Master-Servant Rule - Explained
What is the Master-Servant Rule?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
Table of ContentsWhat is the Master-Servant Rule?How is the Master-Servant Rule Used?Master-Servant Rule ExamplesMaster-Servant Rule History
What is the Master-Servant Rule?
The master-servant rule refers to a rule or doctrine whereby an employer is responsible for all the actions of their employees and a party responsible for the actions of its delegates and agents. The master-servant rule is also known as the law rule of vicarious-liability which makes an employer responsible (vicariously liable) for the actions of his employees while they were discharging their duties under him. The master-servant rule is often used for negligent acts of employees and agents, in this situation, the employer is liable for their actions, whether he is aware or unaware of those actions.
Back to: LAW, RISK, & TRANSACTIONS
How is the Master-Servant Rule Used?
Under the scope of the master-servant rule, an employer does not necessarily have to be aware of the actions or negligence of his employees. Whether the actions or offenses are committed with or without his approval, he is liable for them. In many sectors in the United States, an employer is liable for the misdeeds and negligence of their employees. The master-servant rule is applicable in diverse sectors and industries such as in the brokerage industry, construction industry, and others. Regulators hold employers responsible for the misdeeds of their employees because it shows a lack of proper supervision and management of employees. According to regulators, a supervisor or employer who properly supervises their employees would detect unethical activities and curb or stop them.
Master-Servant Rule Examples
A branch manager of a bank or a financial institution is held liable for the negligence and misdeeds of workers under him using the master-servant rule. He is liable because he is seen to have permitted those activities even if he was unaware of them. There are other instances where a supervisor or manager overlooks some errors done by his subordinates, such a manager can face the consequences of the cations of those employees. Another example is when fraud cases occur, the employers of employees involved in fraud are often liable for the fraud transaction. Oftentimes, employers try to mitigate the penalties that come with the application of the master-servant rule. One of the ways to do so is by setting guidelines for employees which they must strictly follow or face the consequences.
Master-Servant Rule History
The master-servant rule started in Rome before it spread to other countries and regions like the United Kingdom, the United States, and others. When it was being used in Rome, The master-servant rule is applicable in circumstances where masters, superiors and held of families are held liable for the actions of their slaves, servants, animals and family members. Sometimes, the history of the master-servant rule is confused with the Master and Servant Acts in the United Kingdom in the 18th and 19th century but this is not so. The master-servant rule in this context has its origin in the ancient Roman culture.