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For most job seekers, rescinded job offers aren’t a topic they know or hear much about, especially given the tight IT employment market of the last few years.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understand that a job may not work out, that a company might have to do a reduction in force, but they don’t think of a rescinded job offer being a possibility,” says Mimi Moore, a partner in the labor and employment group at Bryan Cave LLP.
Rescinded job offers aren’t that common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folks to check out these sites in their regular vetting process when looking for a new role, and if a company has rescinded offers, I’d bet such a thing would be reported there,” he says.
The strength of the economy, and especially the strength of the IT sector, also keeps the number of rescinded job offers low, Rampenthal says.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.
Executives can ask for an acceptable amount of severance should the job be revoked prior to starting or should it go away during some number of months provided they are not terminated for cause, Moore says.
“People can try to negotiate some of those things like signing bonuses and relocation costs if in fact they feel the offer is a high risk [of being rescinded]. There are some employers who realize it is high risk in these economic times, and because they need certain employees, they’re willing to take on some of that risk,” she says.
Actions you can take if an offer is rescinded
If the offer is rescinded ‘for cause,’ then there’s not much you can do except learn from your mistakes, Rampenthal says. There’s also not much you can do about economic downturn or other issues outside of a candidate’s control. In those cases, you’re better off expending your energy continuing your job search than tilting at windmills and trying to get redress from the company, he says.
“In some cases, it’s better to just get over it and move on. Yeah, it sucks and it’s a punch in the gut, but it’s like getting a breakup text or hearing other bad news,” Rampenthal says. “You don’t want to do anything rash, so calm down and think carefully about your response. Look and see what has changed: was there a condition that wasn’t met? Then there’s your answer,” he says.
But if you turned down other offers, purchased equipment, moved your family in reliance on that offer, he adds, then there’s a good chance you are entitled to redress. The problem is, it can be difficult to prove, says Moore.
“There is a claim people can make for what’s called ‘detrimental reliance’ or ‘negligent representation,’” she says. “The concept is that the employee relies, to their detriment, on a job offer. They move across the country or quit a job in reliance on an offer made by a company. People have over the years made that kind of a claim to sue for damages as a result,” Moore says. But courts have been reluctant to enforce those claims for two reasons:
1) It’s difficult to prove damages, and
2) Typically, the offer for employment is at will and once you start working, you can be terminated for anything so long as it is not illegal or discriminatory. The day you start, you are an ‘employee at will,’ Moore says.
“There have been some courts over the years who have upheld those claims or enforced them, but they’re few and far between. It’s not something I would advise employees to rely upon,” she says.
If you do believe your offer was rescinded based on your status within a protected class (think age, race, sex, gender, ability and the like) or if there was a misrepresentation of authority on the part of the hiring company, or you were defrauded in terms of pay, benefits, the existence of the role itself, then your case could seem much stronger, Rampenthal says. But again, it can be very hard to prove, especially in cases of fraud.
“In these cases, unless it’s extremely clear and you have direct evidence of discrimination, it might be easier to try to negotiate outside the legal system,” he says. “You can approach the company and start with, ‘Look, I thought this was going to happen, and obviously it didn’t; I incurred these costs while purchasing equipment, moving, so can you help me out and reimburse me for those costs?’” he says.
How should employers handle rescinded job offers?
From an employer perspective, most will rescind job offers as soon as they become aware of an issue. From a legal perspective, the employer should notify the individual as soon as possible. For example, if one company is merging with another and through that merger the company believes it will need only 25 percent of the jobs it thought it would need, typically the employer will notify those individuals it hired before the merger goes forward, when there is an obvious, known result for those individuals.
“Employers should also do what they can to treat the individual as best they can. They should help the employee find another job inside or outside the company. They don’t want to get a reputation of rescinding job offers because then they’ll have trouble getting people to work for them,” Moore says. “They need to consider the ramifications of rescinding job offers and do what they can to minimize the negative results of that. Most employers are cognizant of that; they’re cognizant of the detrimental reliance theory even though it hasn’t borne out in courts,” she says.
If you do seek legal representation, keep your expectations realistic, says Rampenthal, and trust they’ll be honest with you about your chances of success.
“If you seek legal advice and they won’t take your case, you have to understand it’s not personal; they don’t believe there’s enough evidence,” he says. “So, pivot that energy into your job search and keep moving forward. If something’s really wrong, you won’t have a problem finding someone to take your case. So be prepared to hear the hard truths, and keep looking for other roles,” he says.