The CARES Act creates a conundrum with the Paycheck Protection Program (PPP) loan forgiveness incentives. Employers may find it difficult to get hourly employees to return to work following furloughs and layoffs because sometimes employees can receive more money from unemployment benefits by staying home than by working.
Massachusetts may allow benefits, even if work is affirmatively offered and refused, if the claimant has refused for "urgent, compelling and necessitous circumstances." Depending on the circumstances of the individual case, a refusal may constitute this, which could in theory affect an application for forgiveness aspect of the PPP loan.
The Small Business Administration (SBA) has addressed this issue with FAQ #40.
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) [EMPHASIS ADDED] 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.
Therefore, we would generally recommend:
Any offer of rehire be made in writing - we would recommend emailing and mailing a hard copy via USPS;
Be sure that the number of hours and rate of pay are included, as well as at least a general job description;
Include a reasonable date by which the employee must respond in writing, and what your assumption will be should they not respond; that you would consider failure to respond a voluntary resignation or refusal to accept the offer;
Be sure to notify the recipient that failure to return to work may result in being denied eligibility for continued unemployment benefits;
Follow up with your employee and document that outreach; keep an individual communication log;
If you do not receive a response from your employee, follow up in writing (as per suggested above) with a letter confirming your understanding that person has refused to return to work; it may not be bad practice to include a caveat along the lines that if this understanding is mistaken to please reach out as soon as possible.
The Department of Labor PPP FAQ page can be found here.
Please know that while we strive for relevant and accurate information, this remains a fluid and evolving situation. We aren't lawyers so please understand the information provided here does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only.