Earlier this week the Small Business Administration clarified one of the outstanding questions from many business owners. Due to the sudden change in demand across the economy many employers were forced to lay off employees, but then tried to re-hire the same employee after receiving PPP funds. SBA has clarified that any employee who is offered to be re-hired for the same position, wage, and hours and turns down the offer will not affect loan forgiveness. The full Q&A is below:
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.
The full SBA FAQ is available here.
Additionally, the DOL also clarified that an employee who is offered re-employment is no longer qualified for Pandemic Unemployment Assistance without extenuating circumstances, read HARDI’s post here.