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August 09, 2020

Treasury Updates FAQs: Will Forgiveness be Reduced if Laid Off Employee Declines to Return to Work?

The US Department of the Treasury continues to update its FAQs giving guidance to businesses and lenders alike. On Sunday, May 3rd, the Department added Q&A #40 to address whether forgiveness will be reduced if an employee is asked to return to work, but declines the employer’s offer. 

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.

Note that the Answer indicates that an employer’s forgiveness will not be reduced if the employer made a good faith, written offer of rehire and the employer documents the employee’s rejection.  Dealers should review their rehire procedures to ensure that they have evidence of a written offer of rehire, at least for those employees who choose not to return to work.  A notice provided to employees should include the following:

  1. The date the employee is expected to return to work;
  2. The employee should not return to work if the employee has COVID-19 or is suspected of having or has been exposed to COVID-19 until they either meet CDC guidelines for returning to work or have tested negative for COVID-19;
  3. A statement regarding the steps you are taking to address health and safety concerns.
  4. Failure to return to work may detrimentally affect the employee’s ability to receive unemployment compensation benefits and may also affect the employee’s future employment status.
  5. A contact person to notify if the employee has any questions or is unable to return to work.

For more information, visit the US Department of Treasury’s website:  HERE