David N. McCullough CPA PC

Financial, Tax, and Family Office Services

PPP Guidance- What if a laid-off employee refuses to come back to work?

The SBA has issued clarification on this issue.

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

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 employers – protect yourself by sending the recall notice by mail, email or text to the individual, and get their response back in written form.

Employees – note the last sentence of the SBA’s guidance.

The full FAQs (as of May 3, 2020) are found here.

Scroll to Top