DEFINITION of 'Master-Servant Rule'

A legal guideline stating that employers are responsible for the actions of their employees in many circumstances. If an employee acts negligently - even if the employer was not aware that the employee was doing so - the employer could face fines or a lawsuit. Since the Master-Servant Rule places the onus on the employer, it is important that the employer set the guidelines for appropriate employee behavior.

BREAKING DOWN 'Master-Servant Rule'

For example, an accountant working for a large accounting firm intentially overlooks erroneous sales claims by a manufacturer he is balancing the books for. If the manufacturer is audited and the sales claims are disputed, the accounting firm could be held liable for the accountant's errors.

RELATED TERMS
  1. Special Employer

    An employer who receives an employee on loan from another business, ...
  2. General Employer

    An employer who loans an employee to another business, and who ...
  3. Terms Of Employment

    The conditions that an employer and employee agree upon for a ...
  4. Constructive Discharge Claim

    An insurance claim made by an employee who has quit his or her ...
  5. Convenience Of Employer Test

    The test that is applied to determine whether meals, lodging, ...
  6. Unit Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
Related Articles
  1. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  2. Investing

    401(k) Lawsuits: How Employers Are Protecting Themselves

    Some companies are making it harder for employees to sue over retirement fund problems. Here is what you need to know about the trend.
  3. Small Business

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  4. Insurance

    SHOP Marketplace: How it Works for Employers

    SHOP is a health care insurance resource available for for-profit and nonprofit small business owners that has a straightforward sign-up process.
  5. Small Business

    3 Reasons to Develop an Employee Handbook for Your Small Business

    Learn how a small business can benefit from an employee handbook covering labor laws, codes of conduct, leave policies and media relations.
  6. Insurance

    Take Advantage Of Employer-Sponsored LTC Insurance

    Find out why 98% of employees are missing out on some great benefits.
  7. Small Business

    Employer? Steps To Fill Out Immigration's I-9 Form

    Step-by-step, here's how you and the employee you've hired fill out this required form from the U.S. Citizenship and Immigration Services.
  8. Managing Wealth

    Company Policies you Did Not Know Might Be Illegal

    While you need an employee handbook to maintain law and order, trying to enforce illegal policies can land you in hot water.
  9. Financial Advisor

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
  10. Retirement

    6 Benefits You're Required by Law to Offer Your Employees

    Learn about the benefits that a business must offer to employees, such as family and medical leave, as well as various forms of insurance coverage.
RELATED FAQS
  1. Can LLCs have employees?

    Discover how limited liability corporations (LLC) can have an unlimited number of employees and the legal steps required ... Read Answer >>
  2. What are some examples of common fringe benefits?

    Learn how offering fringe benefits can be a strategic recruitment and retention tool for employers and drastically increase ... Read Answer >>
  3. Should I offer alternative investments to my employees?

    Learn the pros and cons of employer-recommended alternative investments and why risky alternatives, such as hedge funds, ... Read Answer >>
  4. How do I "vest" something?

    Vesting is a term usually related to pension plans that some employer's provide to their employees.An employer may make contributions ... Read Answer >>
  5. How does an employer benefit from a 401(k) matching plan?

    A 401(k) is a type of qualified retirement plan created by employers, where an employee deposits money into a retirement ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center