Job Offers: Why Rescinding One Can be Risky Business
By Jay Starkman and Deby Skawinski
Although rescinding a job offer is not necessarily illegal, there are risks for an employer to consider.
Reported in the Business Journals
Steady progress in the job market means employers are extending more job offers and more candidates are accepting.
Sometimes, however, an employer must withdraw an offer. That's never a good thing for the candidate or the employer. Although rescinding a job offer is not necessarily illegal, there are risks for an employer to consider.
Most states have employment-at-will statutes which allow an employer to terminate an employee at any time without reason. These laws also generally apply to withdrawn job offers.
However, there are exceptions that can lead to candidates taking legal action against the employer.
"Promissory estoppel" is a term used in contract law to support parties when they are harmed as a result of relying on a promise, regardless of whether an enforceable contract was in place. For example, a candidate may quit a job or relocate after accepting a new job offer. If the offer is then withdrawn, he or she can claim economic loss as a result and seek damages.
Whether an employer makes a verbal or written commitment of employment, a candidate may believe a contract has been created based on the language used during the hiring process. Even statements like: "Welcome to the company, we look forward to enjoying a long relationship," could cause a candidate to sue for breach of contract if the job offer is later withdrawn.
Candidates can also seek damages if they are able to show that a company had knowledge of the circumstances that eventually led to a rescinded offer (such as a change in company structure or budget cuts) prior to extending the offer.
The withdrawal of an offer may trigger a discrimination claim against an employer if the unsuccessful candidate is in a protected class. The risk increases if the employer then extends an offer to a candidate outside of a protected class for the same job.
While it is unlikely that a candidate would be entitled to lost wages following the withdrawal of a job offer, if he or she quit a job in reliance on the offer, lost wages may be recoverable under one of the theories above. The employer also may be required to pay related expenses such as moving or relocation costs.
The takeaway for employers
Employers should do all they can to avoid rescinding a job offer. This begins with considering candidates carefully, and reviewing employment offers thoroughly with HR and legal professionals before extending them.
In the event an offer must be withdrawn, a legal review of the offer and the reasons for the withdrawal should be conducted prior to speaking with the candidate. This includes interviewing every employee who spoke with the candidate during the interview and offer process, to ensure no additional promises, either expressed or implied, were made. As with all employment actions, emotions can run high.
The manner in which the situation is handled and communicated by the employer often determines if the candidate will pursue legal action.
Whether making, accepting or rescinding a job offer, thoughtful consideration among all parties will go a long way.