Employment Law Alerts

May 12th, 2020

SBA Clarifies Key Loan Forgiveness Issue for Employers 

Over the last several weeks, many businesses have applied for and received loans pursuant to the Paycheck Protection Program administered by the Small Business Association. The main goal of the PPP program was to provide qualifying businesses with funds to either keep their current workforce on their payrolls or rehire employees they had to lay-off at the start of the COVID crisis. A key feature of the PPP loans is that they are potentially 100% forgivable so long as headcount and salary levels remain constant through an eight week period that begins to run when the loan is funded. However, many companies are finding that certain of their employees are unwilling to return to work and are concerned that their PPP loans may not be forgiven due to an unintentional reduction in headcount. In order to assuage these fears, the SBA has said in a published Q&A that former employees who reject a “good faith” offer of re-employment will be excluded  from the forgiveness calculation. In order to qualify for this exemption, the offer of re-employment must be in writing, it must be in “good faith” meaning that the employee will be rehired for the same position, working the same hours, and for the same salary, and the employee’s rejection must be “documented.” The SBA ends this answer with an stern reminder that, “employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.” If you have questions about PPP loans please contact Tricia Legittino, Jay Rand, Wendy Stryker, Deborah Wolfe, or Lee Silver.