You’ve found a great candidate for the role, after reading through piles of CVs and conducting interviews, and have offered the person a job.
But what happens if, before they start work, something comes to light that makes you change your mind? You might have done some reference checking and found out something about the person that means they’re no longer the right fit for the job or the organisation. Or there might be some sudden pressure on your bottom line or you need to quickly change direction to meet new market demands.
If you’re in the position where you no longer require the role to be filled or don’t want that person to fill it, can you just get in touch and say, “Sorry, we’re going to have to withdraw that job offer”?
The short answer is that, in most cases, you can revoke an offer of employment without putting yourself in legal jeopardy. But, like a lot of employment matters, it all depends on the circumstances.
So let’s have a look at the ins and outs of withdrawing a job offer, when and how to do it safely, and what could happen if you get it wrong.
When you can safely withdraw an offer
The safest time for an employer to withdraw or rescind an offer of employment is before the candidate has accepted the role and signed an employment contract. That’s because once both parties have signed a contract, you and the person have agreed to be bound by it. This means the employment relationship has effectively started and the person is entitled to most of the same rights and protections as any employee.
However, much will depend on the terms of the employment contract. Some contracts stipulate that employment is conditional on the employee actually starting the job, so it would be legal to withdraw the job offer before they turn up to work on the first day.
Other contracts might require you to give the employee notice or pay them in lieu of notice in order to terminate employment (note that a person who has received a job offer but has not commenced working isn’t entitled to notice of termination under the National Employment Standards).
In all cases, you should carefully check the wording of the contract before you decide to withdraw a job offer that your would-be worker has accepted.
Check your reasoning
It is important to make sure you don’t withdraw an offer of employment for a reason that is prohibited under anti-discrimination legislation.
Under the Fair Work Act, an employer cannot take adverse action against an employee (this includes a prospective employee) on grounds like the person’s race, age, sex, sexual orientation, gender identity, disability, religion, marital status or pregnancy.
There are also federal and state and territory human rights regulations that you need to adhere to.
What about background checks?
Part of a robust recruitment process is checking that a person is suitable and eligible to do the job. Steps like checking the prospective employee’s eligibility to work in Australia, contacting referees or other third-parties, and (depending on the requirements of the role, industry, and state or territory legislation) doing criminal background checks or drug tests.
If something unsatisfactory about the applicant comes to light or the checks prove they have exaggerated or misrepresented information they provided during the hiring process, you are legally entitled to revoke the offer (lying about things like qualifications or experience is fraud, after all).
To minimise risk, you should be transparent from the start of the recruitment process that any offer of employment is conditional on you being satisfied with the results of these checks. That means telling the person up front and making sure they have it in writing, e.g. in the job offer letter. You could also include terms in the employment contract stipulating that you can terminate the contract immediately if it turns out the employee has provided false information.
At the same time, you should encourage all candidates to be honest about their background, qualifications, and experience.
Verbal acceptance
It may be that, in the course of your discussions, you verbally offer the prospective employee a job and they verbally accept it, but they haven’t signed a written employment contract.
While you could argue a binding contract has not been entered into legally at this point, you could still be in breach of contract if you have made any false or misleading statements about the availability of employment, future opportunities etc. You could also be in breach of general protections provisions, as well as consumer or competition laws.
Be especially careful if your preferred candidate already has a job and you are trying to lure them away to join your business. If they have already resigned, they may be able to claim for damages, such as a loss of earnings.
What to do if they have accepted the offer
If you no longer wish to have a prospective employee start work for your business, and they have accepted your job offer (even verbally), you should follow a fair and reasonable process in revoking the offer.
Get in touch with the person as soon as possible and inform them you have decided not to go ahead with their employment. Also confirm in writing that you are terminating the contract and provide the reason(s) for it.
Be prepared to discuss the situation, explain your reasoning, and give the person an opportunity to respond. If the reason is due to unsatisfactory results from the pre-employment checks (drug test, physical fitness, references etc.), we recommend sharing the results of the checks with the person (e.g. the drug test that showed a non-negative for illicit substances), explain that you’re withdrawing the offer of employment, and wish them well with their job hunt.
If they have signed the employment contract and you’re required to give the employee notice or pay them in lieu of notice, act promptly in meeting these obligations.
Can the candidate sue the business or claim unfair dismissal?
An employee cannot apply to the Fair Work Commission for an unfair dismissal claim until they have been employed for at least 6 months (or at least one year if the business has 15 employees or less).
Similarly, employees aren’t entitled to redundancy pay until they have been employed for 12 months or more. However, as mentioned, employees can sue an employer for breaching the employment contract (depending on the terms it contains) and/or for lost opportunity, if, for example, they left their existing job to sign an employment contract with your organisation.
If you are found to have breached the contract or the employee has suffered lost opportunity, you may have to pay compensation for losses or damages. Revoking an offer of employment could also harm your company’s reputation and its attractiveness to other prospective employees.
What if the employee decides they no longer want to start work?
It’s common for job hunters to apply for multiple positions at a time or for your preferred candidate to already have a job, so a person might sign the employment contract but then change their mind.
Depending on the wording of the contract, they may be obliged to give notice, which would mean they start the job and work out (all or some of) their notice period.
In practice, however, it’s unlikely you’ll be able to hold them to it, or want to. They aren’t going to become a permanent employee, after all.
Our advice
To hire and onboard new employees confidently and consistently, you need to have good systems in place, follow your procedures, and communicate clearly. Before you advertise a vacancy, you should take a step back and define your current and future business objectives, then ensure you have the right organisational design (the right roles performing the right tasks) to meet your goals.
This will help ensure you don’t need to suddenly change tack in the middle of trying to fill a position.
Talented people are valuable, especially in a tight labour market, but resist the urge to offer someone a job on the spot without doing all the necessary pre-employment checks.
If you need to act quickly, be clear about whether a job offer is contingent on checks and references, and put it in writing for the prospective employee, and make sure you do the checks before the person starts work.
Look closely at the wording of all your employment contracts and include a clause that states the contract doesn’t come into effect until the employee attends work on their first day. If you’re unsure if you’ve got the right person for the role and want to see how things play out, use a probation period.
MyHR is here to help if you need expert guidance on safely revoking an employment offer.
