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  • Advisory Opinion: Rescinded and Deferred Employment Offers

    Organizational Structure
    A man questions whether he has chosen the right hire.

    TAGS: ethics, principles, advisory opinion

    Rescinding a job offer or an acceptance is unfortunate, and should only happen in rare instances when there are no realistic alternatives, such as when an employer is downsizing. To provide guidance in cases when an employer must rescind an offer, the NACE Principles for Ethical Professional Practice Committee offers a review of the laws regulating employment, considers relevant ethical issues, identifies the key roles of career centers and the NACE Principles for Ethical Professional Practice, and makes recommendations for resolving individual situations fairly.

    Legal Considerations

    In general, candidates who have an offer rescinded do not have much legal recourse. Although it varies from state to state, unless otherwise specified, employment is “at-will,” meaning either the employer or the employee can terminate the employment relationship at any time and for any reason. Consequently, candidates have a difficult time enforcing a job offer or recovering damages for a rescinded offer when there is no duty on the part of the employer to honor the candidate’s acceptance of employment.

    That said, there are some circumstances in which a candidate may have legal recourse if an employer rescinds a job offer. The candidate may be able to pursue a claim against the employer under one of the following legal theories:

    • Promissory estoppel
    • Fraudulent representation
    • Breach of contract
    • Discrimination

    Promissory Estoppel: Under the theory of promissory estoppel, an employer may be held liable if the promise of employment results in a loss of some kind to the candidate. Generally, such a claim arises when an employer makes a job offer and the candidate, in relying on the offer, loses or gives up something of value in order to accept the offer. Examples of such losses include a candidate leaving an existing job or incurring moving expenses to relocate for the job that an employer offered, but later rescinded.

    The potential for recovery varies from state to state, but some courts have found that even if the employment relationship is merely “at-will,” the candidate is nevertheless entitled to the damages incurred as a result of his or her “detrimental reliance” on the offer. It is unlikely, however, that an individual will receive the job that he or she was promised.

    Fraudulent Misrepresentation: To maintain a claim of fraudulent misrepresentation, a candidate must establish that the company that made the offer did so with knowledge that the offer was false and intended for the applicant to rely upon it.

    For example, a claim of fraudulent misrepresentation may arise when an employer offers an individual, who is currently employed, a position with its company. The individual then quits her current position and moves to the employer’s location. Upon arriving at work, the individual is informed that the offer is rescinded because the employer is closing the location, a fact that was known by the employer prior to offering the individual employment. In this situation, the employer fraudulently represented the facts to the individual, despite knowing that acceptance of the offer would require her to quit her job and move her family; as such, she may be able to establish a claim for fraudulent misrepresentation.

    While this is a difficult case to prove, a candidate who prevails under a claim for fraudulent misrepresentation may be entitled to past and future lost earnings in addition to possible punitive damages.

    Breach of Contract: If an individual can prove a contractual relationship, above and beyond an employment at-will relationship, he or she may have a cause of action for breach of contract against an employer when an offer is unexpectedly withdrawn. When an offer and acceptance specify a length of time of employment or that employment may only be terminated for “just cause,” a contractual relationship may exist between the parties. If an employer thereafter rescinds the offer, breach of contract liability may be imposed. If a candidate is successful with respect to such a claim, he or she may obtain the total value of the contract.

    On the other hand, a candidate must also be wary of a claim for breach of contract if he or she fails to adhere to the terms of the agreement. If a candidate reneges on an employment agreement after acceptance, the employer may bring a cause of action for breach. In this case, the employer would need to show that the organization was damaged by having to forgo the candidate’s services or because of the costs incurred with respect to replacing such a candidate.

    Discrimination: Candidates should also be wary of the reasoning behind an employer’s revocation of an offer. If a candidate falls within a protected class (e.g. race, age, disability, gender, and so forth) and the offer is withdrawn and offered to a person outside the protected class, the candidate may have been subjected to unlawful discrimination.

    For example, if the revocation comes after the employer determines the candidate’s religious background or discovers the candidate has a disability, the candidate could consider filing a claim for discriminatory failure to hire.

