Fenwick v. Unemployment Compensation Com

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.

Facts. Appellant, the Unemployment Compensation Commission, sought a review of the Supreme Court of New Jersey’s decision to designate Respondent and Chesire partners. Chesire, a receptionist for Respondent’s beauty salon, repeatedly asked for a raise from her fifteen dollars per week. Respondent was not certain if the amount of business would generate enough revenue to pay Chesire a higher salary. Respondent wanted to retain Chesire, so they entered an agreement wherein Respondent would pay Chesire her salary plus twenty percent of the profits. In the agreement, the parties are designated “partners”, but Chesire’s duties never changed post-agreement.

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.