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Some Reluctant to Return to Work: The Impact on Your PPP Loan

As New York begins to ease stay at home orders, businesses that shut down to minimize the spread of COVID-19 are starting to reopen. But as some employers are finding out, not every employee is ready to get back to work. Companies that took out loans under the Paycheck Protection Program (PPP) are worried that their staffs reluctancy to return to work will put their PPP loans in jeopardy of having to be paid back. (Loans under the PPP are only forgivable if employers rehire the same number of full-time employees they used to calculate their PPP loan amount in the first place.) At the same time, employees who are turning down call-backs from their employers are worried they will no longer be able to collect unemployment benefits, made significantly richer under the CARES Act coronavirus stimulus bill. The New York Times estimates workers in more than half of states are receiving more in unemployment benefits than they did from their normal salaries. Here's what the Small Business Administration (SBA) and the Department of Labor (DOL) are doing to address this.


Acknowledging that some employees may not wish to return to work, either because of coronavirus concerns or because they are collecting more while on unemployment, the SBA recently issued new guidance. This guidance states that businesses will not face penalties so long as they "make a good faith" efforts to rehire employees. They must also explain to employees that they may lose their unemployment eligibility by not returning to work. The SBA is also encouraging employers to carefully document any communication with employees, in case they refuse to return to work, the evidence of which will be needed when requesting PPP loan forgiveness. 

The specific language is as follows; "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 reemployment may forfeit eligibility for continued unemployment compensation."


The Pandemic Unemployment Assistance (PUA) program, part of the CARES Act, dramatically expanded the scope of workers who can receive unemployment benefits, including people who are unable or unavailable to work because of certain health or economic consequences of the pandemic, even if their workplace is open. Nevertheless, the PUA does not allow an employee to remain on unemployment simply because those benefits temporarily pay them more than what they'd earn after returning to work. And as the DOL additionally makes clear, a general fear of exposure to the virus also isn't enough for an employee to refuse employment or quit a job. STAY TUNED

The entire country is in uncharted territory. It's possible more guidance will roll out as more businesses reopen and more workers are called back.

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