Rehiring Employees Under the SBA “PPP”Program

May 13, 2020


As businesses are beginning to receive funding from the Small Business Administration (the “SBA”) as part of the Paycheck Protection Program (the “PPP”), they are faced with decisions on whether to rehire employees that they previously had to lay off due to the economic impacts of the COVID-19 pandemic. An emerging issue is what employers can do if their employees do not want to return to work. The SBA and Treasury have announced their intention to issue an interim final rule concerning this matter.

First and foremost, when evaluating applications for loan forgiveness, lenders will compare the payroll amount to the average payroll in 2019 upon which the loan amount was based. The lender will not review whether a specific employee has been rehired or whether a specific role or position is filled. In the event that an employee declines a rehire offer, as long as the employer makes a written good faith offer to rehire the employee at the same rate and for the same amount of hours per pay period as prior to the pandemic, and the employer has documented the employee’s rejection of the good faith offer, the PPP loan forgiveness amount will not be reduced due to that employee’s rejection of the employer’s offer to rehire. When dealing with rehire issues, the key points are that (1) the offer must be in good faith, (2) the offer must be in writing, and (3) the employer must document the employee’s rejection. As with other documentation required for loan forgiveness, it is important for companies to maintain thorough documentation to submit to their lender when it comes time to apply for loan forgiveness.

It is also important to note that an employee who rejects an offer to return to work may lose the ability to collect unemployment compensation.

Employers should work closely with their legal counsel to ensure that their companies receive the maximum amount of loan forgiveness available to them. If you believe your company needs assistance with this or any other issue your company is facing today due to the ever changing legal landscape as a result of the COVID-19 pandemic, please reach out to the team at Rodriguez-Albizu Law, P.A.