How can my company rescind a job offer?

February 6, 2017
How can my company rescind a job offer?

Navigating the complex world of small business compliance, including employee hiring best practices, can be difficult without the right tools and information. Here's a quick overview of the liability associated with rescinding a job offer.

If you withdraw an offer, then you could expose yourself to considerable liability; that liability depends primarily on whether or not the offer has been accepted.
Always consult legal counsel before withdrawing a job offer to understand whether you are exposing yourself to liability.

A formal job offer letter is non-binding until the candidate accepts it.
This means you can make modifications to the offer as you like, or rescind it completely, without risk. In general, if the candidate countered with different terms (i.e., in negotiation), then the initial offer is considered to have been rejected.

Once the offer is accepted, you may expose yourself to liability if you withdraw it.
Talk with a lawyer to examine the exact circumstances and the language of your offer letter to assess your options.

Even if the offer was not explicitly provided as an employment contract and clearly stated that it was for at-will employment, the offer may be construed as a "promise." The legal concept of "promissory estoppel" specifically protects parties who suffer harm when such a promise is made and broken, even if no formal contract has been agreed to.
In some cases, rescinding the offer could cost you more in damages than the salary you offered! A couple relevant examples:

  • If the candidate moved to another location to accept the position, and the accepted offer is withdrawn, then the candidate may seek damages and penalties in civil court.

  • If the candidate provided their notice of resignation to their current employer and cannot withdraw the resignation, then the candidate could lose that job, their benefits, and other career-related opportunities such as seniority or promotion. You may be liable for both current and future damages.

How to minimize potential risks when rescinding an offer letter

The safest way to minimize the risk associated with the withdrawal of an offer is a well-crafted offer letter.

  • Clearly state that the offer is for at-will employment.
  • Unless you intend to use the offer as an actual contract, avoid using language that states, implicitly or explicitly, that the offer is an employment contract.
  • Expressly state the mandatory conditions for the position (e.g., credit check, reference check, drug test) in the offer letter.
  • Avoid language that implies any sort of guarantee for employment, including duration.
  • Include a termination date for the offer, so that it does not remain open indefinitely.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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