As has been widely reported, some employees are refusing to be re-hired because they make more money from unemployment.  Technically, refusing to accept work should disqualify these individuals from unemployment benefits.  Nevertheless, this has not stopped many employees from refusing re-hire offers.  This presents a problem for employers who have received their PPP money and are worried this will affect the forgiveness of their PPP loan.

On May 3^rd, the Treasury Department issued guidance suggesting that so long as a good-faith, written offer to re-hire has been made by the employer and rejected by the employee, the rejected employee will be excluded from the forgiveness reduction calculation.  In other words, this scenario will not reduce PPP loan forgiveness.  Interestingly, the FAQ does not say anything about the employer being required to seek a replacement for the employee who has refused to be re-hired.   The full question and answer from the FAQ is listed below:

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.