Under the Paycheck Protection Program (PPP), borrowers can have their loans forgiven if loan proceeds are used to cover payroll costs, mortgage interest, rent and utility costs in the 8 week period after the loan is made and employee and compensation levels are maintained. But many employers have asked: What happens if you call back laid-off employees and they are reluctant or refuse to return to work?
The Small Business Administration (SBA) and Department of Treasury recently answered this question in their PPP Frequently Asked Questions. While promising to issue a formal rule, the FAQ states the following:
- Question (#40): Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be excused if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
The key to getting your de minimum exception seems to be documentation. If you encounter this situation, we recommend you contact your lending institution as well as legal counsel for advice and assistance.
While this appears to be some good news for employers experiencing this issue, we will need to review the interim final rule to know for use.
Please contact us with any questions at info@michamber.com.