How to Minimize Your Risk in an Offer Letter

You have found the best candidate for the job you’re filling, and your offer is accepted, but sometimes unpredictable things happen.

For example:

• What if you need to rescind an offer of employment?
• What if a candidate starts before their background check is complete and they don’t meet the requirements of the job when the results are in?
• What if a new hire refuses to sign off on company policies or a non-compete?

There are some simple changes you can make to your offer letter to help minimize risk to you and the company if the right person wasn’t selected and your offer needs to be rescinded.

Here are the steps you can take to strengthen your offer letter and a simple risk evaluation that can help decide if rescinding an offer is the safe course of action.

Beyond the basics

Offer letters should always cover the basic key points such as hire date, position title, location, work hours, employment status (full-time/part-time), exemption status (overtime eligible or not), compensation amount and pay schedule.

Additionally, a solid offer letter should detail factors that the offer is contingent on, such as:

• the parameters of the candidate and employer rights if residing in an “At Will” state
• employment verification requirement of the I-9, as well as a link to the site of acceptable documents, stating the timing requirements to complete the form and present valid identification to ensure the candidate is eligible for hire
• a satisfactory completion of a background investigation, reference checks and required documentation
• agreeing to and acknowledging a list of the primary proprietary documents prior to the start date (Note: Reinforcing the importance of your policies will allow another layer of protection of your company practices)
• any licenses or certifications that are required (Note: outline the expectations which could threaten successful employment), and
• signature line for the candidate’s understanding and acceptance of the employment terms offered.

Additional safeguards

Additional safeguards can be made to the offer letter that protect an employer against claims, such as:

• adding verbiage that states if any conditions present in the future that conflict with hire eligibility or standards of employment, their employment is jeopardized. Therefore, if a candidate starts before the background check has been fully completed, you can still part ways if they do not meet the requirements.
• reminding potential new hires of their responsibilities if they have an active non-compete from a prior employer, so as not to implicate you in any way
• detailing any probationary periods required to assess a new hire for necessary skills and attributes needed to be successful in the role
• providing a brief job description or outline of basic job duties listing the key responsibilities and expectations they must meet
• adding candidate acknowledgment that the acceptance includes the assertion they’re able to meet the requirements presented without legal restrictions
• providing an acceptance deadline allowing the candidates three to seven days to review and accept the offer rather than an open-ended offer, and
• stating that the terms of the offer letter replace any statements made prior during the interview period and that any special arrangements – flexible work time, remote status or additional paid leave allotments – should be defined.

Risk evaluation

After the candidate accepts your offer, what if you can’t or choose not to meet your promise of employment?

Perhaps some negative information came to light that you’re not comfortable with. Depending on what the information is and how it was obtained, there are certain things to consider.

The risk of rescinding an offer is ultimately the risk of being sued, and anyone can sue. An “At Will” employer can be sued before or after the person has accepted the offered job. Always verify information through valid channels such as background checks, reference checks and explanations from the candidate.

What to consider before rescinding an offer or potential promise of employment:

• Potential discrimination claim: Consider the possibility of defamation and the validity of the information you received. Is there credible, verified evidence that a prospective employee could cause direct impact or harm to the employer by assuming this role? If information appears to be gossip or inconclusive, it’s often best to trust your initial instincts and go forward with the hiring process.
• Promissory estoppel – damages claim: A withdrawn promise of employment with or without a contractual document presents the means to sue. Additionally, if the candidate has already resigned from another position to join your organization, they may not be able to be reinstated and you have irreparably damaged their ability to support themselves or their family. If after reviewing the risks you decide to rescind, you could consider a good faith payment and release, similar to a severance payment.
• Misrepresentation – fraud claim: Withdrawing an offer based on budget cuts, sudden lost revenue or staffing shifts may not always justify an offer withdrawal in the eyes of justice. Poor planning or sudden changes impacting an employer may not exempt you from being sued.
• Breach of contract claim: If you have followed a process of vetting a candidate through interviewing, verifying references and such, then what basis do you have to change your mind, especially if your letter was overly welcoming?

Ultimately a strong offer letter provides a frontline defense against legal action and protects you from the risk imposed by a bad hire. If expectations aren’t met, refer to the commitment a candidate made to your organization and always be sure that the offer you extend is consistent with company practices and the position offered.