Customization > Lists, Records, & Fields > Record Types > Custom Record > Mail Merge > Email > Recipient: Add Employees to the List

1. Navigate to Customization > Lists, Records, & Fields > Record Types > Edit a Custom Record > Under Fields, add Customer Name, Field 1, Field 2 etc.
2. Set Enable Mail Merge = T
3. On the Forms tab, click on the Preferred Form
4. Fill out the Form and click Save
 
Eg.
Customer Name = My Test Customer
Field 1 = Test 1
Field 2 = Test 2
 
4. On the newly created record, click on the Mail Merge Tab > click Email
5. Click the Recipient dropdown
 
Note: The only option is the main customer in the record (in this scenario, that is My Test Customer) and the (+) Add New button. No other options are available. When the User clicks Add New, this will create duplicate records.
 
Solution:

1. Navigate to Customization > Lists, Records, & Fields > Record Types > Edit the Custom Record > Fields > Add New Field.  
2. This could be Employee, Lead, Prospect or Vendor

Eg.
Title = Employee
Type = List/Record
List = Employee
Store Value = T
Show In List = T

3. Create a new record via the Custom Record List link > New

4. For example, you want to send the email to an Employee, then select the employee name under the Employee Field created in Step2 > Save

5. In the Mail Merge tab > Email > Recipient > You will now notice that the employee name is now coming up as an option from the dropdown list, this way the user can send the email without creating a new record.