Master-Servant Rule

AAA

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.

INVESTOPEDIA EXPLAINS '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. Tort Law

    The area of law that covers the majority of all civil lawsuits. ...
  2. Administrative Law

    The body of law that governs the administration and regulation ...
  3. Common Law

    In the United States, a body of unwritten laws based on precedents ...
  4. Civil Money Penalty - CMP

    A punitive fine imposed by a civil court on an entity that has ...
  5. Indemnity

    Compensation for damages or loss. Indemnity in the legal sense ...
  6. TSA Pre

    This program allows travelers deemed low-risk by the Transportation ...
Related Articles
  1. Retirement

    Build A Wall Around Your Assets

    Learn how to protect your money from lawsuits, creditors and other judgment proceedings.
  2. Entrepreneurship

    Don't Get Sued: 5 Tips To Protect Your Small Business

    Find out what you can do to limit risk and keep your business running smoothly.
  3. Home & Auto

    Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.
  4. Home & Auto

    Protect Your Company From Employee Lawsuits

    Understanding employment practices liability insurance is easy, once you know the basics.
  5. Bonds & Fixed Income

    How Diaspora Bonds Work

    Developing and emerging nations with sizable populations living overseas are using diaspora bonds to raise financing from emigrants.
  6. Economics

    The Economic Impact of Better US-Cuba Relations

    We examine what the normalization of relations between the US and Cuba will mean for the two countries' economies.
  7. Professionals

    How do you protect yourself against sudden unemployment?

    Learn the steps you can take to protect yourself from unexpected job loss and how you can turn a potentially desperate time into a career opportunity.
  8. Insurance

    How do you financially prepare yourself for unemployment?

    Lean some simple ways that you can financially prepare for the possibility of unemployment. Read information for saving money and avoiding debt.
  9. Personal Finance

    What are the top trends in corporate social responsibility?

    Learn about top trends in corporate social responsibility. Companies are increasing transparency, innovating, investing locally and addressing inequalities.
  10. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center