As many states are issuing reopening orders and Phase 2 conditions for businesses and public establishments, employers are ready to return their employees back into the workplace. Some employees are simply reestablishing their physical presence in the office, where others are returning from a temporary layoff or shut down.

This should be good news for many, but unfortunately for some small businesses such as retailers or restaurants, employers are finding that some employees are refusing to return to work. Say what?

Yes, it’s true! For some, it’s simply for the sheer fact that under the new CARES Act signed into law in late March, employees are making more income by not working and remaining on unemployment then they did while working.

This has caused quite the problem for employers, who under the original PPP, are required to remain at the same headcount and staffing levels as prior to the layoffs or they forfeit the loan forgiveness. However, under a new interim final rule from the Small Business Administration (SBA) PPP borrowers who originally could have up to 8 weeks of payroll expenses, as of June 5th, this has been extended to 24 weeks, offering employers more flexibility when using PPP funds and applying for loan forgiveness. Additionally, employers now have until Dec. 31, rather than June 30, to rehire certain laid-off workers if they are seeking loan forgiveness.

The new interim rule addresses the issue many employers are facing who originally laid people off with the expectation that they could have loan forgiveness if they maintain headcount, and rehired those workers. But what if the laid off employees decline the offer and don’t want to return to work?

The interim final rule adjusts the penalties for employers if they face this scenario in offering to rehire their employees but the employee refuses. This seems to be happening in many companies across the U.S. because laid off employees may be receiving unemployment benefits covered by the CARES Act, which gives them more money than what they would make while working.

What Should a Small Business Do?

According to the SBA, here are 5 Steps an employer must meet in order to avoid having their loan forgiveness reduced should they not meet the headcount and staffing requirements.

  1. Clearly present an offer letter in writing to the laid-off worker.
  2. Offer the same salary, wages and number of hours the employee had prior to the layoff.
  3. Receive a rejection of the offer.
  4. Document the offer and the rejection.
  5. Notify the state unemployment office within 30 days of the date the offer is refused.

Must the Refusal to Return to Work be in writing?

The documentation provision is required of the employer, not necessarily the employee.  The offer for reinstatement can be sent via e-mail or written letter, but the rejection must be documented even if it is received by phone call or text. Employers are required to maintain detailed records on the rehiring-rejection process, and all documentation should be kept in a loan forgiveness file.

PPP Flexibility Act Passed June 4th:

Loan forgiveness is an important consideration for those small business owners who received a PPP loan. Originally, the coverage period was set at 8 weeks, but new changes have provided greater time durations.

The final bill includes the following changes:

  • Increasing the PPP loan forgiveness coverage period from 8 weeks to 24 weeks.
  • Deferring payroll tax for PPP loan borrowers through Dec. 31, 2020. 50% of the deferred amount will be due Dec. 31, 2021, and the other 50% of the deferred amount will be due Dec. 31, 2022.
  • Deferring PPP loan repayment for 10 months instead of 6 months.
  • Allowing borrowers to use 40% of PPP funds to pay for non-payroll expenses as opposed to only 25% and still be eligible for full forgiveness.
  • Extending the rehiring deadline to offset the effect of enhanced Unemployment Insurance beyond June 30, 2020. This accounts for those businesses who have employees making more on unemployment and are facing a harder time rehiring staff as a result.

For more information on required documentation, preparing your staff for reopening your business, or implementing a Return to Work program, please contact JB Consulting Systems where we can help support your business during these difficult times.