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Risky Business! Rescinding a Job Offer

It is common for circumstances to arise requiring an employer to rescind a job offer.  Even after seeking out the most qualified candidate for a position and making an offer, there are a variety of reasons the offer might need to be retracted.  For example, the corporate health of the company is poor and the company cannot take on another employee, or the candidate did not pass a background check.  Although rescinding a job offer is not necessarily unlawful, there are legal issues an employer must consider when withdrawing a job offer.

Most states, including New York, are employment-at-will states which enable employers to terminate an employee with or without reason at any time.  Generally, these laws equally apply to the withdrawal of a job offer.

However, sometimes a job offer can constitute a promise of a job which can be enforced by the candidate.  For instance, if the candidate reasonably relies upon the job offer and quits his or her job only to have the offer later withdrawn, there can be damages for the candidate’s reliance on the offer.  The employer can be held liable for the candidate’s economic loss if his or her reliance and conduct were reasonable under the circumstances.  Thus, if an offer is conditional, be sure to express it as a conditional offer in writing.

Employers must also be aware that depending upon the wording of an offer it can constitute a contract of employment.  A written offer should not contain a time period of employment, and if it states an annual salary it should have the reservation that it is stated as an annual figure for convenience only.  Offer letters should clearly state that the employment is at-will in order to avoid the possibility of it being construed as a contract.

Employers may also find themselves defending against a discrimination claim if the unsuccessful candidate falls within a protected class, e.g., race, national origin, age, religion, disability or gender.  Further, this risk increases if the employer extended an offer to a candidate falling outside of a protected class for the same job.  If an offer is withdrawn be sure to have documentary proof as to the business reason for the withdrawal.

In order to avoid running into problems with rescinding a job offer, employers should not extend an offer until pre-employment screening information has been received.  However, some screening steps, including background checks, physicals and drug tests, cannot be done until after the offer is made.  Hence, the offer letter must clearly state that the job offer is merely conditional and not a promise of employment.

Under New York and Federal law, there are strict guidelines on how an employer can consider matters that arise from a criminal background check or credit check.  New  York employers should be sure to familiarize themselves with the requirements of Article 23-A governing criminal background checks.  There are a number of steps an employer must document that it took before it rescinds an offer based upon a conviction.

Ultimately, if the decision is made to withdraw an offer, documentation of the reasons are necessary.  Just as a company would document its reasons for terminating an employee, the same measures should be taken in rescinding an offer.  Ensure that those employees who communicate with candidates understand what should and should not be said about an offer and that they know the difference between a firm offer of employment and conditional offer.  Lastly, it is important for employers to handle a withdrawal of a job offer with as much tact as possible, as this can have reputational and legal implications.


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