Will Entrepreneurial Branch Managers Gain Momentum?... Court Rules "Not Employees"

Conflict Resolution in the Insurance Industry... Introduction Burden Expected to Decrease

[Asia Economy Reporter Oh Hyung-gil] Court rulings are increasingly finding that entrepreneur-type branch managers introduced to strengthen sales capabilities do not possess the status of employees. The insurance industry expects that concerns over the introduction of entrepreneur-type branch managers will diminish.

According to the insurance industry on the 2nd, courts have ruled that entrepreneur-type branch managers who operate insurance branches and train and manage agents are not employees. The 41st Civil Division of the Seoul Central District Court (Presiding Judge Kim Myung-soo) ruled in favor of the company on the 25th of last month in a severance pay lawsuit filed by 15 agency managers affiliated with MetLife Life Insurance against the company.

The managers worked as insurance agents and signed consignment contracts with the company to operate each branch and recruit, manage, or train agents. They filed a lawsuit demanding severance pay totaling about 970 million KRW, claiming, "Although we formally signed consignment contracts with the company, in reality, we provided subordinate labor under the company's direction and supervision."

They argued, "The head of the company's business division convened meetings for the managers of the branches they managed to provide training or set performance targets for each branch," and "Our working hours were around 7:30 a.m., and we had to get approval from the division head before taking leave."

However, the court stated, "The division head's encouragement of sales performance was merely to induce performance improvement in a cooperative relationship among managers who shared a common interest in profit generation through results," and "The meetings and training were measures to prevent mis-selling, and no special disadvantages were imposed for non-attendance."

Furthermore, the court pointed out, "Managers received commissions calculated based on the performance of insurance agents affiliated with their branches, regardless of the content or hours of their duties," and "Since these amounts varied greatly each month, it is difficult to consider these commissions as compensation for labor itself."

Based on the fact that the consignment contract explicitly stated that an employment relationship was not established and that managers sometimes hired assistants at their own expense, the court ruled that "managers do not qualify as employees under the Labor Standards Act," siding with the company.

In October last year, the court also ruled that Mirae Asset Life Insurance was not obligated to pay severance to 17 former entrepreneur-type branch managers who filed a severance pay claim against the company. This ruling was finalized earlier this year when the plaintiffs withdrew their claims.

Entrepreneur-type branch managers, who convert high-performing agents or branch managers into contract positions, are praised for enabling the growth of sales organizations based on sales expertise. Meritz Fire & Marine Insurance introduced the entrepreneur-type branch manager system early on and recently promoted a former agent to an executive position.

This content was produced with the assistance of AI translation services.