    Does a Signing Bonus Make the Contract Enforceable?

    As a practical matter, accepting a signing bonus forms a legal commitment by the job candidate to work for the employer. Unless there is a contract indicating otherwise, however, it is likely that the employment relationship will remain at-will. As such, the employee can resign one minute after beginning work.

    In this scenario, however, it is very likely that the employer will seek repayment of the signing bonus from the employee. To avoid post-termination issues, employers should provide such signing bonuses only pursuant to a written agreement clearly defining the employee’s commitment in exchange for the bonus. Generally, such agreements will indicate what an employee’s requirements are with regard to repayment should employment terminate earlier than anticipated by the agreement. Such agreements must be clearly drafted so that the status of employment is not altered and the employment remains at-will.

    Notwithstanding the foregoing, if an employer provides an individual with a signing bonus prior to the commencement of employment without a written agreement, the employee may have no legal obligation to return the bonus. Absent such an agreement, the employer’s only legal recourse may be a claim of unjust enrichment.

    Further, at least one court has held that the language of an offer letter can determine when a signing bonus vests, requiring payment to the candidate. A candidate may be entitled to payment of the signing bonus, regardless of whether he or she actually commenced employment, if the offer letter suggests that the bonus “vests” upon acceptance of the offer. If, on the other hand, the signing bonus is payable to the candidate only upon commencement of employment, the employer, generally, has no legal obligation to provide payment if the candidate never actually starts working. As such, a candidate should make sure that the offer letter clearly states that he or she is entitled to the signing bonus, even if the offer is rescinded.

    In sum, because most employment offers and acceptances are for unspecified periods of time, the creation of an enforceable employment contract based on an offer and acceptance is unlikely. While there may be a moral commitment to follow through with the employment relationship, especially when a signing bonus is involved, the employer and job candidate must rely on their ethical commitments to each other for the agreement to have any viability.

    Ethical Considerations

    Because laws are not intended to regulate all conduct or to remedy all harm, we regard ethical principles as the platform for managing our dealings with others. If an action results in injury to someone, where no firm rules or prescriptive standards exist, we seek to negotiate fair resolutions for individual situations. We try to achieve outcomes that everyone can live with, even if the terms aren’t fully satisfactory to all.

    No one should deny that there is damage incurred as a result of a rescinded offer. For the employer, there are short-term, unrecoverable recruiting costs, including lost employee time. Longer term, there is loss of credibility and reputation on campus.

    For the job candidates, the losses are more personal. All of them have lost time and opportunity for significant earnings. They must restart their job searches, often after having declined other job offers. In some cases, candidates have already relocated before their job offers were revoked, leaving them with potentially significant moving and lodging costs. Some candidates have even incurred medical costs in attempting to cope with their anxieties, disillusionment, and frustration.

    Career services professionals experience losses as well. They must endure knowing that much of their good work in carefully cultivating relationships with employers is at risk. They share the disappointment and frustration of students because their efforts to help them, ultimately, were unsuccessful. In addition, students may question the value of career services programs.

    If an employer must revoke an offer, the employer should let the candidate know as soon as possible. The employer should consider offering some type of assistance to help the student get back into the recruiting process, such as providing outplacement services or a stipend to help the student cover expenses.

    The Key Role of Career Services

    This advisory opinion is focused on how to best address the immediate consideration: the student’s deferred or revoked offer. Career centers will also want to consider how they will address ongoing relations with employing organizations that have a pattern of deferring or rescinding offers.

    Dismayed though they may be, career services professionals have resources for resolving individual problems and restoring equilibrium to campus recruiting programs. (Note: “Campus recruiting” refers to the various offerings of the career center that help students and employers connect, e.g., career fairs, job postings, on-campus interviews, and so forth.) They can assist students in regaining their balance and help them to salvage their employment campaigns, even for students who have found their opportunities outside of campus recruiting. They can advocate and mediate equitable resolutions to the students’ hardships. Career services staff can also counsel employers on how to minimize damage to their reputation, restore their credibility, enhance their campus recruiting efforts, and start fresh.

