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New Guidance on Laid-Off Employees

Employees Refusing to Return to Work - COVID-19

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

Businesses that received Paycheck Protection Program (PPP) loans can exclude laid-off employees from loan forgiveness reduction calculations if the employees turn down a written offer to be rehired, according to new guidance from the U.S. Small Business Administration (SBA), which warned that employees who reject offers of reemployment may find themselves ineligible to continue receiving unemployment benefits.


RBSK Payroll understands these changes to mean that:

  1. Employees are receiving an extra $600/week under the CARES Act. For many employees, this extra $600 means they're making more on unemployment than if they returned to work, so they may not want to go back to work for less money.
  2. Employees who refuse to be rehired risk losing their unemployment compensation. 
  3. Businesses can exclude laid-off employees from the loan forgiveness reduction calculation if the employee refuses to be rehired.

Turning Down Offers to Return to Work COVID-19Some employees have turned down offers to be rehired for the same jobs for a variety of reasons, one of them being that they are making more money in unemployment benefits than they do in pay at their jobs because the CARES Act temporarily provides an additional $600 per week to people who have been approved by their state for unemployment insurance. 


FAQ About PPP LoanThe guidance was included in the SBA's frequently asked questions (FAQs) about PPP it maintains with Treasury you can find by clicking here. The new guidance is included in FAQs 40–42. The new questions asks if a borrower's PPP forgiveness amount would be reduced if the borrower lays off an employee and then offers to rehire the employee, but the employee declines the offer. The new FAQ further warns that employees could be banned from receiving unemployment benefits if they turn down a reemployment offer.


"Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation," according to the guidance, which did not provide specifics on how that process might work. RBSK Partners PC will provide additional guidance as it becomes available.


SBA and Treasury to Introduce New Bill COVID-19SBA and Treasury plan to issue a new rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the loan forgiveness reduction calculation spelled out in the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which authorized Treasury to create the PPP through the SBA's lending system.


Interim Final Rule PPP LoanThe interim final rule will specify that a borrower may exclude an employee from loan forgiveness calculations if the borrower made a good-faith, written offer of rehire and also documented the employee's rejection of that offer. The guidance does not specify what form that documentation should take, but RBSK Partners PC will provide additional guidance once it becomes available. 


Possible Changes for PPP Recipients

The PPP was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). An eligible recipient of a covered loan can receive forgiveness of indebtedness on the loan in an amount equal to the sum of payments made for the following expenses during the eight-week covered period beginning on the covered loan’s origination date:

  1. Payroll costs,
  2. Any payment of interest on any covered mortgage obligation,
  3. Any payment on any covered rent obligation,
  4. Any covered utility payment. 

New legislation introduced in the Senate on Tuesday, May 5 would overrule an IRS notice and clarify that ordinary expenses funded by Paycheck Protection Program (PPP) loans are deductible by taxpayers. The bill is currently in the Senate Finance Committee and is supported by the AICPA. RBSK will provide additional information as it becomes available.


This information has been provided by The Journal of Accountancy and has been used with their permission. 

For more information visit our COVID-19 Guidance Center.

Where to Find Info About COVID-19Tips of where to get your information about the virus
Centers for Disease Control and Prevention
Indiana State Department of Health News
World Health Organization

Where to find local updates about the virus
Decatur County Health Department Facebook Page
Bartholomew County Health Department Facebook Page
Ripley County Health Department Facebook Page
Franklin County Health Department Facebook Page
North Vernon Plain Dealer & Sun Homepage

We are committed to serving clients with care, and we are confident we are taking precautionary measures to promote the health and safety of our staff and clients. We know that this is a stressful time for everyone, and we hope that you, your family and our community stay safe.

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Please call us at 812-222-1559 if you have any questions

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