Report regarding investigation directed to be made by the President in his Executive Order of November 27, 1933, approving the Code of Fair Competition for the motion picture industry (July 1934)

ID Moreover, even if the term "unreasonably excessive" could be determined on some discreet or quantitative basis, the penalty provided for the discipline of offenders could not be expected to exercise any materially deterring influence. The Code Authority is limited in its assessment of fines for the payment of unreasonably excessive salaries to a penalty of $10,000. Since the amounts involved in excessive salaries run into large figures, this relatively small penalty could not be expected to prove effective. If the public interest is being subserved through the payment of excessive salaries out of earnings of other divisions of the industry, or out of funds realized from the sale of securities, then the solution is obviously to be found in the establishment of machinery which will eliminate these practices, rather than in the attempt to arbitrarily limit the amount of salaries to be paid. It is therefore recommended that the provision as now contained in the code dealing with the payment of excessive salaries be indefinitely suspended. COMPETITIVE OFFERS OF EMPLOYMENT The other sections of the code suspended by the President's Executive order (article V, division B, part 5, sections 1 (c), 2, 3, 4, and 6) seek to preserve the relationship existing between a producer and his employees by controlling the terms under which competing offers of employment may be made — (a) Prior to the last 30 days of the period of the contract ; (b) Within the last 30 days of the period of the contract, and (c) Within 3 to 6 months after the expiration date of the contract, dependent upon the salary range. The first two of these provisions are designed to control the conditions under which offers of employment can be made prior to the termination of the contract. Offers of Employment at Increased Compensation Prior to the Last 80 Days of the Contract The first provision of this suspended section (article V, division B, part 5, section 1 (c)) provides that no producer shall negotiate with or make any offer to an employee under contract with another producer prior to the last 30 days of the period of the contract. It is designed to prevent secret raids upon the artists of one producer by another producer, and presumably to make it possible for the artist to devote his unqualified energies to the work of his employer during the period of the contract. It assumes that since he owes complete loyalty to his employer, he should not be subjected to any disturbing influences which might affect his ability to perform effectively under the terms of the contract. It further assumes that the application of the provisions would work no hardship on a competing producer, inasmuch as he does not intend to secure the services of the artist prior to the expiration date of the contract, and therefore is under no necessity to negotiate for his services more than 30 days prior to the expiration date of the contract. All of the employees affected, however, maintain that any restriction on their right to negotiate at any time during the period of their then outstanding contract for their services following the expiration of such contract would constitute an interference not only with their legal rights, but also with the right to assure themselves presently for the future. To illustrate: The California statutes permit contractual relationships for employment for a 7-year period. Usually the contract of employment is so drawn by the producer that while he, through the exercise of options at stated intervals of time, may continue the services of the affected employee for the full 7-year period, nevertheless upon his failure to exercise such option he will be free of any contractual obligation and the employee will be without employment. The employee, therefore, whose services might be in great demand by reason of some outstanding success, or other circumstances, insists upon his privilege to contract at any time for the rendition of his services following any expiration date of his contractual relationships then existing with his present employer. The balance of interests is so nicely adjusted that the consideration of the public interests involved would appear to be the determining factor. In my opinion the public interest should not permit such form of restraint as proposed, and it is therefore recommended that article V, division B, part 5, section 1 (c) of the code be indefinitely suspended. Offers of Employment During the Last 30 Days of a Contract The second provision of this suspended section (article V, division B, part 5, section 2) provides that no producer shall negotiate with or make any offer to an employee who receives at least $250 per week or $2,500 per picture, and who is under contract to another producer, during the final 30 days of the period of the contract. The provisions of this section do not apply to "free-lance" players unless their employment is intended to cover a period of at least 1 year. Thus there is immediately excluded from the provisions of this section of the code not only the "free-lance" player but other employees who earn less than $250 per week or $2,500 per picture. The so-called "little" artist is not affected. Under this part of the suspended section the producer has the right to list with a registrar the names of his artists who fall within the specified classifications of the code. If a competing producer wishes to make an offer to any of the listed employees, he is required to give notice to the present employer and to deliver a copy of his offer to the registrar. The employing producer in turn must be given a reasonable oppor