How Employees Who Choose Not to Return to Work During COVID-19 Affect PPP Loans

The World Floor Covering Association (WFCA) is offering guidance on employees who choose not to return to work during the COVID-19 pandemic and how they can impact the amount of Paycheck Protection Program loan that is forgiven. In order to maximize the amount of loan forgiveness, 75% of a business’s PPP loan must be used on payroll costs. Furthermore, each employee’s pay during the eight weeks must not be reduced by more than 25% of the employee’s regular pay; and the average number of full-time employee equivalents paid during the eight weeks must be the same average number of full-time employee equivalents paid between Feb. 15–June 30, 2019, or Jan. 1–Feb. 29, 2020.

However, new guidance issued by the Small Business Administration (SBA) allows businesses to exclude “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,” according to WFCA. To do so, employers must make “a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented.” Documentation can take the form of an email, and WFCA notes that businesses should be sure to include both the written offer to return to work and the employee’s rejection of the offer in the application for PPP loan forgiveness.

There is still uncertainty regarding exactly how the exclusion will be applied, according to WFCA.