Is It Fair for Companies to Charge Interview Costs if You Decline Their Job Offer?

Can a company include a clause in the appointment letter stating that if an employee declines the offer before the date of joining, the employee will be responsible for reimbursing the expenses incurred by the company for the interview? Is this clause valid?

Dear Smriti,

Understanding the Difference: Offer Letter vs. Appointment Letter

First and foremost, you need to understand the difference between an "Offer Letter" and an "Appointment Letter." The former is issued when a candidate fulfills the recruitment criteria and the company considers his/her selection. In most cases, the latter is issued once the employee joins the company. In extreme cases, an appointment letter is issued even before the employee joins the company.

Considering the Implications of a Clause

You might introduce this type of clause; nevertheless, please anticipate the repercussions of the insertion of this clause as well. Why recover just the cost of the interview and selection? Why not the cost of discontinuity in work as well? The latter cost is greater than the former!

The introduction of this type of clause could scare away job candidates. When a job aspirant starts searching for a job, it is obvious for him/her to attend interviews at as many places as possible. Possibly, he/she might get selected in 2-3 places. Therefore, the job candidate weighs options and chooses the best one. What if job candidates start declining job offers because of this clause?

Potential Consequences and Company Image

Secondly, a needy candidate may accept the job offer even with this clause, but then what if he/she still does not turn up? To recover the cost of the interview and selection, will your company sue the job candidate? Under such cases, how many court cases will you go on fighting? By settling the score with the job candidates, what image will your company cultivate in the job market?

Job candidates do not turn up even at MNCs as well. "No show" is a fait accompli that employers need to put up with. Nevertheless, what matters is the brand image of the company. The higher the brand image, the fewer the chances of a "No show." Therefore, the real challenge lies in how to enhance the brand image of the company so that you can attract quality candidates. The failure of job candidate(s) to join your company after the issue of an offer letter shows that your brand image means nothing to him/her. Rather than drawing solace from the recovery of a small amount owing to "No shows," please address the larger issues.

Thanks,

Dinesh Divekar

Divekar ji,

You may please like to review your answer in the spirit of the question put by the member. The question was, "Can a company put a clause in the appointment letter that if an employee declines the offer before the date of joining, then the employee will reimburse the expenses incurred by the company for the interview? Is this clause valid?" BUT CERTAINLY NOT about the brand image of the company.

Dear Friend,

As the learned Shri Dinesh Divekar pointed out, do not adhere to such clauses; opt for better options. Furthermore, nowadays, employees are passionate about finding a good working environment. They are eager to rid themselves of bad bosses, even if the organization is excellent. In most cases, employees desire recognition; otherwise, you will end up with substandard employees.

Of the five paragraphs of my reply, paragraphs 2, 3, and 4 deal with the direct query by the poster. The first paragraph is to bring clarity to the offer letter and appointment letter, and the last paragraph is reserved for brand image. This paragraph is written to assess why the situation came to such a pass where the company is thinking of introducing a recovery clause in the offer letter itself.

From my point of view, these challenges are faced by SMEs. Everybody wants to work in a branded company, and companies with a lesser brand image suffer in the job market. I wanted to bring to the fore this fact. Hence, my paragraph on brand image.

Thanks,

Dinesh Divekar

Dear Smriti, you should understand that companies do not intend to spend a lot of money and time in the process of conducting an interview to select a capable candidate, only for it to go to waste. However, if a selected candidate backs out after accepting the offer of appointment, the company has to restart its recruitment process from scratch, resulting in a waste of time and money, ultimately affecting the productivity of the company and potentially causing a backlog of work. Therefore, it is not unreasonable for a company to include a clause for reimbursement of recruitment costs by an offer acceptor who later declines to join.

It is essential for the employee to carefully consider before accepting an offer of appointment. The company's brand image should not be at stake during the recruitment process. Brand image is not built by merely squandering the company's money and management's valuable time to cater to the whims of candidates. If a candidate has attended interviews at other companies as well, they can request an extension of time for accepting the offer letter from the selecting company but should not renege on an already accepted offer. Such actions can be viewed as dishonest and selfish on the candidate's part. A candidate who is solely focused on self-interest may benefit temporarily from another job offer but may not succeed in advancing their career in the long run. The future is always uncertain, and the same company that is currently offering a position can turn out to be a significant opportunity for the candidate if they act ethically.

Every company expects a selected candidate to be honest and sincere, meeting the management's expectations and following employment ethics diligently. A candidate must bear in mind that a company undertakes recruitment to meet its own needs, not to fund unethical behavior on the part of candidates.

Regards

Dear Shri Divekar,

I would like to totally differ with your views. There seems to be a big difference between yours and my views and in the understanding of the central idea of the question. If you wish, you may want to go through my reply in response to the question of the member.

So far as the question of scaring off the job candidate is concerned, when the clause is already included in the offer letter, why does the candidate accept that clause by accepting the offer?

No, I do not think such a clause can solve any problem. Isn't it the same as saying that you can resign, but the company will release you (even after the notice period) if you provide us with the replacement? If the above clause is unjust, so is the above clause.

On the other hand, this clause will deter the employee from saying yes, especially if the joining date is after 3 months, as there is uncertainty in that period. So, no, inserting this clause will not serve any purpose, as the company will spend more on the litigation expense than the actual recovery amount.

Instead, make your selection and offer sound in other manners, so that it is difficult for the candidate to reject or fall back after accepting.

Regards,
Ashutosh Thakre

Are you the HR or the candidate? While the answer would essentially be the same, it's not legal. The reasons, justifications, and angles would vary depending on which side of the table you are.

