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J.Y. Interpretation No. 740 "Whether a Service Agreement between an Insurance Solicitor and an Insurance Company is a Labor Contract"
At the 1446th conference of the Justices of the Constitutional Court, the Justices of the Constitutional Court issued J.Y. Interpretation No. 740, per the letter Ref. No. Tai-Da-Er-Zi-1050026814, dated 21 October 2016. The Interpretation is about whether a service agreement between insurance solicitors and an insurance company ("Service Agreement") is a type of labor contract and thus, being subject to Subparagraph 6 of Article 2 of the Labor Standards Act ("Labor Contract"). The main points are as follows:
1. Criteria for determining a Labor Contract
One of the critical terms in a labor contract concerns the provision of service and the payment for such service. Whether a contract is a Labor Contract shall be determined based on the nature or the characteristics of the contract (e.g., the time and place for the service to be provided, supervision, the assumption of business risk) and the subordination of a service provider and the employer.
2. Whether a Service Agreement is a Labor Contract shall be determined on a case by case basis
While an insurance solicitor may only solicit insurance policies under his/her contract with the insurance enterprise concerned, if the insurance solicitor can determine the method of solicitation (e.g., solicitation activities, working hours) and assumes the business risks on his/ her own (e.g., his/her remuneration is calculated based on the premiums for the policies sold) then we tend to conclude that the insurance solicitor's dependence on the insurance company is relatively low, therefore, a Labor Contract might not be formed.
3. "Regulations Governing the Supervision of Insurance Solicitors" shall not be the determining factor:
The legislative purpose of the "Regulations Governing the Supervision of Insurance Solicitors" is to enhance the administrative management of insurance solicitors but not to limit the services to be provided by insurance solicitors to those within the scope of employment. It is improper to determine whether a Labor Contract is formed between the insurance solicitor and the insurance company solely based on the "Regulations Governing the Supervision of Insurance Solicitors".