As of May 3, 2020, further guidance from the Small Business Administration (SBA), in consultation with the Department of the Treasury (Treasury) provided that employers who borrowed loans through the Paycheck Protection Program (PPP) will still be eligible for loan forgiveness if a previously laid-off or furloughed employee due to COVID-19 rejects a reemployment offer by the PPP borrower-employer.
We previously reported on the PPP, which was introduced as part of the CARES Act. Through the PPP, eligible businesses that borrowed loans from the PPP would be qualified for loan forgiveness if such borrowers either retained their employees and maintained their salary levels or rehired employees and restored their salaries by June 30, 2020. However, the SBA and Treasury provided that the PPP borrower would not lose its loan forgiveness qualification if the borrower (1) made a written offer of rehire in good faith to its laid-off or furloughed employee, (2) the employee rejected the offer, and (3) the borrower documented the employee’s rejection of such offer. The rehire offer to the laid-off or furloughed employee must include the same salary or wages and work hours from before the employee was laid off or furloughed. The SBA and Treasury are expected to issue an interim final rule that will address this guidance.
Some individuals may be disincentivized from accepting a reemployment offer from their employer due to, for instance, their unemployment insurance (UI) benefits being equivalent to or greater than their wages or salary earned while employed. It is important to note that individuals who have been receiving UI benefits while they were laid off or furloughed may no longer be eligible to continue receiving UI benefits if they reject a reemployment offer from their employers. This is the standard for receiving continued UI benefits even under circumstances outside of the COVID-19 pandemic.