diff --git a/artifacts/api-server/src/routes/jobs.ts b/artifacts/api-server/src/routes/jobs.ts
index 125d74c..ade713b 100644
--- a/artifacts/api-server/src/routes/jobs.ts
+++ b/artifacts/api-server/src/routes/jobs.ts
@@ -381,16 +381,31 @@ async function advanceJob(job: Job): Promise<Job | null> {
       });
       if (partialGrantReserved <= 0 && (job.absorbedSats ?? 0) > 0) {
         // Pool drained between advisory decide() and payment confirmation.
-        // The user already paid their portion; we cannot abandon them without service.
-        // Proceed with work. Timmy absorbs a bounded loss (at most job.absorbedSats sats)
-        // for this edge case. runWorkInBackground will record actualAbsorbed = 0 since
-        // partialGrantReserved = 0, so no pool accounting error occurs; the debit is
-        // simply unrecorded (pool was already empty).
-        logger.warn("partial grant pool drained after payment — work proceeds, no pool debit", {
+        // We cannot execute at the discounted terms — that would operate at a loss
+        // without pool backing. Mark the job failed with refund pending so the user
+        // can resubmit at full price.
+        logger.warn("partial grant pool drained at payment — failing job, refund pending", {
           jobId: job.id,
           pubkey: job.nostrPubkey.slice(0, 8),
           requestedAbsorb: job.absorbedSats,
+          workAmountSats: job.workAmountSats,
         });
+        await db
+          .update(jobs)
+          .set({
+            state: "failed",
+            errorMessage: "Generosity pool exhausted — your payment will be refunded. Please retry at full price.",
+            refundAmountSats: job.workAmountSats ?? 0,
+            refundState: "pending",
+            updatedAt: new Date(),
+          })
+          .where(eq(jobs.id, job.id));
+        eventBus.publish({
+          type: "job:failed",
+          jobId: job.id,
+          reason: "Generosity pool exhausted — your payment will be refunded.",
+        });
+        return getJobById(job.id);
       }
     }