HIGH COURT RULES RETIRED AGENT ISN'T "EMPLOYEE'

HIGH COURT RULES RETIRED AGENT ISN'T "EMPLOYEE'

The U.S. Supreme Court ruled that a retired insurance agent for Nationwide Mutual Insurance Co. cannot use a federal pension act's definition of ''employee" to sue Nationwide for retirement benefits denied him because he later sold policies for a competitor.

Tuesday's unanimous decision may protect employers from paying assorted benefits to insurance agents as well as many other quasi-employees operating under contracts with a primary employer, said Harry Conaway, a principal with the William M. Mercer benefits consulting firm."It's certainly going to be important for the insurance industry, because it has a lot of quasi-independent contractors and quasi-employees," Mr. Conaway said.

In an opinion written by Justice David Souter, the court reversed and remanded a lower court decision that the agent, Robert T. Darden, was entitled to collect retirement benefits from Nationwide as an employee under the Employee Retirement Income Security Act of 1974.

Columbus, Ohio-based Nationwide claimed Mr. Darden "disqualified" himself

from receiving retirement benefits from the company under his contracts with the company because he violated a prohibition against selling policies for competing companies in the first year after leaving the company.

"Erisa's nominal definition of 'employee' is completely circular and explains nothing, and the act contains no other provision that either gives specific guidance on the term's meaning or suggests that construing it to incorporate traditional agency law principles would thwart the congressional design or lead to absurd results," Mr. Souter said.

While the U.S. Court of Appeals for the Fourth Circuit had said that Mr. Darden "most probably would not qualify as an 'employee' under traditional agency law principles, it did not actually decide that issue," Mr. Souter said.

The appeals court will need to initiate further proceedings and rule on the issue.

Nationwide commented that the ruling properly applies "common-law principles" to determine whether a person is a company employee or an independent contractor as defined under Erisa.

"We at Nationwide Insurance were distressed by the Fourth Circuit Court's decision," said Gordon E. McCutchan, general counsel.

"If allowed to stand, that ruling would have created serious problems, not only for Nationwide, but for any company that relies on independent contractors," Mr. McCutchan said. "An immediate problem is the serious tax problem it would have caused our agents who suddenly would have lost their independent contractor status."