PPP Forgiveness Eligibility Update

By now you may have heard that there are several stipulations surrounding the forgiveness eligibility of the Paycheck Protection Program funds that some of you have received. This update is in reference to one such stipulation – the Full Time Equivalent staff calculation. 

Previously, it had been understood that if a business owner had to reduce staff because of Covid-19, they would have until June 30 to restore their payroll to pre-Covid levels. Otherwise, their PPP forgiveness amount would be reduced by the percentage of workforce reduction. For example, if you had 10 full time employees, laid off 4 due to Covid and were unable to restore your full time staff back to 10 by June 30, only 60% of your PPP funds would be eligible to be forgiven. 

New information released by the Treasury Department last week has now added some clarity to that calculation. Namely, if the business owner offers laid-off employees their jobs back and they refuse to be rehired, the borrower will not be penalized on the forgiveness portion of PPP. To be eligible for this exemption, the employer must offer the employee the same job they had before the lay-off at the same pay rate and the offer must be made in writing.  The employee’s refusal must be documented. 

An employee may choose to reject a rehire offer. However, rejection of a job offer can disqualify the employee for unemployment and they may be required to repay the state for unemployment collected after a job was offered. Each situation is different and the employee should carefully examine their options before rejecting a rehire offer.  

We will continue to keep you posted on any new guidance from the Treasury Department concerning PPP Funds.