Attempting to hire your laid off employees and pay them with PPP funds is becoming a disaster in the small business world right now.
Here is the latest information and interpretation about loan forgiveness regarding workers returning to work or refusing to return to work, including examples.
To our clients and friends,
We remain hopeful that your families and friends are safe and healthy! Today’s news is about unemployment compensation and deals with both employers and employees.
What if some refuse to return?
The SBA released new guidance on loan forgiveness through its FAQ page just before 3:00 PM EDT Sunday, 3 May. For employers, the main clarification deals with rehiring laid-off workers. The SBA said if a worker refuses to return to work after a written offer of employment at the old pay rate and number of hours, the worker will be excluded from the employer’s FTE calculation when computing the amount of loan forgiveness. How excluding the worker will appear in the calculation is unclear, but if the hours are not in the base or the offered hours are included in the PPP hours, the answer will be the same.
How it might work if they do — or if they don’t
The following example illustrates our interpretation of this new provision.
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Employer A, who is in an essential business, has 6 FTEEs (all full-time) in one of the calculation periods (15 February – 30 June 2019 or 1 January – 29 February 2020.) Due to lack of work A lays off two employees. On 4 May, A decides that the two employees can work at their usual jobs. Employee 1 accepts the offer, while employee 2 stays on unemployment. In this case, employee 2’s refusal to return would not count against the employer. Either the base number of 6 FYEEs would be reduced to 5; or the hours offered to employee 2 but not accepted would be included in the FTEE calculation for forgiveness. Both methods would help A qualify for full forgiveness, but we don’t know how the SBA or the banks will want to see the presentation.
Looking at the same example from the employees’ perspective, employee 1 would notify unemployment that she went back to work and that would be the end of it. If employee 2 were concerned about the health risk of going back to work, he could work with employer A to determine his level of risk. This web page is a tool developed by the PA Department of Labor (PA DOL) to help assess each employee’s risk of contracting COVID-19.
If, after assessing the risk, the employer still needs the employee but the employee refuses without a good reason, the employer should report the employee to PA DOL using the new form UC-1921. On the other hand, in his press conference on 20 April Governor Wolf said that “fear for his or her life” is a “good cause” for an employee to refuse work.
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We hope this puts the unemployment compensation situation in better focus for you. Please feel free to call if you develop any questions, as we try very hard to stay up-to-the minute and things are changing quickly — 610-770-9236 or info@wernercpa.net.
Stay safe,
All of us at Werner & Co.
