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  • Advisory Opinion: Rescinded and Deferred Employment Offers

    Organizational Structure
    Two business people on a broken bridge.

    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    In general, candidates who have an offer rescinded do not have much legal recourse.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 Consequently, candidates have a difficult time enforcing a job offer or recovering damages for a rescinded offer when there is generally no duty on the part of the employer to honor the candidate’s acceptance of employment.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: 1) promissory estoppel, 2) fraudulent representation, 3) breach of contract, 4) discrimination.

    Promissory Estoppel: Promissory estoppel is a legal theory pursuant to which individuals can attempt to enforce a “promise” if they relied upon such a promise to their detriment. 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leaving an existing job or incurring moving expenses to relocate for the job that an employer offered, but later rescinded.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 the candidate’s “detrimental reliance” on the offer. It is highly unlikely, however, that an individual will receive the job that 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 the individual 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, depending on state law, 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, there 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 and/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. A candidate who is successful with respect to such a claim may obtain the total value of the contract, in addition to potentially recovering any costs and fees (including attorneys’ fees) incurred in remedying the breach.

    On the other hand, a candidate who fails to adhere to the terms of the agreement must also be wary of a claim for breach of contract. 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, national origin, or any other characteristic protected by state, local, or federal law, statute, or regulation, 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 depending on the terms of any agreement between the parties. To avoid post-termination issues, employers should provide such signing bonuses only pursuant to a written agreement that clearly defines 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—whether voluntarily or involuntarily—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, which is a claim wherein a party alleges that the other party obtained a benefit to which they were not entitled.

    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 by the employer. A candidate may be entitled to payment of the signing bonus, regardless of whether employment has actually commenced, 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, the candidate should have a clear understanding of the parameters surrounding the payment of the signing bonus.

    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, the employer and job candidate must rely on their ethical commitments to each other for the agreement to have any viability beyond which is stated herein.

    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 are not 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 also 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:

    • Principle 1: Practice reasonable, responsible, and transparent behavior;
    • Principle 2: Act without bias; and
    • Principle 4: 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:

    • 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.
    • If the offer must be revoked, the employer may 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.
      • Providing the candidate with a written statement that the offer has been revoked. This may help the candidate secure a job offer that was turned down in favor of the offer that has now been rescinded.

    It should be noted that any form of “compensation” provided to the candidate is subject to tax ramifications and may also result in the “candidate” being viewed as an “employee” for purposes of certain employment related laws, e.g., workers’ compensation, anti-discrimination, and so forth. Accordingly, employers must be mindful of the legal ramifications prior to providing the candidate with any monetary consideration if an offer is revoked or 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 well as the status of any preemployment background check, as soon as possible to enable the candidate to make informed and timely decisions regarding other employment opportunities and options.

    4. The candidate should alert the employer about any changes in employment status or work authorization status as soon as possible to enable the employer to make informed and timely decisions regarding the candidate’s employment opportunities and other options. International students filing for optional practical training (OPT) or other changes to their work authorization status should speak with their career center and office of international affairs regarding options.

    5. 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 career center staff can provide the candidate with services to help with gaining other employment.
    • The staff can advise the employer on how to minimize damage to the organization’s reputation and recruiting effectiveness.

    6. 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. 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-search process and move onward.

    Conclusion

    The campus recruiting process has succeeded for many years in large part because the NACE Principles provide employers, students, and career centers with direction to make their cooperative efforts successful. Using the NACE Principles as 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.

    Reviewed and updated by the 2020 Principles for Ethical Professional Practice Committee.

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