Q: After we sent an offer letter to a new hire but before his scheduled start date, we realized there was insufficient work to support the position. Can we withdraw the offer? Will there be any legal consequences to this unexpected and unfortunate change in circumstances?
A: As long as the offer—whether accepted or not at the time of the attempted withdrawal—was not in the form of a formal employment contract containing a promise to continue employment for some designated period of time, or some limitation on the circumstances in which employment might be terminated, it would be characterized as an offer of "employment-at-will."
This means it could be terminated by either party at any time, with or without notice, and for any reason—except an illegal reason, for example, such as a discrimination based on protected class membership.
Otherwise, if the disappointed new hire could insist on commencing employment, the at-will status would still presumably allow termination at any time thereafter, on the first day, second day, week, or month.
So why not before employment as well?
The truly unfortunate situation arises when the new hire has given notice on their old job, cannot get it back and, further, has sold the old home, packed up their belongings, removed the kids from school, put a deposit on a home in Connecticut, and is en route to start their new life here.
An employer aware of such steps taken by the "about to be rejected new hire," might have some liability for damages under a legal theory of "detrimental reliance."
The relocating new hire would have to show that the employer knew, or should have known, that he or she relied on the job offer and took the reasonable steps of moving family and possessions—and that injustice can only be prevented by enforcing the offer of employment.
Such cases are highly fact-specific, including whether the applicant planned to move here anyway, sought other jobs, whether any such other jobs might still be available, and what is a reasonable amount of damages in losing the admittedly “at-will” position that could have been ended at any time.
It's not a pretty picture.
The lesson to the employer is to keep a finger on the pulse of your business and the actions of your applicants when engaging in the hiring process. Be transparent when discussing job terms and the prospects of continued employment, don’t oversell the opportunity, and don't delay communications when circumstances change.
You might even check with other business owners or placement firms about possible job opportunities to assist your applicant find an alternative position.
Employers may also want to consult with legal counsel, and consider some offer of modest payment to address the expenses the new hire legitimately and sincerely incurred in order to avoid a legal dispute of even greater magnitude.