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Rescinding a Job Offer? What You Need to Know

Rescinding a job offer is a hard decision, but there are times when it’s the only choice. This might be due to internal issues or because of something you’ve discovered about the applicant. If you do have to withdraw a job offer, it’s important to understand all the implications, so you can protect both your business and your relationship with the candidate.

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Why job offers are rescinded

Rescinded job offers are more common than you might think and happen for a variety of reasons. An offer might be withdrawn because of something changing in your business or due to a discovery about the candidate. Common reasons for rescinding a job offer include:

  • Failed drug test
  • Discovery of a criminal background
  • Unsatisfactory background check
  • Poor post-offer experiences with candidate
  • Unsatisfactory reference check
  • False material supplied during the interview
  • Budget cuts in the organization
  • Organizational restructure
  • Postponed project or lost client

Legal considerations when rescinding a job offer

In most areas of the country, employment is “at-will.” This means that the relationship between you and your employee may be ended at any time, by either party, with or without notice or cause. At-will employment also covers the period of time between an offer being made and the candidate starting the job.

This is true as long as you’re not rescinding the offer for an unlawful reason. There are two circumstances when a reason would be considered unlawful: if you’re discriminating against the employee, or if they’re fired in retaliation for whistleblowing.

It’s unlikely that someone would be whistleblowing before starting employment, but it’s important that you understand the federal discrimination laws that are involved. The laws prohibit discrimination on the basis of the employee’s membership in a protected class. This means you can’t choose to rescind a job offer due to a candidate’s race, religion or gender, or because you find out they have a disability.

Keep in mind that states may have other laws that impact your decision to rescind an offer. For example, “ban the box” laws can stop you asking about an applicant’s criminal history until after an offer is made, and in some jurisdictions can prevent you from rescinding an offer unless the conviction has a “substantial relationship” to the position. Credit history background checks can also be classed as “disparate impact discrimination” in some states, which may stop you rescinding an offer based on what you find.

As with any business decision that may have legal ramifications, make sure you discuss rescinding a job offer with a lawyer or someone who understands the regulations, such as an HR professional. This can help your business stay as protected as possible.

Are you liable under civil law?

When rescinding an accepted job offer, you may be concerned about being liable for damages to employees who were relying on the job. This may be especially worrisome if a candidate quit their job or moved across the country only to find your position was no longer available.

Unfortunately, this question is tougher to answer. In some states, such as New Jersey, employers might be held liable for damages. This is through a legal concept called promissory estoppel, which means someone can recover losses based on a promise made.

In other jurisdictions, including New York, courts have said there’s no distinction between when the offer is made and when the job starts. This means that damages haven’t been awarded.

How to protect your business

Obviously, it’s best not to make offers until all the relevant screenings have been completed; however, some screenings can only be conducted after an offer is made. This may include criminal checks, drug tests and physicals.

Although some states have chosen not to award damages, it’s best to take steps to help protect yourself from liability before you rescind an offer.

The first step is making sure an offer letter is worded correctly. An offer letter should state clearly that it’s subject to successful completion of checks and screenings. It should also list what those checks and screenings entail. If the offer is conditional, state what the conditions are. This lets the candidate know that the position still isn’t finalized.

Be clear in the letter that the offer is conditional and not a promise. It’s often best to state that the prospective employee shouldn’t resign from their current position until they receive written confirmation that they’ve met the relevant conditions.

It can be helpful to include language in the offer letter that states it’s not a contract of employment and that any employment is offered at-will. Also, have the applicant sign and return an acknowledgement showing that they understand the conditions set out in the letter.

The best way to rescind an offer

There are best practices to follow when you’re withdrawing a job offer. These have less to do with protecting yourself legally, and more to do with protecting your reputation and employer brand. If the offer is being rescinded because of changes in your organization, you may want to hire this person in the future. This means it’s important to still create a positive candidate experience.

First, talk to the candidate when delivering the news. Speaking to them in person is best; however, it may be more practical to call them. State clearly that the offer is being withdrawn and tell them why.

If the withdrawal is due to internal issues, be honest about that. You don’t need to divulge company secrets, but let them know your circumstances have changed. You may also want to say that you’d welcome an application from them in the future.

If the withdrawal is due to something you discovered during the screening process, tell them what the issue is without judgment or accusations. Make sure you say that the process is confidential, so they’re not concerned about information being released to other people inside or outside your organization.

Answer any questions the applicant has and invite them to follow up with you or your HR department if any further questions arise. Some companies may opt to provide assistance through a positive recommendation if possible.

It’s important to remember that the offer isn’t formally rescinded until it’s put in writing, and the applicant has a hard copy of the withdrawal. Send them a physical letter that includes the information that was provided over the phone. It’s best to send this via certified mail, so you can be sure the applicant received a copy.

Understanding all that’s involved in rescinding a job offer can help protect you if this issue arises. With the help of HR professionals and a lawyer, you can make sure you’re handling the situation correctly for you and the candidate.

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