There has been an ongoing controversy surrounding the employee status of “branch managers” who have been delegated that role by insurance companies.  On April 14, 2022, the Supreme Court rendered several conflicting decisions on this issue, drawing attention from various insurance companies.

The plaintiffs, who worked as “branch managers” for Insurance Company A, argued their employee status primarily based on the fact that they were subject to regular performance management by Company A.  In response, Kim & Chang made detailed arguments to highlight (i) the typical work carried out by “branch managers,” (ii) the reason Company A delegated work to the plaintiffs, and (iii) whether the parties were aware of the purpose and unique nature of the contract in this instance.

The Seoul High Court, the appellate court, clarified that “the act of encouraging performance or taking contractual measures against poor performers should not be hastily deemed as proof of employment relationship.”  The Supreme Court also affirmed such decision of the Seoul High Court, which resulted in a meaningful standard for determining employee status of a “branch manager” (Seoul High Court Decision 2019Na204860, January 26, 2021 and Supreme Court Decision 2021Da218205, April 14, 2022).

Additionally, the Supreme Court provided the following grounds for denying the employee status of a branch manager of Company A (Supreme Court Decision 2021Da218205, April 14, 2022, Supreme Court Decision 2021Da246934, April 14, 2022, and Supreme Court Decision 2020Da287310, April 14, 2022):

• Although the Company presented and encouraged each branch manager’s performance target, there are no grounds to conclude that the Company engaged in substantial supervision and control over the method of achieving such a performance target.

• It is difficult to conclude that the Company managed the time of arrival/departure from work for branch managers.

• As commissions were paid based on performance, the amount of commission for each month varied significantly.  There was a minimum guaranteed amount of compensation, but the amount of such guarantee was not significant or temporary in nature.

The Supreme Court has recently rendered conflicting decisions on the same issue of “employee status of branch managers” due to the differences in the circumstances leading up to the introduction of the branch manager system, the parties’ awareness of the purpose of the contract, the way in which insurance companies communicated with the branch managers, and the way in which the branch managers were compensated or supported by the insurance companies. 

Therefore, in such disputes about employee status, it is imperative for the dedicated team to respond carefully and systematically so that the nature of the underlying contract can be appropriately highlighted from the early stages.