Fenwick v. Unemployment Compensation Commission

Fenwick (plaintiff) employed Chesire as a cashier and receptionist at his beauty parlor. Chesire initially worked for $15 per week, but after several months she demanded a raise. Not wanting to lose Chesire, Fenwick agreed to increase her compensation if his beauty parlor made more money. Fenwick and Chesire executed an agreement which described their association going forward as a “partnership,” and each of them as a “partner.” The agreement provided that Chesire would continue her current duties and be paid her existing salary plus 20 percent of the profits “if the business warrants it.” The agreement also stipulated that Chesire would make no capital investment in the beauty parlor, and that Fenwick would retain complete control of it and be solely responsible for its debts. Chesire continued to work as cashier and receptionist for three years after the agreement was executed. She subsequently terminated the agreement and quit her job to stay home with her child. A case was brought before the New Jersey Unemployment Compensation Commission (Commission) (defendant) to determine whether Chesire was Fenwick’s partner or employee. If Chesire was Fenwick’s employee, Fenwick would be responsible for paying into the state unemployment compensation fund. The Commission found that Chesire was Fenwick’s employee, holding that the agreement was simply an instrument used by the parties to set the level of Chesire’s salary. The New Jersey Supreme Court reversed, relying heavily on the terms of the agreement and ruling that Fenwick and Chesire were partners.