Fenwick v. Unemployment Compensation Commission case brief summary

Fenwick v. Unemployment Compensation Commission NJ 1945

 

Facts: Respondent Fenwick operated a beauty shop where petitioner Arline Cheshire worked as a receptionist. Petitioner asked respondent for a raise and respondent expressed a willingness to pay higher wages if the income of the shop warranted. The two parties had a lawyer draft an agreement that referred to the parties as “partners.” Petitioner left the beauty salon and seeks unemployment payment and she believes that her employer should have made payments for unemployment compensation.

Issue: Was petitioner a partner of respondent’s, thus making respondent responsible for unemployment compensation payments for petitioner?

Holding:  The burden of alleging a partnership is on the one who alleges it to exist. A partnership has not been established here, and the agreement between these parties, in legal effect, was nothing more than one to provide a method of compensating the girl for the work she had been performing as an employee. She had no authority or control in operating the business, she was not subject to losses, she was not held out as a partner. She got nothing by the agreement but a new scale of wages. 

Reasoning:

Argument for Partnership:

-Agreement calls arrangement a partnership

-Chesire gets “a bonus at the end of the year of 20% of the net profits”; Fenwick receives 80% of profits

-Books are open for inspection of each party

-Partnership continues until termination

-Filed partnership tax forms

-Held themselves out as partners to Unemployment Commission

 

Argument against Partnership

-Chesire makes no capital investment

-Fenwick controls and manages the business

-Fenwick alone is liable for debts.

-Chesire does not want more ownership in the business, she simply requested a raise.

 

-If we were to apply the UPA to the facts of this case there can be a strong argument made that there is a partnership, however, the court held that there was no partnership.

-The UPA seems incomplete, in that it says that if you are sharing profits there is a presumption that you are partners, however, as we see from this case, many employees share profits and aren’t partners.

            -Must look at the totality of the circumstances. Just as we saw in the case of agency, when         measuring whether someone is an agent the judge must assess it based on the circumstances.        So it is tough to say that one factor is dispositive.

-Problem with making a “partnership check-list” or the standard of what is a partnership too clear, is that some people may not want their relationship to be a partnership, yet if they fulfill all of the elements they would be required to form a partnership.