SBA Issues Guidance on Laid-Off Employees Who Refuse to Be Rehired

The SBA addressed employees who refuse to be rehired in its PPP FAQ, which has been updated twice this week.

40. Question: Will a borrower's PPP loan forgiveness amount (pursuant to Section 1106 of the CARES Act and SBA's implementing rules and guidance) be reduced 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.

SBA Extends Safe Harbor Deadline to Return Funds

The SBA announced yesterday that it has extended the safe harbor deadline to return PPP funds, moving the date from May 7 to May 14, 2020. Additionally, the SBA intends to provide additional guidance on how it will review the required certification that the loan is necessary to support ongoing operations before May 14.

Resources

Earlier this week, the IRS updated its FAQ addressing questions employers have about the Employee Retention Tax Credit to address the eligibility of businesses that return a PPP loan before the safe harbor deadline.

80. Is an employer that repays its Paycheck Protection Program (PPP) loan by May 7, 2020 eligible for the Employee Retention Credit?

Yes. An employer that applied for a PPP loan, received payment, and repays the loan by May 7, 2020 (in accordance with the Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request in the interim final rules issued by the Small Business Administration effective on April 28, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an Eligible Employer. For more information, see Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Promissory Notes, Authorizations, Affiliation, and Eligibility (PDF) .