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. Indemnity

    Compensation for damages or loss. Indemnity in the legal sense ...
  5. Civil Money Penalty - CMP

    A punitive fine imposed by a civil court on an entity that has ...
  6. Plant Patent

    An intellectual property right that protects a new and unique ...
Related Articles
  1. Build A Wall Around Your Assets
    Retirement

    Build A Wall Around Your Assets

  2. Don't Get Sued: 5 Tips To Protect Your ...
    Entrepreneurship

    Don't Get Sued: 5 Tips To Protect Your ...

  3. Cover Your Company With Liability Insurance
    Home & Auto

    Cover Your Company With Liability Insurance

  4. Protect Your Company From Employee Lawsuits
    Home & Auto

    Protect Your Company From Employee Lawsuits

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center