Master-Servant Rule

What Is the Master-Servant Rule?

The master-servant rule is a legal guideline expressing that employers are responsible for the activities of their employees. It applies to any activities an employee embraces while in the service of an employer that is inside the scope of their duties for that employer.

This concept may likewise go by "the principle of respondeat superior" or "let the master reply." It isn't connected with the United Kingdom laws of the eighteenth and nineteenth hundreds of years in regards to the master-servant relationship, known as the Master and Servant Acts or Masters and Servants Acts.

Understanding the Master-Servant Rule

The master-servant rule expects that an employer is vicariously to take responsibility for the [torts](/misdeed regulation) and wrongdoings of its employee. In any case, deciding if an employer is found responsible for an employee's activities relies generally upon whether the employee's bad behavior was part of finishing the work for the employer or on the other hand assuming the employee was carrying on of their very own interests.

An important part of the rule is that the employer doesn't must have information on an employee's awful behavior or negligence to be held responsible for their activities. This is known as the "obligation of supervision."

In the brokerage business, for instance, an overseeing branch manager who neglects to distinguish, address, or stop unethical or illegal activity can be found by regulators to be at legitimate fault for a "inability to direct." In such a case, the brokerage company would doubtlessly be held responsible for any damages and could face punishments.

Employers of [independent contractors](/independent-project worker) are not subject to the master-servant rule.

Since the rule puts the onus on an employer to be responsible for any civil bad behavior committed by an employee, common sense would suggest that an employer should set out the guidelines for suitable employee behavior. These guidelines might appear as an employee handbook, manual, or code of conduct; training on ethical behavior and norms; and all around planned and publicized methodology on the best way to recognize and report possibly unethical behavior.

The master-servant rule originated in old Rome, where it was applied initially to the activities of oppressed individuals and later to those of servants, creatures, and family individuals from the head of a family.

Special Considerations

The courts have found in some respondeat superior cases that employers may not be obligated assuming they were unaware of their employees committing fraud. Such discoveries put forward the viewpoint that the liability of the employer isn't applicable in light of the fact that there was no participation in the employee's fraud.

In different cases, when an employee, through activities at work, hurts another employee, the company probably won't be held obligated on the off chance that it has [workers' compensation insurance](/laborers compensation). These policies pay money to employees who have been harmed at work — and on the off chance that the accident was not due to employer negligence, the employer may not be responsible.

Laborers' compensation doesn't cover all injury insurance claims, however, which is the reason many companies opt to add employer's liability insurance. This sort of insurance safeguards companies from financial damages due to an employee's lawsuit coming about because of job-related wounds that are not covered by laborer's compensation.

Instances of the Master-Servant Rule

Despite the fact that there are various instances of the master-servant rule in which a company or employer has been held obligated, it's fitting to counsel a legal counselor while defying a case, as every one has its own conditions. Below are a couple of occasions where an employer may or probably won't be held at risk for an employee's activities.

Arthur Andersen and Enron

An accountant working for an accounting firm intentionally ignores erroneous sales claims by a manufacturer. On the off chance that the manufacturer is examined and the sales claims are questioned, the accounting firm could be held responsible for the accountant's errors.

Something almost identical to this occurred in 2002. That is when Big Five accounting firm Arthur Andersen was forced to surrender its licenses to practice as certified public accountants (CPAs) over its auditing of Enron. A court found the firm at legitimate fault for the lawbreaker allegation of block of justice, yet in 2005 the U.S. High Court switched the conviction. Notwithstanding, by then the company was in essence covered.

Company assets

On the off chance that an employee gets into a vehicular accident utilizing a company truck during after-work hours, the employer would in all likelihood not be held responsible. Notwithstanding, assuming that the employee got into an accident while on the road on company business or for the company, the employer could be responsible for any damages brought about by the accident.

Features

• This rule might cover employee acts that fall inside the scope of their ordinary duties carried out for that employer.
• The master-servant rule is a regulation that makes employers responsible for certain activities made by their employees.
• The master-servant rule additionally states that an employer need not know about the activities of an employee to be held at risk for their wrongdoings.