8 things you need to know about rescinded job offers

It is rare for an employer to rescind a job offer, but it does happen. Here, two legal experts share what you need to know to reduce the risk that it will happen to you … and what to do if it does.

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What do you do when a prospective employer offers you a job but rescinds the offer before you start work? What happens if you've resigned your good, stable position for one that doesn't materialize, or spent thousands of dollars to relocate? What recourse do you have, if any?

For most job seekers, rescinded job offers aren’t a topic they know or hear much about, especially given the tight IT employment market of the last few years. While “…people understand that a job may not work out, that a company might have to do a reduction in force, but they don’t think of a rescinded job offer being a possibility,” says Mimi Moore, a partner in the labor and employment group at Bryan Cave LLP.

Rescinded job offers aren’t that common

That’s because the scenario isn’t that common, says Chas Rampenthal, general counsel for LegalZoom. “In this age of social media and sites like Glassdoor and other review sites, if this was something happening regularly, we’d definitely hear about it,” Rampenthal says. “I’d advise folks to check out these sites in their regular vetting process when looking for a new role, and if a company has rescinded offers, I’d bet such a thing would be reported there,” he says.

The strength of the economy, and especially the strength of the IT sector, also keeps the number of rescinded job offers low, Rampenthal says. With fewer options available, companies would be loathe to rescind offers to valuable talent – though a weaker economy could lead to an uptick in offers being revoked.

The risks rise as you climb the ladder

The risk of having a job offer revoked is even greater for executives than for lower-level workers, says Moore, because executives are often hired farther in advance of their start date. An employer's needs can change between the time an offer is made to an executive and the time she starts, which can be as much as six months later. By contrast, lower-level workers are usually hired to fill an immediate need.

“There’s also employer size to take into account, as well as specialization,” says Rampenthal. “It’d be more common for a very small company of two or three people adding a fourth person — and possibly rescinding an offer because circumstances change — than a large organization with the resources to add hundreds of people,” he says. Organizations are less likely to rescind an offer to specialized talent with specific skills and experience than offers to unskilled workers, he says.

You can reduce risk by asking the right questions

Job seekers at all levels can protect themselves from being blindsided by a rescinded job offer by asking incisive questions about a prospective employer's hiring practices and by negotiating certain protections into offer letters and employment contracts, Moore says.

An employer can rescind a job offer at any time, says Moore. Absent a signed employment contract between an employee and an employer that provides for a specific term of employment and specific provisions for breach by either side, a job offer is essentially a contract for employment at will. “Many people think once they have an offer, it's in writing, they sign it and return it, they think it's a contract. But really it's a contract for employment at will, which can be terminated at any time,” she says. “Candidates are not employees until they go to work. Even at that point, they're employees at will. After the first day of work, either party can end the relationship. Individuals don't have a right to a position [that's been offered to them],” Moore says.

Why job offers are rescinded

There are a few typical scenarios under which job offers get rescinded, says Rampenthal. The most common is when a candidate is found to be in violation of the offer terms. For example, the job offer may be contingent on a candidate passing a background check or a drug test, he says.

“That’s basically a contract violation – you made an agreement, you accepted with the conditions, and if those aren’t met, then you are in violation,” he says. “Same thing if, for example, you accepted a job with the understanding that you had to relocate, but then you changed your mind, called up the HR person and said, ‘No, sorry, I won’t move, I want to do this job from my home.’ That’s not in agreement with the contract you accepted,” Rampenthal says.

A job offer could also be rescinded because of a candidate’s actions between the time they accepted the job and when they start work, he says; perhaps a candidate gets arrested for a DUI or otherwise breaks the law, or they make it clear in some way that they’re not the type of person a company would want to hire.

“There was a case a few months ago where a person landed an internship at NASA, and then Tweeted using the F word,” Rampenthal says. “Her Tweet was seen by someone who worked there, and when confronted, a vulgarity-laced Tweetstorm erupted. And that person quickly lost [her] chance at the role. In this day and age of social media and radical transparency, you really have to be careful and adhere to codes of conduct, even before you start a job, because if a company sees something like that, they’re going to rightfully take action,” he says.

Of course, there are also instances that are completely out of the candidate’s control, Rampenthal adds, such as unexpected or unforeseen changes in the business’s needs or in the economy at large. “Maybe the business was downsized. Maybe they were acquired by a much larger company and your position was eliminated before you could even start,” he says. And sometimes the decision to eliminate a position and rescind that job offer is made for the benefit of current employees. For example, a company may think "it would be better to vacate a position they've offered to someone instead of terminating their employment, in order to save employees who've been working there for a long time,” Moore says.

