Yesterday the Small Business Administration (SBA) issued a new FAQ which helps PPP borrowers whose employees elect not to return to work.  As set forth in the CARES Act, the PPP loan amount eligible for forgiveness is to be reduced, in part, if a PPP borrower’s average number of full-time equivalent employees during the 8-week loan period is less than the average number of such employees previously employed by the borrower. 

One issue beyond the control of PPP borrowers is employees that do not accept rehire offers, potentially effecting a PPP borrower’s ability to receive full forgiveness.  The SBA announced that they will be issuing guidance which will exclude laid-off employees that do not accept rehire offers from the loan reduction calculation if the following requirements are met:

  1. The PPP borrower makes a good faith, written offer of rehire;
  2. The rehire offer is for the same salary/wages and the same number of hours;
  3. The employee rejects the offer of rehire; and
  4. The rejection is documented by the PPP borrower.

The FAQ cautioned both employers and employees, that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

Employers in Pennsylvania may want to consider completing and filing a Form UC-1921W (Refusal of Suitable Work) with the PA Department of Labor and Industry as one method of documenting the employment rejection (although the FAQ does not discuss methods of documentation).  Filing this form may also assist with an employer’s unemployment compensation rate for next year.  

If you have any questions, please reach out to us.  We are here to help. 

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

SBA to Provide Exemption from Loan Forgiveness Reduction for Non-Returning Employees