## Facts

- Robert T. Darden sold insurance under successive agency contracts with Nationwide from 1962 to 1980 and agreed to sell only Nationwide policies.
- Nationwide paid commissions and enrolled Darden in the Agent’s Security Compensation Plan, which included deferred compensation credits and an Extended Earnings component tied to prior renewal fees.
- The contracts provided that plan benefits would be forfeited if, within one year and within 25 miles of termination, Darden sold insurance for competitors, or if he later induced a Nationwide policyholder to cancel a policy.
- Nationwide terminated the relationship in November 1980 under the contract.
- Darden then became an independent agent, worked from his prior office, and sold insurance for Nationwide competitors.
- Nationwide asserted that Darden’s post-termination conduct triggered forfeiture of plan benefits; Darden sued under ERISA’s civil enforcement provision, alleging vested, nonforfeitable benefits.

## Issues

1. Whether “employee” in ERISA’s definition of “participant” is governed by traditional common-law agency principles or a broader, policy-based test.
2. Whether courts may adopt an ERISA-specific definition of “employee” based on expectations, reliance, and bargaining power rather than common-law criteria.

## Decision

- The Supreme Court unanimously held that “employee” in ERISA incorporates traditional common-law agency criteria for identifying master–servant relationships.
- The Court rejected the Fourth Circuit’s policy-driven test focused on expectations, reliance, and bargaining power.
- The judgment was vacated and the case remanded for application of the common-law agency test to Darden’s status.

## Legal Principles

- When Congress uses the term “employee” without supplying a substantive definition, courts presume Congress intended the common-law agency meaning unless Congress clearly indicates otherwise.
- ERISA’s definition of “employee” (“any individual employed by an employer”) is circular and does not displace the common-law presumption.
- Employee status under the common-law agency framework is determined by a multifactor inquiry assessing and weighing all incidents of the relationship; no single factor is controlling.
- Policy considerations and general statutory purposes do not authorize courts to replace the common-law meaning of “employee” with a judicially created standard absent statutory text supporting that departure.

## Conclusion

The Court required ERISA “employee” status to be decided under a multifactor common-law agency test, rejecting a policy-based approach and directing lower courts to reassess Darden’s eligibility to sue as a plan “participant” under the proper standard.


Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992)