Employees and agents create a variety of legal issues for employers. For example, an employer is liable for injuries caused by an employee while acting within the scope of employment and agents may bind the employer-principal to contracts. In contrast, independent contractors provide considerable legal insulation and reduced liability for their employers. However, these advantages may be lost by mistakenly granting an independent contractor apparent authority to act as an agent.
Actual authority is a specifically stated grant of agency status to someone to be a representative and create legally binding contracts on her or his behalf. An individual's conduct may cause a third person to justifiably believe that actual agent authority exists. Apparent authority arises when a reasonable person exercising due diligence would think that agency status was present. The supposed authority cannot be created by the would-be agent's conduct but only by the principal. A recent Texas Court of Appeals decision considered allowing an individual to use company email as one factor creating apparent authority (PanAmerican Operating, Inc. v. Maud Smith Estate).
PanAmerican allowed an independent contractor to use a company email account, physical address and phone line. The contractor negotiated an oil and gas lease contract via email, claiming to represent PanAmerican. Subsequently PanAmerican denied that the independent contractor was its agent and refused to honor the agreement. While other factors also indicated actual authority, the email account is of special interest.
The Court acknowledged that merely granting an individual an email account does not automatically create apparent authority. Nevertheless, knowing that this individual would negotiate with third parties required PanAmerican to order the independent contractor to inform third parties that no agency existed and to more closely monitor the individual's conduct. The Court used the familiar terminology of "clothing" someone with authority. This was not a situation in which an individual sent an email unrelated to the company claiming to be an agent. Pan American was bound by the negotiated contract.
Email may be a source of legal problems. For example, employers may be liable for sexual harassment and a hostile work environment based upon email. Email comments by supervisors may provide proof of unlawful discrimination. A few decisions have declared that contracts may be created by merely typing a name on the email (going back to telegraph communications). An employee may claim an expectation of privacy in email unless the employer clearly states otherwise. Invasions of privacy may create civil liability and prevent effective investigations of criminal misconduct. The National Labor Relations Board may determine that email exchanges create protected "concerted activity." The attorney-client privilege may be lost by email communications. Intellectual property and trade secrets may be lost by careless email. As illustrated by the current case, email may help establish apparent authority. Beyond legal issues, offensive or embarrassing email may become a public relations disaster.
Employers should not overlook the significance of granting an email account. Creating a comprehensive email policy that is acknowledged and agreed to (typically by a signed document) as a condition of obtaining an email account is always prudent. More fundamentally for any employer, under what circumstances are non-employees, including independent contractors, volunteers, interns, and other marginally affiliated individuals, granted email accounts?