Will Entrepreneurial Branch Managers Be Introduced? Court Rules "Not Employees" (Comprehensive)

Resolving Conflicts in the Insurance Industry... Expected Reduction in Implementation Burden

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

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, recruit and manage agents, and conduct training.

They claimed, "Although we formally signed consignment contracts with the company, in reality, we were subject to the company's direction and supervision, providing subordinate labor," and filed a lawsuit demanding severance pay totaling about 970 million KRW.

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

However, the court ruled, "The division head’s encouragement of sales performance was merely an inducement for performance improvement within a cooperative relationship among managers who shared a common interest in profit generation through results," and "Meetings and training were measures to prevent incomplete sales, 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 work," 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 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 workers, are praised for enabling the growth of the sales organization based on sales expertise. Meritz Fire & Marine Insurance, led by Vice Chairman Kim Yong-beom, introduced the entrepreneur-type division head system in 2016 to prevent the outflow of agents to GA (General Agencies), expand its own sales organization, and increase the number of affiliated insurance agents. Recently, it has even produced executives who were formerly agents.

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