It’s no secret that the job market is facing some headwinds, with employers implementing layoffs and hiring freezes to avoid being overstaffed in the event of a recession. Another tool that employers may consider in this challenging economic climate is rescinding job offers previously extended to candidates.

Employers must be careful when withdrawing job offers, however, as doing so can expose the employer to legal liability and as well as harm to their business reputations.

Employers generally have wide latitude in rescinding job offers so long as they do not do so on the basis of a candidate’s protected class status, e.g. race, gender, disability, etc. Additionally, employers face potential legal claims if the candidate demonstrates that the employer specifically promised a job and the candidate relied on that promise to their detriment. For example, if an employer makes a specific job offer, and the candidate accepts the job and then quits their current job, the employer could face legal liability for the harm it caused the candidate by revoking the job offer. Potential legal liability includes harm such as lost job opportunities, relocation expenses, etc.

One of the ways employers can protect themselves in such situations is to ensure they make clear in the offer letter that the offer is conditioned on the candidate’s successful completion of certain conditions, such as a background and reference check, pre-employment drug screen, etc. Additionally, it is best practice to include an “at will” disclaimer in the offer letter (assuming the employment is to be at will), i.e. language confirming that both the candidate and the employer are free to terminate the employment relationship at any time for any reason.

If you decide to rescind an offer of employment, ensure that you are doing so for a legitimate business purpose that you can clearly articulate and that is properly documented. Take the time to have a conversation with the candidate to explain clearly the reason for the company’s decision to rescind the job offer. Although under no legal duty to do so, some employers offer to assist the individual in finding new employment, e.g. a monetary payment, outplacement assistance, etc. Taking these steps will go a long way towards managing the legal risks and potential harm to your company’s reputation when you decide you must rescind a job offer.