Help Avoid Legal Pitfalls When Withdrawing a Job Offer
Finding the right person for a job opening is often difficult, and employers may jump the gun when they think they have a good candidate. Occasionally, they learn too late that they shouldn’t have made a job offer at all.
Depending on the circumstances, withdrawing an offer may be the right move. For example, the new hire may have flunked a background check — criminal, credit or drug — after he or she accepted the job. Or your staffing needs might have suddenly changed due to a reorganization or a financial setback.
Regardless of the reason, proceed with caution to avoid hot water. There’s nothing illegal about rescinding a job offer. However, you could be risking litigation if your reason for doing so is rooted in discrimination against “protected class” individuals, or based on learning that the job applicant is pregnant.
Also, if you have made a written job offer, but the job applicant hasn’t formally accepted the job at the time you rescind it, the offer isn’t generally binding. Similarly, if the applicant presents you with a counteroffer (meaning that you’re negotiating over job terms), there has been no agreement and you can’t be held to your original offer.
Even if discrimination isn’t a factor in rescinding a job offer, you could still be open to a lawsuit on several other grounds. Keep in mind that the way courts will look upon a suit can vary from one state to the next, depending upon their labor laws, and their interpretation of “employment at will.” Here’s a rundown:
- Misrepresentation or fraud. The “un-hired” person may be able to succeed in court if it can be established that you knew the job might soon be eliminated, but made a job offer anyway.
- “Promissory estoppel.” This legal term applies to the situation in which someone has gone to trouble and expense, because he or she relied on the promise of a new position (for example, the applicant may have quit an existing job). This could apply even if that promise isn’t a legally binding contract.
- Breach of contract. With or without a formal written contract, actions you take may be construed by courts as having established a contractual agreement to provide a job.
As the saying goes, an ounce of prevention is worth a pound of cure. Preventing someone from taking you to court because of a job offer requires several precautions. First, and most basic, don’t have the person start working until all backgrounds checks are complete and you’re confident there’s no other known reason the job offer isn’t solid.
Next, informal acts and statements on your part can tilt the legal scales against you. Saying, for example, “Welcome to the company” or “We’re looking forward to having you on board for a long time,” or “This room is where you will be working” makes a job offer seem more like a done deal, than something hypothetical.
State the Caveats
The alternative is to make your job offer in writing but with essential caveats added. Those include a reminder that the individual will be employed at will (assuming that comports with your local laws). Also, perhaps most important, be clear that the offer is contingent upon satisfactory completion of whatever background checks you intend to perform. As an added precaution, it’s a good idea to have the job applicant sign a letter acknowledging that he or she understands the offer is contingent.
Note: Suppose you run a credit check which turns up some troubling information. Under the Fair Credit Reporting Act, you’re required to give the applicant the opportunity to review and respond to negative findings before you take any adverse action, such as withdrawing an offer of a job.
Also, if the offer is in writing, don’t create any expectations of how long the job will last. Otherwise, if the applicant is able to persuade a judge that you’re guilty of a breach of contract, any damages assessed could be based upon the expected duration of the job.
Finally, if you discover that it’s necessary to withdraw a job offer, do so as quickly as possible, to mitigate possible damages. The longer you wait, the greater the chances the applicant will rely on the job offer to take actions, such as relocating to your geographic area. Such conditions could bolster the applicant’s grounds for a claim of promissory estoppel.
How you rescind the offer is no less important than when you do it. It’s generally recommended that you notify the applicant both orally and in writing, to ensure the message is clearly stated. Also, since you probably won’t be putting that written statement in the individual’s hands, when you mail it, use a delivery service that includes a confirmation of receipt mechanism.
It’s always prudent to consult with an employment attorney for advice on how to craft a template for a job offer, job rescission letter, or how to handle any job rescission action that you suspect might have negative legal repercussions.