Over the past two weeks, the SBA has released further guidance and requirements regarding PPP loan forgiveness and importantly, set a new requirement in order to not have rejected offers of rehire affect borrower’s loan forgiveness.
The Loan Forgiveness Application
On May 15, 2020, the SBA released a form
PPP Loan Forgiveness Application
(the “Application”). The Application includes: (1) a PPP Loan Forgiveness Calculation Form, (2) a PPP Schedule A; (3) a PPP Schedule A Worksheet, and (4) an optional Borrower Demographic Information. Borrowers must submit the PPP Loan Forgiveness Calculation Form and PPP Schedule A to their lenders. The Application provides instructions on completing the various documents and rules regarding forgiveness, including clarification on payroll costs and non-payroll costs eligible for forgiveness.
The New Interim Final Rule
On May 22, 2020, the SBA released a new
Interim Final Rule
that provides further guidance on the Application and the process to obtain PPP loan forgiveness.
As a reminder, a borrower’s loan forgiveness amount will be reduced based on reductions in employee headcount or in their salary/wages during the covered period. Importantly, the Application and Interim Rule confirm that a borrower’s loan forgiveness will not be reduced if the borrower laid off an employee or reduced the employee’s hours, then offered to rehire that same employee or restore that same employee’s hours, but the employee declines the offer.
The Interim Rule provides that in calculating the loan forgiveness amount, borrowers may exclude any reduction in FTEs that is attributable to an individual employee if:
- The borrower made a good faith, written offer to rehire or restore reduced hours of that employee during the covered period or the alternative payroll covered period;
- The offer was for the same salary or wages and same number of hours as earned by that employee in the last pay period prior to the separation or reduction in hours;
- The offer was rejected by that employee;
- The borrower maintains records documenting the offer and its rejection; and;
- The borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer.
This is the first time we have seen any requirement that a rejected offer must be reported to the state unemployment office. The SBA is expected to provide additional information regarding how borrowers are to report information concerning rejected offers. As of June 1, 2020, the SBA has not yet provided such information.
The Paycheck Protection Program Flexibility Act of 2020
On May 29, 2020, the House of Representatives passed a bill titled “The Paycheck Protection Program Flexibility Act of 2020.” The bill contains certain important changes to the PPP, including:
- Maintaining forgiveness potential while allowing 40% of the loan to be used on non-payroll expenses;
- Expanding the forgiveness period from 8 weeks to 24 weeks while maintaining the option of using the 8 week time frame;
- Moving the rehire/restoration of wages safe-harbor date to 12/31;
- Making the loan repayable over 5 years, instead of 2;
- Making a reduction in FTE irrelevant to forgiveness if, at December 31, the borrower is able to document an inability to return to the same level of business activity as pre-crisis due to compliance with safety and health requirements.
The Senate is anticipated to take up the bill this week.
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If you have questions or would like additional information, please contact EGS’s Employment Law Practice Group Leader, Amanda M. Fugazy at
afugazy@egsllp.com
or the primary EGS attorney with whom you work.