Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1922-03-23
p.R.T:B0NUS LEGAL,
COUNSEL DECLARES
Former Judge Gordon Says
Company Has Right in Law
to Reward Employees
"a COST OF OPERATION"

The legal right of the Rapid Transit
Company to pay bonus to its EN-.
ployes is upheld in an opinion fur.
nished Thomas r. Mitten. the prcsi.
dent, by former Judge James Gay Cor.
don, counsel for the company.
.' Mr.. Gordon holds that the proposed
extra compensation would be cost OF
operation and therefore not earnings
properly distributable as dividends" n
phrase employed in the 1907 contract
between the city and the company.
The issue was raised by Mayor
Moore, who questioned the legality Of
the bonus, which also had been de.
scribed as q go. operative dividend"
The 1907 contract provides that the
city is to share IN p. Il. 7. profits after
O per. cent dividend has been paid
stockholders.
As an incentive to good service. the
company plans 10 distribute hmong Elm.
ploycs an amount equal to 40 per cent
Of the total payroll. This Is contingent
on q reduction of expenses by $1,000
900 and the declaration of q @ per cent
dividend to p. Il. I. stockholders.
,. Mr.. Mitten's Letter
Mr.. Mitten's letter to the Mayor said
The opinion Of Judge Gordon, which
was dictated by him at n conference of
counsel and concurred in by Mr.. Ballard
and Mr.. Joyce, a copy of which you
request. is as follows:
""rhe amount paid to the men IL
extra compensation paid for services as
q commission, in addition to their regu.
lar wages. and is a cost OF operation.
1t Is, therefore, not earnings properly
distributable Us dividends, to use the
language OF the 1907 contract with the
city, and hence, the city has no right
or interest in the sums thus to be nei,l
to the men for their work.
This opinion was given after had
proposed to the men the method of
compensation by commission on profits
earned in addition to their regular wage
and after you had suggested the OBJ.
lection that such method Of paving
labor would violate some right of the
city under its contract with the com.
pany.
1T is no unusual thing for service
to be so paid. On the contrary. It is
quite common. and is only q method of
rewarding labor according to the re-
suits produced: 1t promotes efficiency
and is an ordinary expense of opera.
tion.
ITO this mode / am committed. the
stockholders by their recent vote have
ratified that commitment, the men have
accepted it. and ] intend to carry n
out and believe all your doubts are H.
lusory."
The Mayors Reply
The Mayors reply to Mr.. Mittcn
reads:
THANK you for sending me. under
date of March %, an extract Of Judge
Gordon's opinion holding that the sum
you proposed to pay the men at YOUR
Ice Palace meeting was not a dividend
IN excess of O per cent, which would
be in violation of the contract of 1907,
but extra compensation paid for sery.
ices as a commission. in addition 70
their regular wage, and is a cost of
operation This letter I am referring
to the City Solicitor. to whom I re.
ferrei the question Of your right TO
apply surplus in excess of q per cent
to any others than the stockholders and
the city.
II have not raised the question of
your right to compensate the employees
of the Philadelphia Rnpid Transit Com
pany out of funds properly usable for
that purpose. but the statement Won
made to the men at the Ice Palace with
regard to dividends appeared to be in
violation of the 1907 agreement. and.
therefore, might be regarded as illu.
sorry.
IL have been puzzled by your state.
ments as to the exact amounts which
are to be paid to the men. and what,
u any. measure you may have for de.
termining this amount. The only state.
ment which was made public was that
" was contingent upon increased eff
nency 70 a sufficient extent that the
Philadelphia Rapid Transit COMPANY
might be able 10 pay 9 per cent on its
stock. To that extent it would Ger.
tainly, come after dividends. and. there
fore. be part Of surplus charged back.
against Onerating exnenses -