Implied Authority

Implied Authority refers to the authority a person holds in a specific setup based on their role, position, or relationship with an entity. In the context of organizations, it refers to the implicit or unsaid authority or power employees are given or perceived to hold. It empowers people in various positions to take the actions necessary to fulfill their responsibilities, even when those actions are not explicitly stated or written anywhere.

Implied authority is crucial to the functioning of an organization. It promotes a dynamic organizational framework that enhances operational efficiency and empowers employees. It also fosters employee development by allowing individuals to hone their decision-making skills and take on increased responsibilities, contributing to their professional growth.

Implied authority is the power of individuals, typically agents or employees, to take actions reasonably necessary to fulfill their roles or responsibilities, even if those actions are not explicitly stated in a contract or agreement. This authority is assumed based on the nature of the relationship between an agent and principal (or an employee and employer) and the tasks they are expected to perform.

Implied authority clauses are vital in contractual relationships, most notably in scenarios involving agents and principals. While express authority delineates specific actions explicitly granted to an agent within a contract, the scope of human interactions and business dynamics often encompasses a broader spectrum of tasks.

Authority in this form allows people to step in and bridge this gap, enabling agents to undertake actions that can be categorized as rational, necessary, and closely aligned with the core duties entrusted to them by the principal. This form of authority recognizes that not every conceivable action can be meticulously outlined in a contract. It embraces the reality that business environments are replete with situations that require swift decision-making.

Implied authority hinges on the premise of business necessity, involving tasks traditionally associated with a given role or those logically arising as part of executing express authority. It ensures that agents can efficiently carry out their responsibilities without feeling bogged down by the need for explicit permission for every probable action they may be required to take during the course of work. This proves particularly useful in fast-paced domains where agility is paramount.

It is important to understand that authority in this form is not exhaustive. Employees or people with such authority must operate with a reasonable and rational mind. They must make decisions or take actions judiciously—decisions or actions that prudent individuals in similar positions or situations are likely to perform. It also facilitates seamless interactions with third parties, as entities can reasonably assume that actions taken by an employee or agent fall within the scope of their responsibilities.

Let us look at some examples to understand the concept better.

Example #1

Here is a hypothetical scenario. Consider a bookstore where Sarah works as the store manager. Her express authority, as outlined in her job description, involves inventory management, staff scheduling, and customer interactions. One day, a customer approaches Sarah with a rare book and inquires about its authenticity. While her job description does not explicitly mention appraisals, Sarah's position implies a certain level of expertise.

She examines the book, offers insights into its authenticity, and provides an estimated value based on her knowledge. Her action is born out of implied authority, as she makes a decision beyond her explicit responsibilities to address a customer's inquiry, leveraging her role's assumed expertise to provide valuable assistance.

Example #2

Assume Adam is a Registered Nurse (RN) at a renowned hospital in Texas, US. In a medical setting, a Registered Nurse (RN) demonstrates implied authority within the scope of their role. Adam also exercises this authority in situations that demand quick action. He does not seek permission in specific situations, such as dealing with Code Blue (sudden respiratory or cardiac issues).

While doctors have the express authority to diagnose and prescribe treatments, nurses are entrusted with various responsibilities that do not necessarily need explicit permission for every action. For instance, administering medication to patients based on doctor's orders is within their express authority. However, implied authority allows them to take immediate action in emergencies, such as administering CPR, stabilizing a patient in critical condition, or notifying the doctor about critical changes in a patient's health.

Such implied authority is based on the understanding that nurses are trained professionals who can make urgent decisions to ensure patient safety and well-being, even if these specific scenarios are not explicitly outlined in their job descriptions.

While authority in this form can be beneficial for streamlining decision-making and empowering individuals within organizations, it carries certain risks. These risks have been discussed below.

• Misunderstanding: The lack of explicit clarity can lead to misunderstandings about the extent of implied authority. Individuals might assume they have the authority to take certain actions that actually fall outside the scope of their roles, resulting in confusion and potential conflicts.
• Overstepping Boundaries: Without well-defined boundaries, individuals might overstep their implied authority, making decisions that produce unintended consequences or those that are in direct conflict with the overall objectives of an organization.
• Legal Implications: If an action taken under implied authority results in legal trouble, the organization might be held liable. Determining whether an action was within the reasonable scope of implied authority can be complex and may involve legal challenges.
• Inconsistency: It can lead to inconsistencies in decision-making, as different individuals might interpret their authority differently. It can result in different people dealing differently with similar situations or tasks, introducing inconsistencies within an organization.
• Risk Aversion: Employees might avoid making decisions that fall within the scope of implied authority due to fear of making mistakes or facing repercussions. This could hinder initiative and innovation.
• Lack of Accountability: Since this kind of authority is not always explicitly documented, it might be challenging to hold individuals accountable for their decisions, especially if disputes arise.

The differences between implied authority, apparent authority, and express authority are: