Returning to Business and PPP Loan Forgiveness

What if I Offered to Rehire Employees and they Refuse?

The loan forgiveness portion of the Paycheck Protection Program (PPP) Small Business Administration (SBA) loans will permit Employers who borrowed during the Covid-19 crisis to have up to 100% of the balance of a loan forgiven if the employer-borrower meets certain criteria.  Generally, these criteria require that the business maintain or restore the level of Full-Time Equivalents (FTE’s) that they employ, as well as the individual salaries of their employees, to pre-Covid-19 levels.  But what if employees who are able to work refuse to return?

A new Interim Final Rule (IFR) published by the SBA/Treasury Department on June 1, 2020 gives specific guidance to employers regarding what they must do in order to take advantage of the “safe harbor” on PPP loan forgiveness calculations when employees decline an offer to return to work.  If the employer borrower has offered to rehire an employee and followed the steps below, they will be permitted to exclude these employees from their loan forgiveness calculations.

In order to take advantage of the safe harbor provision, employer borrowers may exclude any reduction in full-time equivalent employee headcount or reduction in an individual’s salary that is attributable to an individual employee 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; and
  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.

 The federal CARES Act that created the PPP loan framework reduces the amount of the PPP loan that may be forgiven if the employer borrower reduces the number of FTE’s or the amount of individual employee salaries. This reduction is waived if the employer borrower eliminates the reduction in full-time equivalent employees and salaries.

In Ohio, informing the state unemployment insurance office involves notifying the Ohio Department of Job and Family Services (ODJFS).  Currently, ODJFS is revising the forms that it may provide for this purpose.  However, ODJFS provided an email address where employers may notify ODJFS of the employee’s refusal to return to work.  We recommend that employers email the names of the employees, along with the offer letters and documentation of the employee’s refusal to return, to the following email address:  UIReturntoWork@jfs.ohio.gov

Pickrel, Schaeffer and Ebeling is here to help with all issues regarding employee’s safe return to work.  If you need legal guidance on how to return employees to work safely, PPP loan forgiveness issues or complying with local, state and federal Covid-19 regulations, please contact Kristina Curry or Matt Stokely in the Labor and Employment Department at kcurry@pselaw.com or mstokely@pselaw.com, or call (937)223-1130.

AUTHOR: Kristina Curry
kcurry@pselaw.com