Nationwide Mutual Insurance Company v. Darden

PETITIONER:Nationwide Mutual Insurance Co. et al.
LOCATION:Burning Cross at residence

DOCKET NO.: 90-1802
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 503 US 318 (1992)
ARGUED: Jan 21, 1992
DECIDED: Mar 24, 1992

Christopher J. Wright – on behalf of the United States, as amicus curiae, supporting the Petitioners
George R. Ragsdale – on behalf of the Petitioners
Marion G. Follin, III – on behalf of the Respondent

Facts of the case


Media for Nationwide Mutual Insurance Company v. Darden

Audio Transcription for Oral Argument – January 21, 1992 in Nationwide Mutual Insurance Company v. Darden

Audio Transcription for Opinion Announcement – March 24, 1992 in Nationwide Mutual Insurance Company v. Darden

David H. Souter:

The third and blessedly shortest case is Nationwide Mutual Insurance Company and Darden, No. 90-1802.

In this case, we issued writ of certiorari to the United States Court of Appeals for the Fourth Circuit to determine the test of status as an employee under the Employment Retirement Income Security Act or ERISA.

Robert Darden operated an insurance agency according to the terms of several contracts with petitioner, Nationwide Mutual Insurance Company.

Under the contracts, Darden agreed to forfeit his right to retirement plan benefits if within a year of his termination as a Nationwide agent in 25 miles of his prior business location, he sold insurance in competition with Nationwide.

When Nationwide relied on that condition, to deny him retirement benefits to which would otherwise have been entitled.

Darden sued for them claiming that they were non-forfeitable because already vested under the terms of ERISA.

Darden has an action under ERISA only if he qualifies as an employee as that term is used in the statute.

The District Court held that under traditional common law principles, Darden had worked for Nationwide as an independent contractor and not as an employee.

The Court of Appeals reversed finding the common law test inapplicable in this context and holding instead that an ERISA plaintiff can qualify as an employee simply by showing that he had reasonable expectation of receiving pension benefits, that he relied on the expectation, and that he lacked the economic bargaining power to contract out of benefit plan forfeiture provisions.

In an opinion filed with the Clerk today, we unanimously reverse.

Under ERISA, an employee is any individual employed by an employer, a completely circular definition that explains nothing.

In the past, when Congress has used the term employee without defining it in any helpful way, we have construed the term to incorporate common law or agency principles for identifying master-servant relationships, and we adapt that rule here as well since nothing in ERISA suggest that construing the statute to incorporate the common law criteria would tort the congressional design will lead to absurd results.

We remand the case to the Fourth Circuit to determine whether Darden does in fact qualify as an employee under traditional common law principles.