*Co-Written by Jean Novak and John Kelly
Under the CARES Act Paycheck Protection Program (PPP) loan program, employers are encouraged to hire back employees and restore pay to February 15, 2020 levels. If the employer meets the various tests set by the program, then the employer is able to have the entire balance of the PPP loan forgiven. More specifically, to receive loan forgiveness, the employer is required to spend 75% of the amount borrowed on payroll costs and the remaining 25% on rent, mortgage interest, and utilities in the eight weeks after the PPP loan is received. In addition, the employer is supposed to hire back an equivalent number of fulltime employees and restore wages and salaries to February 15 levels by June 30, 2020. There is no requirement that the borrower rehire the same employees; restoring the number of full-time equivalent (“FTE”) employees is sufficient. If the employer fails to hire back 100% FTE workers or fails to restore 75% of wages, or fails to meet other tests, then a portion of the PPP loan will not be forgiven and will have to be paid back.
One concern of many employers is that the level of unemployment benefits paid to laid off workers is so high (the CARES Act offers laid off workers an additional weekly benefit of $600 per week through July 25) that many workers may prefer receiving unemployment benefits to receiving wages for actual work. If former employees do not return to work, then the employer may not be able meet the June 30 deadline date for restoring employment and not have a portion of the PPP loan forgiven.
PPP Loan Forgiveness – US Treasury Guidance (Q/A 40 – May 3, 2020)
Under the Treasury guidance, an employer may exclude workers from the June 30 count because the employee refused the offer to be rehired, so long as:
Effect of an Offer to Rehire on PA Unemployment Benefits
Every PA employer may, within seven days of the worker’s refusal of an offer to rehire, inform the PA Office of Unemployment of the refusal using a Form UC-1921W. If the department determines the that the worker’s refusal was not for a “necessitous and compelling reason” the department may terminate unemployment benefits for the worker. Determinations are made on a case-by-case basis. It is important to note that acceptance of part-time employment does not automatically terminate employment benefits. Employees may be eligible for partial unemployment benefits. Under PA law the receipt of compensation for part-time work does not eliminate employment benefits, until the part-time earnings exceed 130 percent of the weekly unemployment benefits. Should you need additional guidance on unemployment benefits, please contact Jean Novak of our office (direct dial – (412) 227-0272, or by e-mail firstname.lastname@example.org)