SBA Issues PPP Guidance on Laid-off Employees Who Refuse to be Rehired

May 5, 2020

The Small Business Administration (SBA) recently issued guidance stating businesses that received Paycheck Protection Program (PPP) loans can exclude laid-off employees from loan forgiveness reduction calculations if the employee turns down a written offer to be rehired for the same salary/wages and number of hours as before.

The guidance was added to the IRS’s PPP frequently asked questions document and states the interim final rule will specify a borrower may exclude an employee from loan forgiveness calculations if the borrower made a good-faith, written offer of rehire and documented the employee's rejection of the offer.

The newly updated FAQs also state employees could be banned from receiving unemployment benefits if they turn down an offer to be rehired.

The FAQs also address (1) whether seasonal employers must make all the required certifications on the Borrower Application Form if they elect to use an alternative 12-week base period as allowed under the interim final rule issued April 27 and (2) whether not-for-profit hospitals exempt from taxation under Sec. 115 of the Internal Revenue Code qualify as "nonprofit organizations" under Section 1102 of the CARES Act.