Legal Question in Business Law in California

Re: employer obligation to pay for work ordered employee.

The answer is "it depends". An employee can bind an employer if the employer had "ostensible" or "apparent" authority to complete the transaction.

In other words, did the software company have an reason to NOT believe the tech employee had the authority? If you hire an employee, they will have certain duties and powers implied in their position.

What you might do is send a letter to the software company disputing the bill and point out that: (1) the employee did not have the authority; and (2) the services rendered were of no value.

Re: employer obligation to pay for work ordered employee.

If your employee had apparent authority to order it. If it would reasonably be apparent that he had that authority in the vendor's eyes.

Re: employer obligation to pay for work ordered employee.

Mr. Starrett and Mr. Bravos are correct. I want to add that the employee's ostensible authority derrives from the company's actions and not his own. If the company gave him a title which suggests he has authority to contract on its behalf then it is probably stuck. The same is true if an officer or director heard this employee tell the other company he had such authority but did nothing to correct him. But if the other company only believed the employee had this authority because he claied he did then your business is probably not liable.

Re: employer obligation to pay for work ordered employee.

Yes, if the vendor had reasonable reliance on the employee having authority to make an order. It is fact based. If you can't work it out, they could always sue you. Contact me if it reachs that point, maybe before for negotiation help.

Re: employer obligation to pay for work ordered employee.

The question concerns the law of agency. An agent is someone appointed by another, called the principal, to conduct certain business on his, her or its behalf. Common examples are purchasing agents and real estate agents, but there are many other, often less formal, principal-and-agent situations in everyday life.

An agent has the power to bind his principal when certain conditions are met. One of those conditions is that the agent have authority from his principal. Absent authority, more likely than not, the agent alone is liable on the contract.

An agent's authority to bind the principal can be actual (express or implied) or it can be apparent or ostensible. The legal meanings of these terms are technical; although each is discussed a bit more below, suffice it here to say that if someone is a "vice president" "general manager" "purchasing agent" etc., they will be deemed to have authority under one or more of the theories and the employer will be bound by the agent's acts on the principal's behalf.

A principal can also become bound by its later ratification of the supposed agent's acts, or by accepting the benefits of the contract, if any.

It's pretty clear your employee didn't have express authority; probably no implied authority either, unless there was a history of prior dealings between the vendor and the employee from which agency powers could reasonably be inferred.

If there is also no history of dealings between your company and the vendor, from which the vendor could get the idea that the employee was an agent (e.g., the owner didn't tell the CEO of the vendor that "Employee is our most responsible person on Project X") there would be no apparent authority.

Finally, ostensible authority is not really authority at all, but rather a situation created by the principal where it would be very unfair to the vendor to allow the principal to say, in effect, " 'haha, gotcha' - Joe Employee doesn't have authority, even though we led you to believe he is our authorized agent by giving him business cards saying 'VIP'. "

This is far from an exhaustive discussion of the law of agency, but it might allow you to evaluate whether the vendor can reasonably assert that your company is bound by an agent's acts, or whether this employee simply acted on his own, and at his own peril.