In the United States, many businesses are legally protected from compensating employees who have been terminated without notice or reason by citing at-will employment. At-will employment means a company does not have to provide a notice period or basis for termination; this is especially true for rescinding a job offer.
However, in Canada, it is illegal for businesses to use at-will employment in their contracts. Companies should be aware that legal setbacks and consequences are attached to rescinding an employee’s job offer without notice or compensation.
That being said, can an employer rescind a job offer in Canada, and what consequences might they face if they do so?
What Does it Mean to Rescind a Job Offer?
When a candidate accepts a job offer from their new employer, only for that offer to be taken away by the business, this is known as rescinding this offer of employment.
When a business decides to rescind a candidate’s employment offer, they are reversing or revoking the individual’s right to that position. However, rescinding an offer can only occur if the candidate has already accepted the employment offer.
In many cases, a business will typically withdraw a job offer because of factors outside of their control or are driven to it by the candidate’s actions. As the hiring process has already taken place and the candidate has been hired, rescinding the offer afterwards results in wasted time, money, and effort for the company.
Whatever the case, businesses should always discuss the withdrawal of a job offer with their Human Resources department or consult with professional legal services to ensure there are no repercussions.
Reasons Why Job Offers Get Rescinded
In certain circumstances, rescinding an offer of employment is necessary. Businesses can end up in this situation for a whole slew of reasons. Such instances include:
- Negative background check results
- The inability of the candidate to meet specific requirements contingent on the offer
- The business found out the applicant lied in the interview
- Falsified credentials and application materials
- Contract negotiations fall through
- Failed drug test
- The employer has just cause to fire the new hire
- The business’s financial health is suffering, and the open role is no longer available due to budget cuts
- Cancelled or postponed projects
Can You Legally Retract an Offer of Employment?
Businesses can legally retract an employment offer depending on the type of job offer that was made and the timing of the proposal. During the negotiation phase, companies have the right to absolve the offer should the candidate disagree with the finer details of the employment contract.
However, if the new employee has already agreed to the offer’s terms and conditions, then there are specific legal consequences attached to the company’s revocation of the position.
When a candidate accepts employment, they are considered an employee of the business, even if they have not yet worked any hours. In this case, a retraction of the offer is equal to being fired. The new employee is therefore entitled to the same compensation as any other employee.
If the employer is found to have breached the employment contract, providing neither notice nor reason for revocation, the employee can seek damages. Such a case can be seen as wrongful dismissal, causing the business to provide remuneration to the employee as pay in lieu, which typically covers three-months wages.
Even in cases where there is a probation period attached to the contract, whereby a business has the right to terminate the new employee for any reason in that period, companies can face reparations. If the new employee does not have the chance to start the contract, then the business cannot use the probation period as an excuse for rescinding the contract.
What Can Employers Do?
Should small business employers decide that rescinding an employment offer is in their best interest, then there are a few options available to them.
If an offer is rescinded, the business can provide the employee with a buy-out option in return for not taking any legal action against them. This buy-out option could cover the three months wages the individual would be entitled to by law, and it can offset bad press and liability concerns.
Businesses can also consider extending a conditional offer of employment to the approved candidate instead of an outright offer. With a conditional job offer letter, you can set out parameters that the individual must fill before being accepted for the position. When the applicant’s references check out and background checks come back verified, only then can the business can go ahead with hiring the new candidate.
Conditional Offer of Employment
A conditional job offer dictates that the applicant must reach specific requirements and qualifications before they can be appointed to the position. Many businesses extend this conditional offer to individuals at hiring events and career fairs, but they can be used at any point during the interview process.
A conditional offer can be contingent on such things as:
- Validated reference checks
- Passing all checks for security level required
- Confirmation of education and certification
- Consideration of individuals with a priority entitlement first
- Passing of second language evaluations
- Meeting specific asset qualifications
If the conditions are met, then the conditional offer letter can be treated as a binding contract, like a letter of employment would be. However, if the conditions are not met within the timeframe given, the offer loses all power and is no longer legally binding. When that happens, the company can withdraw a job offer without providing pay in lieu. At the same time, the conditional employee cannot seek damages.
Ensuring a Successful Hiring Process
One way to offset the need for revoking an employee’s job offer is to ensure finding the right job applicants from the start. Creating a standard hiring procedure, choosing the right questions to ask, and avoiding common hiring mistakes can help vet candidates accordingly.
However, businesses will always face inevitable and unforeseen circumstances that can cause them to rescind an offer of employment. To help offset surprises, and ensure your finances are secure when hiring new staff, consider using QuickBooks Online for your business.
With cash flow forecasting, financial reporting, income and expense tracking, and more, your business will be well equipped to take on new hires should you need to. Why not try it free today?