Two common questions I am seeing about the Paycheck Protection Program (PPP) component of the CARES Act, is when must it be used and what if employees refuse to return?
Use PPP Upon Receipt – Refusal to Return May Make Employees Ineligible for Unemployment Compensation Benefits
The answer to the first question is that you are supposed to start using the money upon receipt.
The answer to the second question is, if an employee refuses to return, your efforts to bring them back should satisfy the SBA. Employees who refuse to return may have forfeited their right to unemployment benefits.
Given this situation, it would be very wise for employers to follow up with employees in writing when they tell them it is time to return to work. This provides support for the notion that you offered the job back. This is important because you need to be able to show SBA that you tried to use the PPP money properly. It is important to get the rejection in writing as well, so you can prove the employee refused to return.
What are Employees Supposed to Do?
I understand that in some cases employees may be making more money through unemployment than their work due to the additional $600 right now. Also, employees may be concerned about returning to work due to risks of COVID-19. However, this is the reality of how unemployment normally works. When an employee is told they can return to work but will not do so, they are considered to have quit their job. People on unemployment, because they were laid off, are normally required to return to work as long as the job is similar enough.
There may, and I stress may be a change in guidance as far as this issue is concerned. Employees could develop the right to refuse to return to work at some point. Currently, there is no certain answer to this issue. So, stay tuned to the SBA for more information as time passes. Employers and employees should speak to an employment lawyer if they have specific questions.
Information from the SBA
If you are wondering where I took the information to provide the above, were it is directly from the SBA on the issue of using PPP and the right to unemployment benefits:
Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, 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 re-employment may forfeit eligibility for continued unemployment compensation. (Emphasis mine).
Try to Communicate with Each Other
These are difficult times for everyone. Employers and employees may not be on the same page as far as when it is time to return to work. However, both groups need to understand that employers are trying to keep their businesses running, and employees are trying to pay their bills and keep themselves and their loved ones safe. It is critical for both to communicate with each other during this pandemic.
Please Check With Your Lawyer
It is important to understand that the SBA is frequently adjusting its guidance right now. As a result, policies could change at any time. This is why it is important to stay in touch with an attorney who is on top of the CARES Act and unemployment law in your jurisdiction.