One of the most difficult things a manager will have to do is rescind an employment offer. An offer letter is not necessarily an employment contract. Which means, it is legal for an employer to recall it. Employment in the United States is 'at-will' (that is, an employer can fire an employee at anytime for any reason or no reason at all). So, unless either party has a claim against the other for damages arising from the termination^*, withdrawing an employment offer is perfectly legal - though it can feel awful to the person delivering the news. Here are the most common reasons for rescinding an offer and how to go about it -

COMMON REASONS FOR RESCINDING AN EMPLOYMENT OFFER

A Candidate Needs More Time To Consider The Offer - Often candidates will seek a new job, but when it comes time to resign from their current employer they may get 'cold feet'. So, they procrastinate. As an employer, you can only wait so long or risk losing other qualified candidates you've interviewed.

A Candidate Is Holding Out In Hopes Of A Higher Salary - Sometimes a candidate will attempt to gain a greater salary, and the employer may be unable or unwilling to pay more for the role. As a result, the manager may chose to rescind the offer.

Circumstances Changed With The Employer - Though uncommon, an employer's circumstances can change suddenly (i.e., lose a big client, suffer budget cutbacks, etc.) eliminating the position they sought to fill.

The Candidate Failed a Drug Test - Well written employment letters include a clause informing the new employee that his/her employment is 'contingent upon the successful completion of a drug test'. So, if he/she fails, the employer has every right to withdraw their offer.

The Candidate Failed a Background Investigation - Some employers will initiate the background investigation within the first few days of employment. If during that time, the candidate's background results include a felony (or other criminal charges) the employer may chose to repeal their offer of employment. Again, a well written employment letter will include a clause stating that employment is 'contingent upon the successful completion of a background investigation'.

The Candidate's References Weren't Strong - I've said this many times, an employer should check references BEFORE an offer is made. However, sometimes a hiring manager is in a hurry to fill the position and may make the offer before they've heard back from all of the candidate's references. Then they hear from the person's former supervisor and the news isn't as good as they'd hoped. So, the offer is rescinded.

Well structured offer letters not only state that employment is contingent upon the successful completion of a drug test and background investigation, it will also note that employment is 'at-will'. Just as the employee can be fired for any reason, so can the employee terminate the relationship for any reason at all.

HOW TO GO ABOUT RESCINDING AN EMPLOYMENT OFFER

This is a heartbreaking thing to happen to an employee.  As such, delivering the news should be done as soon as possible. The manager (usually an HR professional) should simply say - "[Name], thank you for applying for the ____ position at our firm. At this time, the position has been eliminated due to _____ (i.e., restructuring, budget cuts, etc.). As such, we must rescind our offer of employment." You should make no apologies, though you might feel like apologizing. Apologizing sends an impression of regret. So, stand tall, be firm and above all be brief.

While you are likely to endure some frustrated comments and a plethora of questions, you are not to go into any detail other than restating that the position was eliminated due to _____. You may certainly express your well wishes (i.e., best of luck with you search) then excuse yourself from the call.

(Note to Employees: You should NEVER resign from your current job (or stop seeking employment) until you have a formal offer in writing. Being told that an offer is forthcoming isn't an actual offer. Even still, an employer can rescind the offer if things change significantly on their part...though it is less likely.)

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* Depending on the state the employee is in, he/she may opt to engage an attorney on the grounds of Promissory Estoppel or Detriment Reliance, which might allow an employee who relocated as a result of his/her new employment (or otherwise left his/her job based on the promise of employment from the employer in question) to receive compensation. For additional information, visit http://labor-employment-law.lawyers.com/Job-Hunting/Promises-and-Rescinded-Job-Offers.html