Can HR retract a job offer over bad references?

You thought you’d found the ideal candidate and you’ve already offered them the job but now their reference check suggests you may have made a mistake – so what can HR do about it?

“An employer can retract an offer of employment at any time before a prospective employee has accepted it,” says Lucy Harris, a solicitor with Simpson Grierson’s employment team.

However, if the person has already accepted, the employment relationship has already come into existence and rescinding the offer is no longer a possibility – but employers do have some opportunities to protect themselves.

“Every offer of employment should be clearly conditional on the employer being satisfied with the results of all applicable background checks and having no issues with any disclosures made by the prospective employee,” says Harris.

“This will mean that unless these conditions are fulfilled, the employment relationship will not come into existence – regardless of whether the prospective employee has accepted the conditional offer or not.”

Auckland-based Harris also advises employers to go one step further and state that if any background check – medical, criminal or reference – is not completed by the time the employee has started work, their continued employment remains conditional on satisfactory results being returned.

Even without these provisions, employers still have some power to discipline or dismiss employees who were untruthful during their job interviews, reveals Harris.

“If an employee who has already started working has answered a pre-employment question falsely (as disclosed by the results of later background checks), then the employer may potentially have grounds to end the employment relationship under the Contractual Remedies Act 1979, or take disciplinary action on the grounds that they have lost the necessary trust and confidence in the employee,” explains Harris.

“However, as there is an employment relationship in existence, the employer will need to comply with the duty of good faith and act as a fair and reasonable employer could have done in all the circumstances when taking any disciplinary action against the employee,” she continues. “This will require them to follow a fair disciplinary process.”