How to Rescind a Job Offer

No matter how carefully you vet a prospective employee—checking references, sleuthing on social media, conducting multiple in-depth interviews—sometimes a circumstance arises that compels you to rescind a job offer.

Fortunately, it’s a rare occurrence, but each withdrawn offer can bring potential legal and reputational risks, not to mention they can be financially damaging and painful for job candidates.

“Just because you can rescind a job offer, doesn’t mean you should,” says Ricaldo “Ricky” Torres Jr., SHRM-CP, the HR site lead for 3M Medina and 3M Detroit. “Rescinding a job offer can increase the risk of lawsuits, so it should only be done as a last resort.”

Can you legally rescind a job offer? In most cases, yes—at-will employment laws allow employers to terminate an employee or rescind a job offer to a prospective employee for any legal reason. Torres says some of the most common legal reasons for employers rescinding a job offer include:

• Candidate dishonesty or misrepresentation.
• Failed background check.
• Failed drug test.
• Company budget constraints or a reorganization.

The more clear-cut the reason for rescinding a job offer, such as a failed drug test or background check, the less legally risky it is, Torres explains, “because most employers will hire neutral third parties to conduct these steps in the process, and they usually only fail a candidate if they have indisputable evidence.”

Reasons for rescinding a job offer that are illegal include those based on protected classes, such as age, race, sex or disability, says Ben Madden, SHRM-CP, owner of Arlington, Va.-based HR Action LLC.

But just because you’re rescinding a job offer for a legal reason doesn’t mean you’re necessarily in the clear for potential legal consequences. The offer of a job can be seen as a promise of employment in certain cases, a concept known as promissory estoppel. That’s especially true if the candidate experiences hardship based on the expectation of new employment, such as resigning from their current job. In such cases, Madden says, “Organizations can get into dicey situations.”

Rescinding a job offer can also hurt a company’s reputation. Rejected candidates, for example, may post about their experience on jobs sites such as Glassdoor and Indeed.

But that doesn’t mean you should hire a candidate if you have a good reason not to. The cost of a bad hire is real—about $17,000 on average, a CareerBuilder survey found, with surveyed employers saying it can lead to lost productivity (36 percent), poor quality of work (33 percent) and damaged employee morale (31 percent).

So, it’s important to have a thoughtful and thorough hiring process and a clear plan for cases in which you must rescind a job offer. Tips for how to do so include:

Be certain it’s necessary.

Before retracting a job offer, carefully consider your reasons. Sometimes the “why” is very clear—the candidate lied about important work history or failed a drug test—but in other cases, you want to be sure your reasons are fair, unbiased and based on merit, says Dushawn Roberts, an employee and labor relations analyst for the City of Philadelphia Department of Labor.

If your vetting process reveals something troublesome, it can be worthwhile to allow candidates to explain or disprove negative information about them. Candidates can sometimes fail a background check through no fault of their own, Torres says, such as if the company conducting the background check is unable to verify a past employer because it went out of business.

Madden cites one situation in which a background check erroneously surfaced a murder conviction for someone with the candidate’s same name.

“Though rare, these instances happen, and there should be mechanisms in place to review them on a case-by-case basis without simply failing the candidate’s background check and rescinding their offer,” Torres says.

Confer with an attorney.

If you’re considering rescinding a job offer, it’s a good idea to run it past an attorney first, says Tashia Mallette, SHRM-SCP, founder and chief people officer of HR Exchange Group in Los Angeles, especially if you don’t have a strong knowledge of discrimination laws. An attorney can help ensure that you follow the law, help you draft a job retraction letter, and guide you on what to say and what not to say when you inform the job candidate of your decision.

Communicate with the candidate quickly and directly.

Handling a job retraction promptly, professionally and with empathy can help make the best of a bad situation. Act as quickly as possible to hopefully prevent the candidate from giving notice to their current employer, Mallette says. Also be sure to:

• Deliver the news personally. “A personal and direct communication method, such as a phone call or video call, is often the most appropriate,” Roberts says. After that conversation, send a written letter by email or mail. “It provides the necessary documentation that is critical in case of litigation,” Madden says.
• Be transparent. Clearly explain the reason you are rescinding the job offer, unless there’s some valid, lawful reason not to share it. By being transparent, you can avoid speculation and possible misperception by the candidate, Torres says.
• Be empathetic. “Be professional and understanding of the circumstances,” Mallette says. Give the job candidate plenty of time to absorb the news and ask questions.
• Provide resources, but don’t overpromise. Offering constructive feedback and resume assistance, or offering to keep the applicant’s resume on file, are appropriate ways to support the candidate, Roberts says, for cases in which a candidate is not at fault. “By extending a helping hand, we reinforce our organization’s reputation as an employer of choice,” he explains. Be careful, though, about making promises the organization can’t honor, Mallette adds, such as finding the candidate another job in your organization.

You can’t always avoid the need to rescind a job offer, but you can strengthen your hiring processes to reduce the likelihood and give your organization more legal protection, Roberts says. He recommends that employers:

• Ensure candidates know about employment contingencies—e.g., background checks, drug tests and reference checks—at the start of the interview process. Caution ­potential employees not to give notice at their workplace until they’ve passed all those hurdles.
• Use a comprehensive application process that includes questions ­designed with the help of legal counsel to gain important information about candidates while avoiding bias or discrimination.
• Regularly review and update policies and procedures to reflect any changes in employment laws or regulations.

It’s also wise to not put all of your eggs in one basket, and instead keep one or two top candidates “warm,” in case your first choice doesn’t work out, Madden says. But if you have to start your search over, he adds, “look at the role again to tighten up your needs or any criteria for the role.”   

Jennifer Thomas is a ­freelance writer based in Chicago.