Q: Our company was fortunate to receive a PPP loan but now during our ramp up for work several employees have either voluntarily quit and at least one was terminated. How does that affect our PPP payment obligations?
A: Many companies are encountering this issue when seeking forgiveness for a PPP loan. The current instructions state that there are exceptions for reducing full-time employee counts in instances where:
- the borrower made a good faith, written offer to rehire an employee during the eight-week period which was rejected by the employee; and
- employees during the eight-week period:
(a) were fired for cause
(b) voluntarily resigned
(c) voluntarily requested and received a reduction in their hours
You can include those FTEs as an exemption to repayment if the position was not filled by a new employee.
Employers should note the need for appropriate documentation. To take advantage of these exemptions, an offer should be made in writing to return or rehire an employee and preferably you should also have the employee’s refusal to return to work in writing. If the employee is only communicating by text message, save a copy of the text conversation and reaffirm that intent in a letter. In certain instances, the Department of Labor and other agencies will not accept text messages as admissible evidence, so it is always better to have a letter in hand.
