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Will Paycheck Protection Program Loan Be Forgiven If Employees Won't Work?
One of the main benefits of the Paycheck Protection Program (PPP) is if loan proceeds are used to keep employees working or bring back furloughed/laid off employees, the loan amount used for payroll may be forgiven. One hurdle that many employers may not have anticipated: What if employees refuse to return to work?
Employees who are furloughed or laid off must be put back on the payroll no later than June 30, 2020 in order to avoid a reduction in PPP loan forgiveness. But some employers, including those whose business is done primarily during the winter months, hire only seasonal workers and have no need to add people in June. In other cases, employees may be reluctant to come back to their jobs, either because they fear exposure to COVID-19 or because they are making more money collecting unemployment benefits, which currently includes an extra $600 weekly payment.
The Small Business Administration (SBA) and Treasury Department offered some guidance on the issue, saying they may exempt laid-off employees from the loan forgiveness reduction calculation if the business that receives the loan offers to rehire the employees for the same salary/wages and same number of hours, but the employees decline the offer. In addition, employees who refuse to return to work may forfeit their eligibility for unemployment compensation benefits.
Employers must authenticate each employee's refusal to return to work, with documentation of a good faith, written offer to rehire, and the employee's rejection of that offer.
There are some uncertainties in the guidance. The SBA may not excuse widespread employee refusals, and the exemption may not apply if an employer alters the terms and conditions of employment - such as reducing wages or hours - when rehiring workers.
The SBA has promised an interim final rule on how they will handle instances of employees refusing to return to work. In the meantime, employers should take steps to document - in writing - offers to rehire and any employee refusals.
Rules covering the PPP loan program are continually evolving. Join in our webinar today - W ednesday, May 6th - at 1:00 pm EDT for more information on key issues of the PPP program, including the potential impact of employees who refuse to return to work. You can register for the free webinar by clicking here.
For the latest information or help in applying for or managing the PPP loan process, you can also contact the Gray, Gray & Gray team at (781) 407-0300.

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