If you have gone through the responses of so many senior members, they have been based on the basic presumption of you being the candidate or the HR. Either way, some have wasted their time. Don't you think everyone who responded with the wrong presumption has wasted at least some time in addressing an issue that's way off the mark from your perspective and may not have answered your query completely or appropriately?

This is coming from someone who has been a member of CiteHR since August 2011. I suggest first clarifying your locus standi and also giving the background of the query. That will enable the members to give pointed and actionable suggestions for your benefit.

Regards,
TS

Legal Implications of Clauses in Offer Letters

In a practical sense, this clause will have zero meaning. You will find it impossible to enforce this clause. The candidates also know this, and they know the cost of taking this to court will exceed the amount that you can recover for such expenses. It is also unlikely that the courts will give a judgment in your favor.

From a legal point of view, the offer letter may not even have enforceability from a contract act point of view. Every contract needs consideration. Consideration actually means an offer of something of value in return for something of value. In the case of the offer letter, there is no consideration that has been exchanged. It is actually an agreement of intent to enter into a contract of employment.

If the above view is correct in the eyes of the court, you do not really have any scope of recovery of your money.

Understanding the Debate on Employment Offer Clauses

Very interesting debate. As the learned member Mr. Tajsateesh said, it would have been worthwhile if the member who posted the question clarified whether they are seeking the answer from the employee's perspective or from the HR (company) perspective, as it would have attracted more focused replies from the senior members. From the employee's perspective, the question, I believe, centers around the enforceability of such a clause and the consequences of breaching it. However, the reply to the question from the employer's perspective, in my view, is not merely confined to legal ramifications but extends beyond them.

The Employee’s Perspective

Here, the company, by making an offer, signifies its willingness to promise a job and puts a condition that the candidate has to reimburse the company for interview expenses if they decline the offer, with a view to obtaining their acceptance. This clause raises many questions of legal importance, such as:

• How does an offer or proposal fructify into a contract when it is declined? Legally, an offer or proposal, when accepted, becomes a contract.

• Does the Contract Act envisage consideration for declining an offer, if at all the willingness to reimburse the expenses is considered as consideration? The Act envisages consideration only in the case of accepting an offer (of a job) or proposal.

• How far does such a compulsive condition make the consent by the candidate 'free consent,' and will it not taint it with 'undue influence' as one party, namely the company, is in a dominant position vis-a-vis a candidate?

• If the condition becomes operative only in the case of declining the offer, then is it that the candidate need not reimburse the expense of the interview once they accept the job and join, and later quit the next day?

Therefore, for the clause to be valid, it must withstand legal scrutiny, and it is not possible to answer the query satisfactorily from a legal perspective in this forum, as the issue involves many legal nuances and technical interpretations. It is better to leave it to the courts to decide. I am not going into the legal aspect of the question.

The Employer’s Perspective

The learned members have also attempted to address this. My two cents on this perspective are:

• The anguish and agony of an employer who incurs a cost on hiring and sees it go to waste is understandable. They may feel helpless and resort to such compulsive options at least to make the candidates join the job, though they may not really mean to recover the expenses. However, it is not prudent nor desirable to incorporate such clauses if tested against the principles of prudence, practical wisdom, and market psyche.

• It is paradoxical and inconsistent with the unwritten code of conduct in the business of buying and selling goods and services in markets where the buyer cannot ask the seller to pay for travel expenses for coming to the market if the seller refuses to sell their articles. In the employment market, too, the employer and the candidate will be in the position of buyer and seller. It is first an employer's immediate need to have the required manpower to run their business, and it is they who approach the market directly through advertising or through their agent in the form of a manpower agency to buy manpower to fulfill their need. The candidate only offers to sell their services for a price but does not induce the employer to incur costs of hiring them. For the employer, there is no other option but to incur costs to have access to candidates. Therefore, when a candidate appears for an interview, they do not do so with the knowledge that they have to pay for their interview as well. So the transactions up to this stage of the offer from the employer's side fall into an unwritten understanding or code of conduct (accepted behavioral norms) in the employment market. Therefore, it defies logic to pass the cost of hiring to the candidate, even with some conditions.

• Secondly, does it require any guessing as to how many candidates would show up for an interview if they knew they had to pay for appearing for their own interview, even with some conditions? On the other hand, in some cases, employers are even willing to pay for the travel expenses of the candidates. Therefore, it defies, in my view, practical wisdom in hiring and is counterproductive.

• The paradigms of employment are undergoing a change with tech-savvy, freedom-loving, job-hopping, and more entrepreneurial modern Gen-Y workforce, which may view such conditions as reflecting a negative culture of the organization. With the Gen-Y workforce so active on social media and WhatsApp, employer branding may take a beating.

Regards,
B. Saikumar
HR & Labour Law Consultant

Hello everyone, I have a similar query. Actually, I accepted an offer from the company. Initially, I was skeptical about joining, and I wanted to take the offer letter home, but they didn't allow me and also took my phone so that I couldn't Google about the company. They advertised the job with one company name, and before going for the interview, I checked the company on Glassdoor and found nice reviews. However, when accepting the offer, there was a different company name. I asked them about it, and they said it's a subsidiary. Additionally, I was made to sign a check for about 3 lakhs for recruitment cost reimbursement in case I don't turn up on the agreed date.

Upon coming home and searching the company name with which I received the offer letter, I found a separate Glassdoor profile with poor reviews. Due to this, I decided not to join and expressed all my concerns to the company. Every time I visited, they manipulated me. Eventually, I decided to join, but just three days before starting, while chatting with a friend, I described the situation without mentioning the company name. He immediately identified the company and warned me not to join.

Currently, they have presented the check for clearing, but I had already given stop payment instructions. Now, they have sent me a legal notice and want to initiate proceedings under section 138. Please advise me on what I should do.