What are the risks of rescinding an offer of employment?

Depending on the circumstances, there may be a lot of risk involved in rescinding a job offer to someone who has accepted and already given notice to a current employer.

Conditional and Firm Offers

Making an offer of employment to an applicant is a commitment to hire. You may make it contingent on other factors, such as successfully passing pre-employment drug testing and/or a criminal background check, but you ​should put these contingencies in writing. Employers also have the right to make an offer subject to the approval of others in the company.

Employers clearly have the right to condition offers on job-related pre-employment screens that may affect whether the candidate will become employed. If you make the job offer contingent on passing a criminal background check,​​ make certain you are following the specific notice procedures required by law. The same holds true for other types of background checks, such as credit checks. California places numerous limitations on the type of information employers can obtain and how they go about obtaining it.

An offer does not become binding until the applicant accepts it; therefore, you are free to change the terms or withdraw the offer if the applicant has not accepted the offer or detrimentally relied on it. If the applicant counters with different terms, you may consider your offer rejected and withdraw it.

CalChamber's Labor Law Helpline often gets calls about employees who are not ready to start work after an offer has been made and accepted. Clearly, if the employer makes an offer with a firm start date, then that date becomes part of the offer. If the applicant cannot start on that date, regardless of the reason, the employer may withdraw the offer.

Employer Penalties

If this employee can demonstrate that you made promises you did not keep, such as term of employment or job duties, then you could be exposed to penalties under the fraudulent inducement provisions of California law, as well as wrongful termination.

If the applicant or employee quit his/her current position in order to accept yours and cannot rescind the resignation or find another equivalent job, the potential future damages — loss of salary, benefits, etc. — will be greater. You may be liable for these future damages as well as the other costs listed above that the individual incurred in accepting the job with your organization.

If you induced the employee to move to, from or within California by misrepresenting the nature, length or physical conditions of employment, then you would be exposed to liability double the amount of any cost incurred by the employee taking the job with your company. These costs include moving expenses, purchase of a new home and loss of wages.

Labor Code Sections 970 and 972 allow an applicant to sue any person, agent or officer for double damages for knowingly making any false representation. In addition, a person who is guilty of violating Section 970 is guilty of a misdemeanor punishable by a fine of up to $1,000 or imprisonment up to six months, or both.

The hiring process is important for both the employer and applicant. Being clear about the hiring process and what the job entails (pay, benefits and start date) are essential to forming a good working relationship. Making an offer of employment, whether it is verbal or in writing, can be binding if the applicant accepts the offer. Therefore, it is important to be clear about contingencies and the approval process before offering an applicant a job.​​

You can find more information on Offering Employment and ​​Background Checks and Testing in the HR Library.​