Repercussions of rescinding a job offer
Having to rescind a job offer after a candidate has accepted a position is always a worst-case scenario. It’s unfair to job seekers, terrible for an organization’s reputation, and can have legal repercussions in some states. Still, instances of job candidates having offers revoked just days before their start dates have made headlines in recent months. Between January and July 2022, the workplace review website Glassdoor.com showed a 217% increase in posts mentioning job offers being rescinded.
As recession risks continue to rise going into 2023, employers should prepare for the potential of difficult financial circumstances that may force them to eliminate positions, slow hiring, and, in extreme cases, revoke ongoing job offers.
“If a company is rescinding job offers, it indicates that it has no other option for economic wellbeing or survival,” Charley Cooper, Chief Communications Officer at enterprise technology provider and blockchain software company R3, told BBC.com. “It speaks to an employer’s depths of concerns not just today, but also longer-term: they likely wouldn’t feel the need to revoke accepted offers if they thought there would be a quick bounce-back.”
An uncertain labor market in 2023
For many months following the peak of the COVID-19 pandemic, workers and job candidates had the upper hand in the labor market. Starting in the spring of 2021, unemployment rates tapered, and more than 47 million Americans voluntarily left their jobs in an unprecedented exodus deemed “The Great Resignation.”
The wave of voluntary job resignations has continued in more recent months—with 4.2 million people leaving their jobs in July 2022—but the situation is complicated. Even as employers remain concerned about labor shortages, hiring, and retaining talent, more than half of U.S. companies expect “headcount reductions,” in the next 6 to 12 months, according to an August survey of 722 U.S. executives from international auditing firm PwC.
Ultimately, the survey paints a picture of uncertainty: while 83% of surveyed executives say their current organizational strategy is growth-oriented, other survey results point to scaled-back recruitment. For example, 46% of those surveyed are dropping or reducing signing bonuses, and 44% are rescinding job offers.
Reasons for rescinding job offers
Rescinding a job offer for reasons other than conditions unmet by the candidate (like a failed background check or drug test) should always be a last resort. However, when economic situations suddenly change, organizations may choose to rescind current job offers rather than lay off existing staff.
“In many cases, I would say that rescinding job offers is better than layoffs when the only answer is to cut payroll—every company’s top operating cost,” Jill Chapman, SHRM-SCP, a senior performance consultant at Houston HR services firm Insperity told SHRM. “That said, there are other avenues that should be explored before doing either, and the best thing is to avoid the situation in the first place through organized, well-paced growth, and strategic workforce planning.”
Is it legal to rescind a job offer?
Most states employ “at will,” which means employers can terminate an employee for any legal reason. However, in cases where a job candidate can prove they’ve suffered losses as a result (for example, if a person leaves their prior job and moves states in order to start a new role) there may be a legal case for breach of contract or promissory estoppel, which prevents a person from going back on a promise even if a legal contract does not exist. To that end, Chapman recommends employees avoid using language that labels the offer letter as a contract, as well as language that guarantees employment.
How to rescind a job offer
If you must rescind a job offer, it’s critical to lead with empathy and let the person know as soon as possible. If an offer is being rescinded for budgetary reasons, employers should be honest and communicate that the job rescission is not due to the person’s abilities, but due to economic circumstances. If possible, employers should extend financial compensation or job placement services to those who have had an offer revoked.
“Employers can offer outplacement services and stipends to cover expenses in recognition of the candidates’ lost time, lost opportunity for earnings, and the restart of the job search,” Chapman told SHRM. “Before you offer assistance, clear it through legal counsel and also consider what kind of precedent you’re setting. And when hiring resumes, look to this pool first, if possible.”
Revoking job offers is a bad look for employers and an obvious cause for anxiety among current employees who may be concerned with the health of the organization and their own job security. Getting ahead of the conversation by being transparent with current employees, letting them know that job offers had to be revoked, and opening up a dialogue for questions can help employers regain the confidence and trust of their employees.
“While such conversations are never easy, offering transparency lets employees know where they stand and what they need to do to maintain their roles,” Lemon.io CEO Aleksandr Volodarsky told HrExecutive.com. “Being transparent about the challenges the company is facing and how it intends to overcome them will reduce fears of redundancy and ensure workers are in the right headspace to weather the storm.”
If you need to make difficult HR decisions like rescinding job offers, let us guide you through. 501(c) HR Services is a confidential resource available to help walk nonprofit organizations through difficult personnel issues. Whether urgent advice is needed, or you just need help understanding the latest legislation, HR Services is always available. We currently serve more than 3,000 nonprofits from across the United States and 34 other countries.