PPP Update: What If I Can't Re-hire an Employee?

Posted By Mike Meyer, Wednesday, May 6, 2020

budgeting with a face mask

By Patrick O'Brien, JD, legal coordinator, American Med Spa Association

The U.S. Department of the Treasury has published some additional guidance on rehiring employees and loan forgiveness for borrowers of the Paycheck Protection Program (PPP). In what has become almost a daily occurrence, the FAQ on the Treasury's website is updated with additional answers—you can read it here. Many of the answers are to technical questions for lenders or to help clarify eligibility for larger businesses. However, several answers address core issues and uncertainties that small business owners have with this unusual lending program.

Today, I want to draw your attention to question 40. This question asks if the forgiveness of the PPP loan will be affected if the employer has attempted to rehire an employee, but the employee refuses to come back. This is a very real concern—employees may be reluctant to return due to fears or concerns about COVID-19, or because they are making more on unemployment. Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, which created the PPP, the amount of loan forgiveness is directly reduced by the ratio of employees you retain; this means that for a four-person office, for example, the forgiveness amount would be reduced by 25% if one of the people didn't come back.

The answer to question 40 provides some relief to employers in these difficult situations. It states that loan forgiveness will not be affected by that calculation if the employer follows certain steps in making the rehire offer. The offer must be made in writing and provide the employee the same salary and number of hours. The employer also must document the employees' rejection of that offer of re-employment.

The answer also highlighted two important caveats:

  1. This policy in this answer will be formalized into a rule. So, the specific steps and documentation needed to qualify for this may be different from the language used in the FAQ.
  2. In most states, if the employee rejects an offer of re-employment, they may forfeit their right to unemployment compensation.

Everything with the COVID-19 pandemic has been evolving extremely rapidly, and the PPP and other relief measures are no different. AmSpa has gathered a number of resources to help our members through this time in our Coronavirus Resource Center, as well as put together a Re-Opening Checklist and Toolkit. We are also offering a Live Online Cadaver Training this Thursday (registration here) to help expand your skills as you prepare to re-open.

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