SBA / Treasury FAQ – 40. Will a borrower’s PPP loan forgiveness amount...be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Compliance > CARES Act
Q:   Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act (codified as section 7A of the Small Business 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?
 
A:  No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act (codified as section 7A(d)(6) of the Small Business Act) to prescribe regulations granting de minimis exemptions from the CARES Act’s limits on loan forgiveness, SBA and Treasury issued 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 specifies 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.
 
 

This Q&A was based on information contained in the Treasury Department’s March 12, 2021, version of “Paycheck Protection Program Loans, Frequently Asked Questions,” which is updated from time to time.  This CARES Act / SBA / PPP related issuance may be found here:  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

 

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