Things you need to know about rescinded job offers

by Meridith Levinson

April 22, 2008 —

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

Most job seekers don't know the answers to these questions, according to Mimi
Moore, a partner in the labor and employment group at Bryan Cave LLP. She says
job seekers tend to be unaware of the specter of rescinded job offers: "People
understand that a job may not work out, that the company might have to do a
reduction in force, but they don't think of a rescinded job offer being a possibility,"
she says.

In fact, rescinded job offers are a growing reality in a weakening economy,
and Moore expects to see an uptick in the coming months. "I think fewer
job offers are going to be extended, and the ones that are will have a higher
probability of being rescinded," she says.

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 so much
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 six months later. By contrast, lower-level workers are usually hired to fill
an immediate need.

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rescinded job offer by asking incisive questions about a prospective employer's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 elaborates on these details for employers and employees
in this Q&A.

CIO: What do employees need to know about rescinded job offers?

Moore: An employer can rescind a job offer at any time. 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.

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].

Under what circumstances do employers rescind job offers?

Typically, job offers get rescinded in situations where employers, for one
reason or another, do not have the need for a job that they predicted they'd
have when they first offered the job to a candidate. A typical situation is
an employer interviewing on a college campus, extending offers to college grads.
By the time the college grad is 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. 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.

Higher-level candidates can see offers rescinded when a company decides to
do a restructuring and to eliminate the position they've offered for economic
reasons: The company decides 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.

Alternatively, job offers occasionally get rescinded when something [bad] is
discovered about an individual or their references don't check out.

What can job seekers do to protect themselves from rescinded job offers?

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. Do as much research
and ask as many questions to determine whether the company will revoke job offers.
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.

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. 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.

Executives can ask for an acceptable amount of severance should the job be
revoked prior to starting or should it go away during the first whatever many
months provided they are not terminated for cause (embezzling, theft, sexual
harassment).

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.

What questions should prospective employees ask a company to determine whether
the job for which they're applying is at risk of disappearing?

How many people are currently in the department? How many people have been
in the department over the past few years? Are they hiring more people? For
what positions? Why?

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?

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? If they
had to rescind job offers, what, if anything, have you done for those individuals
whose job offers were revoked? Some companies will provide a stipend for a period
of time to candidates whose positions were eliminated so that they can look
for another job. Some companies will help the person look for a new job. Some
companies will delay the candidate's start date for six months (if it's production
workers) or offer them part-time work for a certain period of time.

When in the process should prospective employees ask these questions?

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/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.

If an employer rescinds a job offer, can the candidate sue the employer
for damages?

There is a claim people can make for what's called detrimental reliance or
negligent representation. 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.

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.

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.

How should employers handle rescinded job offers?

Most employers 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. 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.

Nine facts about rescinded job offers

1. An employer can rescind a job offer at any time.

2. Job offers are typically rescinded between the time the offers is made and the candidate starts the job.

3. Most job seekers are unaware that an employer might rescind a job offer.

4. Executives are at greater risk of having job offers rescinded than lower-level employees.

5. Rescinded job offers typically happen among groups of employees being hired at the same time, like college graduates.

6 . Employers rescind jobs when they discover something bad about a candidate or when there's a change in their business.

7. To protect yourself in the event your job offer is retracted, negotiate stipulations into your employment offer letter.

8. Job seekers have tried to sue for damages when job offers have been rescinded, but most of their claims haven't been upheld by the courts.

9. A good employer will help you look for another job inside or outside the company if they rescind your offer.

IDG News Service