    The Role of the NACE Principles

    Although the NACE Principles do not address rescinded offers directly, three of the Principles can guide professionals facing this challenge. They are:

    • Practice reasonable, responsible, and transparent behavior;
    • Act without bias; and
    • Comply with laws.

    Further, the NACE Principles are based, in part, on maintaining a recruitment process that is “fair and equitable.” Together, these can guide professionals in addressing the challenge.

    Recommendations for Employers

    Consistent with the principles cited above, the NACE Principles for Ethical Professional Practice Committee urges a two-part approach to employment offers under consideration for revocation. The first emphasizes the need for a commitment to high standards in recruiting. The second offers a reasoned approach to dealing with rescinded and deferred offers. Regardless of the approach taken, however, employers must be consistent in the application of their actions to avoid any claims for discrimination under federal or state laws.

    1. Employers should root their campus recruiting programs and processes to a solid understanding of the NACE Principles, which provides guidance that can help employers both avoid having to rescind or defer offers and manage such situations if they do arise. Employers will want to consider how they actualize Principle 1 to “practice reasonable, responsible, and transparent behavior that consciously avoids harmful actions.” Further, in that effort to be responsible and transparent, employers will want to consider “clearly articulating and widely disseminating the organization’s policies and guidelines,” in an effort to comply with Principle 2—to “act without bias.”

    2. As a practical consideration, employers are encouraged to do their utmost to minimize the negative consequences to candidates when they must change their commitments to them. We recommend the following:

    A. Consider alternatives that do not require rescinding employment offers. These may include changes in job responsibilities, salary reduction and/or reduced work weeks, changes in job locale, delayed starting dates, and other reasonable options.

    B. If the offer must be revoked, it is strongly encouraged that the employer provide assistance to the affected candidate. Such assistance could include:

    • Reimbursing the candidate for expenses incurred in the acceptance of employment, such as travel and relocation expenses.
    • Providing the candidate with short-term financial assistance.
    • Offering the candidate services to secure other employment, or providing a stipend to cover the cost of such services.
    • Providing the candidate with a written statement that the offer has been revoked. This may help the candidate secure a job offer that he/she had turned down in favor of the offer that has now been rescinded.

    These actions benefit the affected candidates by offering fair consideration for their losses. Equally important, these actions also benefit the employer’s university relations efforts by minimizing the damage to its reputation.

    3. The employer should alert the candidate about the changes in employment status or commitment as soon as possible to enable the candidate to make informed and timely decisions regarding his/her employment opportunities and other options.

    4. In accordance with confidentiality requirements and laws, and with the agreement of the candidate, employment professionals can notify the candidate’s career center that the offer has been deferred or rescinded. The career center’s involvement can be beneficial to the student and employer. For example:

    • The staff can provide the candidate with services to help him/her gain other employment.
    • The staff can advise the employer on how to minimize damage to the organization’s reputation and recruiting effectiveness.

    5. If employment professionals opt to delay the candidate’s starting date by more than three months in lieu of revoking the job offer, they should maintain regular contact with the candidate before the start date and provide the candidate with appropriate short-term financial assistance. Doing so will help keep the candidate well-disposed toward the employer. However, it is important that both the employer and the candidate understand that the candidate may decide to accept another offer during this period, as the deferred offer could ultimately become a rescinded offer.

    While this proposal may not provide a perfect resolution to a revoked offer, it does offer the candidate consideration of some value. More important, it gives everyone involved—employers, candidates, and career services professionals—an opportunity to restart the job-placement process and move onward.

    Conclusion

    The campus recruiting process has succeeded for many years in large part because the NACE Principlesprovide employers, students, and career centers with direction to make their cooperative efforts successful. Using the NACE Principlesas our guideline, we have proposed a route, based on the concept of fairness, to reconcile individual situations when employers feel compelled to rescind or defer accepted job offers. We also offer this document as a way to maintain a climate of trust and keep the campus recruiting process on track.

    Posted June 2017.

     

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