Fenwick v. Unemployment Compensation Commission
133 N.J.L. 295, 44 A.2d 172 (1945)

Facts:
Fenwick hired Arline Chesire as a cashier and receptionist at his beauty shop. After about a year she requested a raise. The two then entered into an agreement (which they called a “partnership”) where Chesire would receive 20% of the net profits at the end of the year, if business warranted it. All aspects of her employment remained the same.

  • The UCC disputed the existence of a partnership.
  • If she was deemed an employee, she would be Fenwick’s 8th and deciding employee, and he would have to make the statutorily required employer payments towards the unemployment compensation fund.

History:

  • The UCC held that Chesire was simply an employee.
  • The Supreme Court held that the parties were partners, and gave great weight to the fact that they had called themselves partners.

Issue:
Did a partnership exist?

Holding:
No. Case reversed.

Reasoning:
The court noted 8 factors that are taken into consideration when determining the existence of a partnership:

(1) Intent of the parties.

  • Here, the agreement seemed to be nothing more than one to provide a possible increase in compensation.

(2) The right to share in profits.

  • Existed here.

(3) The obligation to share in losses.

  • Entirely absent here.

(4) Ownership and control of the partnership property and business.

  • Chesire didn’t have any control.

(5) Community of power in administration.

  • Fenwick retained such power.

(6) Language in the agreement.

  • They did call themselves partners.

(7) The conduct of the parties toward third persons.

  • They did file partnership tax returns, however, they didn’t hold themselves out as partners to anyone else.

(8) Rights of the parties on dissolution.

  • Dissolution for Chesire would be the same thing as if she had quit employment.

The Uniform Partnership Act defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.”

Here, the court noted that the element of co-ownership was lacking:

  • Fenwick contributed all the capital, managed the business and took over all the assets on dissolution. Ownership was conclusively shown to be in him.

Furthermore, although the Act provides that sharing of profits is prima facie evidence of partnership, no such inference shall be drawn if such profits were received in payment as wages of an employee.