## Facts

- John R. Fenwick operated a Newark beauty shop, United Beauty Shoppe.
- Arline Chesire was hired as a cashier and reception clerk at $15 per week; her duties were taking customer orders for services and collecting charges.
- When Chesire requested a raise, the parties executed a written agreement effective January 1, 1939 stating they “associate themselves into a partnership” under the shop name.
- The agreement provided: Chesire would contribute no capital, receive no ownership interest in the business assets, and have no management or control rights; control and management were vested solely in Fenwick.
- Chesire continued at $15 per week plus a year-end bonus equal to 20% of net profits “if the business warrants it.”
- Chesire bore no responsibility for business debts or losses; Fenwick remained responsible.
- After the agreement, Chesire’s day-to-day duties and the shop’s operations did not change, and she worked until January 1, 1942.
- The Unemployment Compensation Commission treated Chesire as Fenwick’s employee; if so, she was the eighth and deciding employee making Fenwick an “employer” covered by the unemployment compensation statute.

## Issues

1. Whether Chesire was a partner or an employee for purposes of New Jersey’s unemployment compensation statute, given the written “partnership” agreement and profit-sharing provision.

## Decision

- The court reversed the judgment that treated Chesire as a partner and sustained the agency determination that she was an employee.
- The court held that the relationship was employer–employee, not a partnership, despite the agreement’s partnership label and profit-sharing term.
- The court treated the 20% profit share as compensation and found the arrangement lacked essential incidents of partnership.

## Legal Principles

- A partnership is determined by the substance of the relationship, not by the parties’ label or stated intent in a written agreement.
- Sharing profits, standing alone, does not establish a partnership; it may reflect compensation.
- Indicators against partnership include: no capital contribution, no proprietary interest in business assets, no right to participate in control or management, and no obligation to share losses or liability for debts.
- How the parties function in practice and their dealings with third parties are relevant to characterizing the relationship.

## Conclusion

Because Chesire had no ownership stake, no management rights, and no exposure to losses or liabilities, and because her work remained that of a salaried clerk with a contingent bonus, the court held she was an employee rather than a partner, making Fenwick subject to the unemployment compensation statute.


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