The court’s clarification of New York State Labor Law came from two certified questions from the U.S. Circuit Court of Appeals for the Second Circuit in Elaine Pachter v. Bernard Hodes Group, Inc.

Mr. Rubin defended Bernard Hodes, a media and communications recruitment agency, against Ms. Pachter, a former commissioned employee who claimed business costs were improperly deducted from her earnings.  New York Labor Law prohibits employers from making deductions from the "wages" of employees, except for specific, authorized deductions for insurance, pensions, union dues and a few other purposes.  In Ms. Pachter's situation, she was paid commissions based on a formula in which finance charges, late fees, uncollectible bills to clients and part of the cost of her assistant were subtracted from a percentage of the sales she generated.

This case was followed closely by the legal community and by many industries which use commissioned employees, including the retail and securities industries, both of which submitted amicus briefs.

Critically, the Court held that nothing in New York's Labor Law prevents employees and employers from agreeing to a formula that includes both the sales an employee produces and the costs involved in making those sales.  The Court held that a company does not have to have a written agreement but can rely on an oral agreement or one implied by the course of conduct between the employer and the employee.  The Court found "ample support for the conclusion" that Ms. Pachter had an implied contract in her 11 years with Bernard Hodes under which the final computation of her commissions depended on the deductions of work-related expenses.

"This case is important because it is in everyone's interest to be able to have commission employees on a formula by which they are incentivized to both reduce costs and increase sales, and this decision allows for that," Mr. Rubin said.

About Davis & Gilbert LLP

Since the days when Sen. William Benton (the founder of Benton & Bowles) and his client, a major packaged goods company, asked Davis & Gilbert to structure the deal for the first radio soap opera, Davis & Gilbert has been synonymous with marketing communications and business law. Today the firm serves as advertising, regulatory and intellectual property counsel to many major corporations, including some of the world’s leading brands. Davis & Gilbert counts four of the largest agency holding companies among its clients and provides services on a worldwide basis. The firm holds the preeminent position in this dynamic segment, handling virtually every legal requirement, from corporate governance, litigation, mergers and acquisitions, employment practices and executive benefits and compensation, to new media, real estate, taxation, estate planning and more.

For further explanation of the case and the Court's ruling, please contact:

Howard Rubin
hrubin@dglaw.com
(212) 468-4822

Peggy Chen
pchen@dglaw.com
(212) 468-4902

Allie Lin
alin@dglaw.com
(212) 468-4868

Laurie Morrison
lmorrison@dglaw.com
(212) 468-4830