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Ruling: Was pl a salaried worker?: Def explained the collaboration’s rationale as pl having extensive business knowledge and her having available funds. Considering that pl was concerned about financial stability and gave up a stable job, it is difficult to believe def’s claim that he was to receive no payment and had received only a loan. It is also noteworthy that their financial cooperation began with def paying pl’s employer for his consultation. Furthermore, pl had expressed a lack of confidence in def’s business acumen and as a junior partner, could not himself make any business decisions, including whether to progress with the business. One could possibly still argue that the combination of more flexible work conditions and the chance of significant profit lured him to a partnership even without any pay of security.
However, the contract drafts, which went back and forth between the two sides, are instructive even if they are not signed. In the absence of other documentation, they convey the basic idea behind the parties’ arrangements. Furthermore, on April 9, def emailed pl saying that she agreed to the terms of the contract "in principle," pending emendations by a lawyer.
The draft contract speaks of a $150,000 yearly salary and workers’ benefits for pl from the LLC and assigns def as guarantor of payment should the company fail. Regarding the status of guarantor, def redlined that she was willing to be a guarantor of payment only during the Primary Employment Period, which was three years. Def presented no evidence that the term "employment agreement" was meant only to convince a custody court.
Therefore, pl is to be paid as an employee of the company even though it closed without producing profits.
P'ninat Mishpat (832)
Beit Din Eretz Hemda - Gazit
659 - Receiving One’s Due in a Joint Building Project – part II
660 - Financial Security for a Partner/Worker?
661 - Financial Security for a Partner/Worker? – part II
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Beit Din Eretz Hemda - Gazit
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