Just say he's no fit for the organization. Safe and at least partially fair for the candidates.
Basically, it tells them that there was no technical reason not to hire them, which raises the question of whether it was something illegitimate.
It's sad because nobody wins -- companies get sued for petty nothings, candidates who have been wronged have no recourse, and candidates aren't given the feedback they need to improve themselves.
Our startup isn't hiring yet, but I must confess this kind of thing has me worried...
Where? I've never seen anyone sue a company for not hiring them, and no company I've ever worked at has been sued for not hiring someone. If it was litigation-prone, I'd expect to see some litigation. I don't work in the US; maybe this is a weird US thing? Maybe people who do work in the US can give us some numbers? What proportion of companies one has worked for have been sued for not hiring someone? Or in a given year, what proportion of rejected interview candidates come back to sue the company?
http://www.dailymail.co.uk/news/article-6067331/Swedish-Musl...
But talk to anyone in HR and you'll hear, "The stories that I've seen, if only I could tell you!"
If everyone is so cautious about hiring for fear of litigation, do they still happen? Since everyone is so cautious.
Anecdotally, call centers seem to be a particularly good source of interesting HR lawsuits.
The point is: there exists an incentive to think in terms of information leakage, and it's a very unfortunate state of affairs because everybody loses.