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PPP Employee Rehires and Refusal Guidance

Businesses attempting to rehire employees who refuse to rejoin the workforce can exclude those employees from Paycheck Protection Program (“PPP”) loan forgiveness reduction calculations. This is according to new FAQ guidance from the Small Business Administration (“SBA”) and Treasury Department.

PPP loan borrowers are incentivized to maintain payroll and workforce numbers to maximize the forgivable amount of their loan. However, many businesses are encountering difficulty in rehiring employees for a variety of reasons, including favorable unemployment compensation benefits.

In order to qualify for the carve out, PPP borrowers attempting to rehire laid-off employees should remember to:

  1. Provide a written offer to rehire the employee (offer must be for the same salary/wages and hours that the employee was formerly receiving), and
  2. Retain proof of the employee’s rejection of the offer.

It is unclear whether the number of rehire refusals excluded from the loan forgiveness reduction calculations will be capped, but businesses facing large amounts of refusals should continue to document and retain all correspondence until further guidance is released.

According to the updated FAQs, the SBA and Treasury will soon provide an interim final rule that further details the exclusion process and documentation requirements.

Both employers and employees should also be aware that “employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation” per the guidance.

Please contact your KDDK attorney or any member of the KDDK business law team for additional information and individualized guidance on the Paycheck Protection Program or any related matter.

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