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Legal Update

Is an Insurance Agent an Employee or an Independent Contractor?

6 October 2011
Mayer Brown JSM Legal Update

Is an insurance agent an employee or an independent contractor?

This question came before the Court of First Instance (the "CFI") in the case of Leung Suk Fong Peggy v The Prudential Assurance Company Limited (HCME 11/2010). The CFI held that the insurance agent in this case was an independent contractor.


The defendant was an insurance company. The claimant was engaged by the defendant as an insurance agent under a written agreement (the "Agreement") which contained, among others, an express provision stating that "[i]t is... expressly agreed and understood that nothing under this... intended or intended to be construed as being capable of giving rise to an employment contract or contract of service". The Agreement was later terminated by the defendant.

The claimant lodged a claim against the defendant with the Minor Employment Claims Adjudication Board (the "Board") for arrears of wages, statutory holiday pay and annual leave pay on the basis that she was an employee of the defendant. When the Board dismissed her claim, she appealed to the CFI, having first been granted leave by the CFI to appeal.


The only issue of substance before the CFI was whether the claimant was the defendant's employee. The CFI held that the claimant was not an employee of the defendant.


The CFI first referred to the Court of Final Appeal case of Poon Chau Nam v Yim Siu Cheung [2007] 10 HKCFAR 156, where it was held that the court should examine all the features of the relationship between the parties in deciding, as a matter of overall impression, whether the relationship is one of employment.

The CFI then went on to consider the eight factors that the Board considered in deciding whether the claimant was an employee of the defendant:

(i) Extent of control

It was common ground that the defendant had no restrictions on where, when, how and how often the claimant performed her work. The claimant had every liberty to decide how, when and where to work and to find her potential clients. The Board and the CFI found that the defendant, by asking the claimant to attend training sessions and meetings and to use leaflets and proposals developed by the defendant, only had control over the quality of the claimant's work. Such control was necessary to ensure that the claimant's performance would meet the standard required as the defendant's agent, and was not control over her as an employee.

(ii) Prospect of profit return and risk of loss

The claimant had no fixed monthly salary and her monthly income fluctuated depending on the number of insurance policies she was able to sell. She also had to pay for her own travelling expenses and contribute a small sum to share her up-line manager's secretary's salary. If any of the claimant's client withdrew an insurance policy, she might need to reimburse the defendant the medical examination fees for the client. The Board and the CFI found that the claimant had to bear considerable risks financially in performing her work, which was inconsistent with an employee's status.

(iii) Integral part of the organisation

The Board found that the claimant was an integral part of the defendant's organisation. Although this points to a possible employment relationship, both the Board and the CFI did not consider that it carried much weight in the overall context of the parties' relationship.

(iv) Mutual obligation to work and to provide work

The claimant agreed that the defendant did not provide work to her but she had to look for her own business and clients. The Board and the CFI found that this was a strong factor militating against any suggestion of an employment relationship.

(v) Provision of equipment

The Board found and the CFI agreed that although the defendant provided the claimant with office accommodation, furniture and use of computer and fax machine, this was only for the convenience of the claimant and other agents. What mattered was that the defendant's office was not the claimant's principal place of work where she solicited her business.

(vi) Incidence of taxation and insurance

It was clearly stated in the claimant's tax return that she was not an employee. The CFI found that although the defendant contributed to the claimant's occupational retirement scheme, this was a "wholly neutral" factor because the defendant could have contributed no matter whether the claimant was its employee or not.

(vii) The parties' own view as to the relationship

The Board and the CFI found that the claimant's actions suggested that she knew full well the Agreement was not an employment agreement.

(viii) Traditional structures of the trade

The Board found that from the perspective of the traditional structure of the trade, there exists no employment relationship between insurance company and its agent. The CFI held that although it was unsure whether this finding is supported by the evidence, even if the Board had erred on this point, the overall impression of the parties' relationship (that the claimant was merely an independent contractor) would not have been changed.

While it is common in the insurance industry to have freelance insurance agents, there have been few cases in Hong Kong that have considered closely the issue of whether such "agent" is an independent contractor or employee. This is therefore a welcomed decision that clarifies the nature of arrangements concerning insurance agents.

For inquiries related to this Legal Update, please contact Duncan Abate, Hong Tran or your usual contacts with our firm.

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