Monday, July 14, 2008
Nothing like a trip to the beauty shop to address a bad hair day (left). But when is a beauty shop receptionist a partner and when is she an employee? In Fenwick v. Unemployment Compensation Committee, we learn that the test for whether or not a partnership exists is substantive. The intentions of the parties matter, but their intentions must be to form a partnership, not merely to call themselves a partnership.
Mr. Fenwick valued his receptionist, Mrs. Chesire ("she was a very good girl"). He wanted to keep her but could not afford to increase her salary. Instead, he offered to make her a partner, with a right to 20% of the profits from the business. Naming her a partner rather than an employee also exempted him from having to pay into an unemployment comopensation fund. Under the Uniform Partnership Act (1914), sharing of profits is prima facie evidence of a partnership. Unfortunately for Mr. Fenwick, the presumption of a partnership is rebutted when the sharing of profits is really just an alternative means of paying a salary. Mrs. Chesire was not a partner in the business in any significant sense. She did not help run the business; she did not share in losses; there was no dissolution of the partnership or accounting to her when she quit her job as a receptionist.
I feel some remorse that I could not do anything in the Limerick with Mrs. Chesire's name. It seems to me that a Lewis Carroll reference is called for here, but I could not pull it off.
Fenwick v. Unemployment Compensation Committee
Fenwick's love for his "partner" just waxed
When he learned he'd avoid being taxed.
Co-ownership was lacking,
Fenwick sent packing,
And the Beauty Shoppe partnership axed.