Another common scenariois when companies extend offers to college grads before they’ve graduated, Moore says. By the time they are supposed to start working, whether that is over the summer or in the fall, the employer no longer needs them because of either a downturn in their business or in the general economy.

“Rescinded job offers typically occur in clumps of people,” Moore says. “For example, a law firm believes it needs five new associates. It makes those hiring decisions in September or October, but people won't be starting for another year. The same thing goes for companies interviewing on college campuses. They're making hiring decisions far in advance of an actual start date. If there's subsequently been a change in their business or in the economy that results in there no longer being a need for an employee, they may rescind a job offer,” she says.

When a job can't be rescinded

The lines around what is and isn't legal can get blurred, Rampenthal says, and laws around rescinding job offers may vary from state to state. “If a job requires a certain level of physical ability, and it turns out that a person has a very real disability where the employer should, as the law states, make reasonable accommodations – but they cannot reasonably accommodate, then that’s an issue,” he says.

“If, for example, you must have a certain level of corrected vision for a driving job, or being hired for a physical job and you are unable to lift certain amounts because your doctor says you can’t, then you have to be very careful,” Rampenthal says. “The HR manager would want to know why you weren’t forthcoming about that, first of all! But some cases walk a fine line between things that are in a candidate's control and those that aren’t. Obviously this doesn’t allow for, no matter what, rescinding an offer based on gender, race, age, national origin, etc. -- that’s never okay, in any case,” he says.

Know what questions to ask, and when

If you're not in a position to have an employment agreement, you need to feel confident that there will be a job for you at your start date, Moore says. “If there's a concern that your job won't be there, that should factor in to your decision to accept the offer. Get as much information as you can when you're making the decision,” she says.

There are questions you can ask during the interview and hiring process that can help you gauge the likelihood of this happening, Rampenthal adds, but be careful not to push too hard or you could risk the company not offering you a position at all.

“Health of the company, future growth plans, etc. are things that you can and should be asking potential employers. There’s a period of time between when the offer is given and when you accept when you should be asking these harder, trickier questions, like, ‘What happens if I relocate and the job isn’t available anymore?’ and things like that,” he says.

But again, the timing of these questions is just as important as the questions themselves, Moore says. The ideal time to pose these questions is “after the offer has been extended and while the prospective employee is considering whether or not to accept the offer and during any negotiations regarding moving expenses [or] a signing bonus. I call this the ‘post-offer/pre-acceptance’ period. Such discussions during the interview process would be odd, as well as a bit presumptuous,” she says.

You should also ask how many people are currently in the department, how many people have been in the department over the past few years, whether they are hiring more people, for what positions, and why, Moore says.

“Also ask, ‘Is there a risk from the employer's perspective that this position may be eliminated or that this particular portion of the business may decline? If so, would there be a position for me elsewhere in the company?’” she says. “I would also ask about the employer's track record of rescinding job offers. ‘Have you had to rescind any job offers over the last two years? Why?’ And, if they had to rescind job offers, 'What, if anything, have you done for those individuals whose job offers were revoked?’"

Rampenthal recalls a scenario from his law school days, and explains how the situation was handled successfully and with a minimum of stress and hard feelings on both sides of the employment equation.

“I had a handful of colleagues after law school who received offers from one firm and were in the process of studying for the bar in preparation for those jobs,” Rampenthal says. “They suddenly found out that the law firm they were going to work for had gone under. That law firm reached out and told my colleagues that they were going to write letters of recommendation, make phone calls to any other firms the candidates had already turned down and explain what happened – that it wasn’t my colleagues’ fault and they should receive any and all considerations for jobs,” he says. “They went out of their way to make sure that my colleagues landed somewhere with the same or better employment prospects, pay, benefits and the like,” he says.

In some cases, companies may offer monetary settlement along with a legal release to show other hiring organizations that the candidate was not at fault, Rampenthal says, but that’s not guaranteed.

Get everything in writing

Whenever possible, candidates should get an employment agreement in writing because verbal offers aren't contracts.

“The verbal offer on the phone wasn’t an offer, it wasn’t a contract. You have to make sure, to the best of your ability, that you’re protected,” Rampenthal says. That’s even more important when signing bonuses and relocation and other expenses are involved, adds Moore.

“From a more practical standpoint, candidates who are offered signing bonuses upon being hired should make sure that they will still be entitled to those bonuses if the job offer is rescinded,” Moore says. “Negotiate to have that included in the job offer letter. Some people use that as protection: If they're getting a $10,000 signing bonus, they have some cushion from an economic standpoint if the job offer is revoked. Similarly, if someone is going to be relocating from Seattle to Chicago, I would advise that person to make sure their relocation package will be covered, paid for and accepted even if the job offer ends up getting revoked or if the company determines after six months (or however long) that they don't need the person anymore,” she says.

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