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PPP Loan & Employees Refusing to Return to Work

Written by Soo Yeon Lee, Esq.

In the midst of the COVID-19 pandemic, some employees are refusing to come to work despite not having COVID-19 or being excused for qualified reasons. Some employees are refusing to be re-hired because they make more money from unemployment (though refusing to accept work should disqualify these individuals from unemployment benefits). This presents a problem for employers who have received their PPP money and are worried this will affect the forgiveness of their PPP loan.

The Treasury Department issued guidance suggesting that so long as a good-faith, written offer to re-hire has been made by the employer and rejected by the employee, the rejected employee will be excluded from the forgiveness reduction calculation. In other words, this scenario will not reduce PPP loan forgiveness if:

  1. The borrower made a good faith, written offer to rehire such employee (or, if applicable, restore the reduced hours of such employee) during the covered period or the alternative payroll covered period

  2. The offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours

  3. The offer was rejected by such employee

  4. The borrower has maintained records documenting the offer and its rejection

  5. The borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer (further information as to how borrowers will report information concerning rejected rehire offers to state unemployment insurance offices will be provided on SBA’s website).

Therefore, employer should ensure the following protocol is followed and keep written documentation of all steps so the employees who refuse to work will not impact its ability to obtain full forgiveness of the PPP loan:

  • Make the employee a written offer to return to work

  • Include a clear date by which the employee must respond, with notice that failure to respond shall be treated as a refusal to return to work

  • Include a statement that refusal to return to work may result in the individual being ineligible for continued unemployment benefits.

** The information contained here has been prepared for informational purposes only and is not legal advice. This material describes issues in general terms, and good legal advice required detailed analysis of particular facts and circumstances.