Restrictions are loosening, and, thankfully, many businesses are in a position to call previously downsized employees back to work.  In many instances, however, that’s easier said than done.  Some employees are scared to return; some aren’t able to, and some may have simply moved on.  

For businesses who have taken out PPP loans, loan forgiveness is tied to maintaining payroll numbers (among other criteria), but what happens when employees refuse to return to work?  Will those refusals be held against the employer when it comes time to seek PPP loan forgiveness?   According to guidance from the SBA and Department of the Treasury, the answer is NO, if certain conditions are met.

Last updated May 19, 2020, the US Treasury’s website contains FAQs on the administration of PPP loans.  FAQ # 40 addresses employee refusal to return to work, as follows:

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.

So, the guidance makes it clear that employees who refuse to return to work will not be counted against the employer for purposes of PPP loan forgiveness if:

• The offer to return to work was made in writing;
• The offer to return to work was for the same salary/wages/hours; and
• The employer documents the employee’s rejection of the offer.

Taking this guidance to heart, the following is a sample communication to employees which would satisfy the criteria set forth above:

Dear Employee:

I hope that you and your family are doing well, and I want to thank you for your patience as we figure out how to best resume operations safely. 

I am writing to advise that we are offering to bring you back to work under the same conditions (including pay and hours) that you worked pre-COVID.  You are invited to return to work [date and time].  I need to know whether you will accept this offer.

Please let me know in writing (email is fine) by [date and time] if you choose to accept this offer. If I do not hear from you, I will assume that you have chosen not to return.  After my review of the unemployment assistance guidance, I do want to let you know that an employee who rejects offers of re-employment may forfeit eligibility for continued unemployment compensation.  

Thank you.  I hope to see you back at work soon.

Sending communications like the one suggested above via email is satisfactory, and maybe even preferable, as emails tend to be easier to preserve than paper communication.  Whichever method of communication your business employs, consistency and preservation are key.