Treasury Department Issues FAQs on PPP Loans

The Paycheck Protection Program (“PPP”) loans established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act have been immensely popular. As we noted in a prior post, PPP loans allow most employers with fewer than 500 employees to borrow up to 2.5 times their average monthly “payroll costs” in order to avoid pay cuts and layoffs in the eight weeks after origination. If the employer uses at least 75% of the loan proceeds toward qualified “payroll costs” and meets certain requirements regarding maintaining employee headcount and pay levels, the loan is forgivable.

Due to the popularity of the program, many small businesses have had questions about the intricacies of the PPP so as to maximize loan forgiveness. In an effort to aid employers, the U.S. Treasury Department has issued an extensive Frequently Asked Questions document, which can be found here. We wanted to highlight one topic that has been of particular interest to employers: what if a laid off employee declines an offer of re-hire?

Notably, Treasury states that a PPP loan recipient’s forgiveness will not be reduced if an employee who has been laid off rejects an offer of re-hire for the same salary/wages and number of hours. Treasury indicates that forthcoming regulations will specify that, to avoid the reduction in forgiveness, the employer must make a good-faith written offer of re-hire and document the employee’s rejection of that borrower. Treasury further cautions that “employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.” This echoes recent guidance by Pennsylvania’s Department of Labor & Industry, which confirms the conclusion we reached in a post from last month.

For questions about the PPP or any other labor and employment topic, please do not hesitate to contact the attorneys at Hoffman & Hlavac. To stay on top of the latest labor and employment developments that affect your workplace, be sure to follow us on social media and subscribe to our blog.