Brief Fact Summary. Respondent employer, John Fenwick, entered an agreement with employee, Arline Chesire, wherein they referred to themselves as partners. The agreement was formed to potentially increase Chesire’s compensation.
Synopsis of Rule of Law. The sharing of profits does not alone create a partnership, despite the parties’ intentions.
Thus, not every agreement that gives the right to share profits is for all purposes a partnership agreement.View Full Point of Law
Issue. The issue is whether Chesire is a partner or an employee in Respondent’s shop.
Held. Chesire is an employee despite Respondent and Chesire’s agreement that termed her as a partner. The sharing of profits is but one factor in determining whether a partnership exists. The court looked at several other factors that did not indicate a partnership in this case, such as obligation to share losses, ownership and control, conduct towards third parties, and rights of dissolution. When the court weighed this against parties’ intent and the sharing of profits, the scales weighed in favor of an employer-employee relationship.
Discussion. Agreements to share profits as a method of compensation are common, but it will not establish a partnership. This is true even when the parties refer to it as a partnership.