Can I pay my employees under the Paycheck Protection Program (PPP) while they are also collecting Unemployment Insurance (UI)?
Possibly, depending on the amount that the employee receives from you and other sources. A worker must report any wages earned during a week to the Department of Unemployment Assistance (DUA), which may or may not affect their eligibility for benefits. If the amount of such wages or other income exceeds 1.3 times the weekly unemployment benefit amount, the employee will not receive any UI benefits for that week. Employees may qualify for partial UI benefits depending on total income received in a given week.
Bear in mind, however, that if you pay an employee less than 60% of the wages or salary that you paid the employee during the most recent full quarter in which the employee was employed before you received the PPP loan, your loan forgiveness amount may be reduced.
My business just received a PPP loan. Some of my employees are refusing to return to work. Is it legal for my employees to continue to collect unemployment when I have offered them their jobs back?
Under current law, employees that demonstrate that they left work due to “urgent, compelling, and necessitous circumstances” are eligible for unemployment insurance (UI) benefits. Such determinations are driven by the facts of the individual case. If circumstances have not changed for the employee, such as lack of childcare or being at high-risk for severe complications from COVID-19, they likely remain eligible for pandemic unemployment assistance benefits. If there is not a scenario under the CARES Act that affects an employee’s ability to return to work and an employee rejects an offer of suitable reemployment, the employee may find him/herself ineligible to continue receiving unemployment benefits. Employers are urged to discuss this with employees so they fully understand the risks of refusing reemployment.
Is my PPP loan forgiveness amount reduced if employees refuse my offer to rehire them?
Reductions in headcount of full-time equivalent employees and reductions in the salary or wages of an employee may result in a reduction in the amount of loan forgiveness. However, in its rules concerning PPP loan forgiveness, the US Small Business Administration (SBA) has confirmed it will exclude laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the loan forgiveness reduction calculation. All rehire offers must be made in good faith, in writing. Additionally, any employee’s rejection of a re-hire offer must be documented by the PPP loan borrower. This written documentation is a requirement for exempting such lay-offs (or salary or wage reductions) from the loan forgiveness calculation.
If I am paying my employees with PPP funds, do they have to perform work?
Employees do not have to perform work if they are being paid with PPP funds. However, an employer can require an employee to work—even if the tasks are different from what an employee usually does. Bear in mind that even for an essential service business, an employee with a qualifying scenario under the CARES Act can refuse the work and may be eligible to collect UI. All businesses must abide by the Governor’s four-phased reopening plan which permits certain industries to resume business operations and only if they meet mandatory workplace safety standards.
I just received a PPP loan, but my business is closed because of the Governor’s phased approach to reopening. Can I wait to spend my PPP loan until my business is allowed to resume operations?
You can wait, but the amount of your PPP loan that is eligible for loan forgiveness may be reduced. That is because the amount of loan forgiveness depends in part on the total amount of the loan proceeds that is spent on certain allowable uses during a 24-week period (or by December 31, 2020, whichever is earlier). That 24-week period generally begins on the date you received your PPP loan proceeds.
Importantly, 60% of the PPP loan must be used for certain payroll costs.
Please check this website frequently to ensure you have the most up-to-date guidelines as issued by the SBA on allowable uses of PPP loan proceeds and loan forgiveness.
A copy of the SBA’s loan forgiveness application and instructions can be found here. The application and instructions explain -
- Which uses of the loan proceeds are eligible for loan forgiveness;
- How to determine the first and last day of the 24-week loan forgiveness period;
- How to calculate the loan forgiveness amount. (For example, non-payroll costs that are eligible for loan forgiveness must be paid during the 24-week period or incurred during that period and paid on or before the next billing date, even if that next billing date is after the 24-week period. Similarly, eligible payroll costs must be paid during the 24-week period or they must be incurred during the 24-week period and paid on or before the next regular payroll date);
- How to calculate any reduction in the loan forgiveness amount due to certain reductions in employee headcount and/or certain reductions in employee compensation; and
- Which documents must be submitted with your application to prove the amount of your loan proceeds that was used for eligible uses during the 24-week period.
Under the Governor’s phased reopening, my business is eligible to resume operations, but I do not feel that it is safe yet to do so. Will I lose PPP loan forgiveness eligibility if I choose not to reopen?
PPP loan forgiveness eligibility does not depend on when you reopen. Instead, the amount of loan forgiveness depends, in part, on the total amount of loan proceeds spent on certain eligible uses during an 24-week period (or by December 31, 2020, whichever is earlier). The first day of that 24-week period is the date on which you first received your PPP loan proceeds.
For example, if you received your PPP loan proceeds on Monday, July 6, 2020, then that would be the first day of your 24-week period. The last day would be Sunday, December 20, 2020. Therefore, you would still be eligible for loan forgiveness for amounts paid for certain eligible uses between July 6 and December 20, even in the unlikely event you remained closed until a later date.
There is one exception to the 24-week period’s start date. If you have a biweekly or more frequent payroll schedule, you have the option to choose an alternative start date. The alternative start date is the first day of your first pay period following the date on which you received your PPP loan proceeds. But that alternative start date for the 24-week period applies only to certain payroll costs. The 24-week period for non-payroll costs that are eligible for loan forgiveness still begins on the first date on which you received your PPP loan proceeds.
For more details on the requirements for loan forgiveness, see the SBA’s loan forgiveness application and instructions.