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Imagine this all-too-common scenario. You applied and interviewed for a new job. It sounded like a great fit. You were excited when you got a job offer from the new company, so of course you accepted. You got ready to start at your new position and gave notice at your old job. But then your last day ended. Instead of starting with the new company, it yanked the rug out from under you—it suddenly rescinded the job offer.
Losing an offer is typically more common when the economy is weak, as companies struggle to predict their needed workforce or have to make cuts when their work volume decreases. It’s also more common among higher-level executives and other skilled employees, who are hired far in advance, than among entry-level employees, who are hired closer to their anticipated start dates. But it can happen to anyone, at any level, at any time.
If you find yourself stuck in this situation, what do you do? Can you force the new company to hire you? If not, do you have a potential lawsuit? Unfortunately, the answer to both questions is usually no. However, there are a few steps you can take if you find yourself without a job you expected. If this hasn’t happened to you but you think you might be vulnerable, the good news is that there’s more you can do to protect yourself from the harms of a rescinded offer.
Successful Lawsuits Over Job Offers Are Rare
If your job offer were a contract, then you’d have the right to either be hired or sue for damages. The problem with this approach is that employment is generally “at will” for both the employee and the employer. That means you can quit at any time, for any reason. Your employer can also let you go at any time, for any reason, or even for no reason at all. So an employer could let you show up on your first day and immediately tell you that you’d been fired, and you’d have no contractual rights or benefits.
That’s not to say there are no options. Some states allow you to sue using promissory estoppel. This essentially creates a contract from the promise of a job, so long as you reasonably relied on the promise of work and suffered harm when the employer broke the promise. If you moved across the country to take a new job, you might be able to prove that your employer should cover your relocation expenses under promissory estoppel. It’s also possible that you were the victim of fraud. Fraud is most likely in a competitive marketplace, where the new employer never meant to actually hire you but was trying to damage your prospects or remove you from competition. Such fraudulent misrepresentation might give you a valid cause of action, but it’s hard to prove.
Under either promissory estoppel or fraud, though, courts don’t afford much compensation for damages. You’d be obligated to actively seek replacement employment, and that replacement income would limit the damages you could receive.
What about actual discrimination? Say a prospective employer gave you a job offer over the phone. However, once the employer met you and saw your race or physical characteristics, it rescinded the offer. Wouldn’t you have a case for discrimination? Surprisingly, the answer might still be no. Last fall, a federal appellate court upheld a case where a black woman with dreadlocks lost a job offer because her white employer thought her hairstyle was too “messy.” In that case, the court held that the potential employee’s hair was not an “immutable characteristic” and therefore not subject to protection from discrimination.
So What Can I Do?
If this has happened to you, there are some key questions you can ask and a few alternatives that might help.
First, find out why the company rescinded your offer. Now is the time to be brutally honest with yourself. Did you do something that caused the employer to change its mind about hiring you? According to the Forbes article “Five Reasons to Rescind a Job Offer,” employers often rescind offers when they learn something damaging about a potential employee, such as false information within their application or a relevant but undisclosed criminal record. Surprisingly, “[f]alsified credentials may be the most common reason for a job offer to be rescinded.” Don’t let this happen to you!
If you have to pass contingencies like a drug test or a criminal background check before the offer is official, don’t submit your notice of resignation until you have cleared all of those hurdles.
If it turns out that the company rescinded the offer because it had to withdraw the position entirely, see whether another job is available with the new company. Is there a different position that you may still be qualified for? Alternatively, ask your old employer whether you could get your old job back or whether it has a similar job available. If you’ve been a valuable employee, your old employer may prefer to keep you on instead of finding and training someone new.
What if you have reason to believe that the offer was actually fraudulent from the start? Consider what evidence you have or could obtain to show that fraud occurred. Smoking guns are rare, but if you have one, you might have a case.
Avoiding Rescinded Offers: Employment Agreements
The best time to protect yourself from a rescinded offer is before the company withdraws the offer. While an offer is generally not construed as a contract, an employment agreement is exactly that: an agreement with specific promises between you and the employer about your work together.
To establish such an agreement, you’ll have to negotiate the terms when the company makes the job offer. You might agree that the company can only fire you for cause. Or you might agree that the company will give you a specific notice period before firing you or that it will give you a severance package if it terminates your employment. Be careful, though: your potential employer will try to negotiate its own favorable terms. You don’t want to agree to a noncompete clause, for example, if you’re employed at will. Such an agreement could put you out of work completely!
Employment agreements that include a signing bonus or relocation allowance that remains payable even if the employer rescinds the offer can protect you from some financial losses. While such agreements aren’t standard, you can certainly discuss them with an employer who makes you an offer. Start the conversation by asking what the likelihood of a rescinded offer is and what will happen if the company does have to withdraw the offer. It may be intimidating to advocate for yourself so assertively, but the potential rewards are tremendous!
Summing It Up
Most of the time, an employer can rescind a job offer without any notice, even if you’ve already quit your old job. Because most employment is at-will, the courts are rarely any help in these situations. Consider protecting yourself in advance by negotiating an employment agreement that will pay you a severance if the company rescinds your offer.
Did you suffer harm when a new employer withdrew a job offer after you gave notice at your old job? While legal recourse is rare, it is still possible in some situations. If you need help, or if you’d like advice about how to protect yourself before accepting an offer, please contact our office. We can help you understand your rights and obligations before you find yourself without a job.
