Like termination of employment, rescinding a job offer is another difficult situation an employer has to handle. It could potentially pose not only compliance risks, but also reputational harm, especially if the incident draws public or media attention. However, with the right approach and compliance with applicable laws, employers can rescind an offer on good terms and avoid violating a candidate’s rights.
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Why employers might rescind a job offer
The decision to rescind a job offer must be permitted under applicable law. The following are examples of situations where an employer may wish to rescind a job offer:
- The candidate fails a legally required drug test.
- The company can no longer afford to hire a new employee due to budget cuts or financial instability.
- A background check reveals convictions that relate to job duties.
- After receiving an offer, the candidate exhibits a lack of professionalism or other behavior that violates the employer’s standards of conduct.
- References share unsatisfactory information about the candidate.
- Due to changed circumstances, the position is no longer needed or supported by leadership.
- The employer discovers that the candidate provided false information about skills, licenses or work experience.
In these situations, employers should consult counsel to ensure their decision to rescind a job offer is permitted and administered under applicable law. For example, decisions based on the results of a background check may require compliance with the Fair Credit Reporting Act (FCRA) and other applicable state and local laws before taking adverse action.
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In addition to the compliance risks of rescinding a job offer, employers should consider situations where a candidate could potentially suffer harm. For instance, an employee might pre-emptively quit their current job or relocate their home, only to learn later that the position has been rescinded. These potential risks could lead to litigation and damage the company’s reputation and should also be discussed with counsel.
Additional requirements before rescinding a job offer
If employers consider rescinding a job offer based on a background check subject to FCRA, certain additional steps must be taken beyond initial notice and consent requirements. Specifically, a candidate is entitled to notice and an opportunity to review and correct any background check subject to FCRA that may form the basis, at least in part, of an adverse decision. For more information on FCRA requirements, employers may review the Consumer Financial Protection Bureau website or consult with counsel.
State and local requirements might also apply. For example, some jurisdictions may require employers to include additional information in adverse notices or provide candidates more time to dispute reports.
Alternatives to rescinding a job offer
If there are changes in funding or the position itself, rescinding a job offer may not be the only option. For example, employers may consider the candidate for other roles in the company or stay in contact with the individual until another feasible opportunity arises. These additional steps may be helpful to both the candidate and the employer’s business.
Frequently asked questions about rescinding a job offer
Can a candidate sue for a rescinded job offer?
If employers do not comply with applicable laws, candidates may have a basis for bringing a claim against the employer. For example, candidates may bring claims for violations of applicable background check laws. Also, if the decision to rescind a job offer is based on a candidate’s gender, race, age, religion, national origin, disability or any other characteristic protected under applicable law, a candidate may bring a discrimination claim against the employer.
How legally binding is an offer letter?
An offer letter is not necessarily a contract of employment. Many offer letters contain the phrase “at-will employment,” which means the employer can sever the relationship with the employee at any time and for any reason. To understand whether an offer letter has any legal effect, employers should consult counsel.
How common is it to rescind a job offer?
Rescinding a job offer may not be very common, but when the need arises, employers should consult counsel. To avoid rescinding job offers, employers should hire for positions they need with up-to-date and legally compliant job postings. Additionally, any background check requirements, e.g., upon conditional offer, should be specified as permitted by applicable law.
This article is intended to be used as a starting point in analyzing rescinding a job offer and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
