Employees Refusing To Come Back After PPP; Now What?

Employees Refusing To Come Back After PPP; Now What?

If you’re like the hundreds of thousands of businesses who received an SBA loan under the Paycheck Protection Program, you’re likely wondering what comes next? Like you, many business owners are facing a new challenge; employees are refusing to come back to work upon reopening.

Whatever the reason may be, an employee refusing to come back to work could have an impact on your PPP loan forgiveness. Thus, it’s a problem that needs solving.

In a recently published Frequently Asked Question document, the SBA clarifies what happens when employees refuse to come back after a business receives their PPP loan. The guidance is as follows:

40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

In sum: a borrower should make a good-faith written offer of re-hire. If the employees refuse to come back after the offer, it should be documented by the borrower. Every situation is different, and one size does not fit all. States may have different laws regarding paid family sick leave and COVID.

If you have questions or would like us to prepare a letter or employment agreement for your employees, give us a call!

Adam Blaier, Esq.

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