Paycheck Protection Program: SBA Will Provide Relief from Potential Reduction in Loan Forgiveness for Attempts to Rehire Employees

May 5, 2020

The SBA recently issued updates to its Frequently Asked Questions interpreting provisions of the Paycheck Protection Program. FAQ #40 addresses application of the CARES Act provisions that reduce the amount of loan forgiven based upon the number of employees retained by a borrower. 

Specifically, the FAQ provides that a borrower would not lose the benefit of loan forgiveness if a previously laid-off employee declines an offer to be rehired. The FAQ indicates that a new interim final rule will be issued providing that those former employees are to be excluded from the CARES Act loan forgiveness reduction calculation. 

The interim rule will require that the borrower make a “good faith” offer to rehire the former employee. The offer to return is required to be in writing and for the same wages or salary and the same scheduled hours as before the layoff. In addition, we advise the written offer to return outline any precautions the employer has taken for a safe return to work, provide a return to work date as well as a deadline for the employee to accept the offer, and include applicable provisions of leave available for active employees under the Families First Coronavirus Response Act (FFCRA). The written offer to return to work should not include any guarantees or promises of employment for any definite period of time that might alter the status of an otherwise at-will employee. We also recommend that the employer invite the employee to offer any concerns or objections they have in returning to the workplace. Finally, the letter could also warn the employee that their refusal to accept the good faith offer to return could result in them being ineligible for continued unemployment benefits or other consequences of their rejection of the offer to return unique to that employee or employer.     

It has now been more than a month since the SBA indicated that it would issue separate guidance concerning loan forgiveness. We are still awaiting this guidance and will provide updates as available.  

Please contact one of the attorneys listed here if you have any questions regarding the Paycheck Protection Program.

Michael S. Moore is a partner in the firm’s Labor and Employment Practice Group with an emphasis on wage-and-hour collective action employment discrimination defense. He specializes in litigation of discrimination cases, wage-hour collective actions, sexual harassment, wrongful discharge, FMLA and employee and supervisor training. 

Daniel L. Herrington is a partner in the Labor and Employment Relations Practice Group focused on representing employers in all areas of labor and employment law, including ADA, FMLA, Wage and Hour, Title VII, OSHA and NLRA. 

Robert T. Smith heads the Finance and Commercial Transactions Practice Group.His diverse corporate practice focuses on representing companies and financial institutions in general business, transactional, securities and regulatory matters. 

H. Wayne Young is a partner with the firm and a member of the Labor and Employment Law Practice Group. His practice focuses on employment and labor law including discrimination matters, harassment, wage and hour compliance, family and medical leave and covenants not to compete. 

Katherine C. Campbell is an associate in the Litigation Practice Group at Friday, Eldredge & Clark. She serves as litigation counsel for individuals and businesses in complex business and commercial disputes.