A diamond dealer engaged with a company dealing with the manufacture and sale of diamonds in an agreement under which the diamond dealer acted as a salesperson and was entitled to a percentage of sales. At some point the diamond dealer was terminated, but the company contended that he is not entitled to rights of an employee because in practice the parties were engaged in a partnership. The employee filed a claim against the company and its shareholders.
The Court accepted the claim and held that a partner in a partnership is not an employee of the partnership, but the fact that the payment of a salary to an employee is by way of a percentage of the profits does not by itself indicate the existence of a partnership and does not render the employee a partner in the company. In this case, the tests for the existence of employee-employer relations are met and therefore the employee is entitled to rights as an employee.
The Court also held that a breach of an employee's social rights is not in itself sufficient to justify piercing the corporate veil and personal liability of shareholders in the company and therefore rejected the claim against the shareholders.