A waitress clears a table at a restaurant.
Unsplash/Louis Hansel

It's likely welcomed news for many operators.

New PPP Guidance: Restaurants Won’t be Penalized if Employees Reject Job Offer

The National Restaurant Association has pushed for this change.

The National Restaurant Association has continued to urge officials to adjust guidance on Paycheck Payment Program loan forgiveness provisions. One of its requests came to fruition Monday.

Now, employers will not be penalized with reduced PPP loan forgiveness if a worker rejects an offer to return to their job—a significant concern for operators given the reality many employees are making far more money on unemployment.

READ MORE: The challenge to rehire employees begins

Here’s the Treasury guidance issues on May 3:

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) 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.

The Association has brought this up in late April, saying, “employee retention levels will be a continued challenge for restaurants, as many have changed their business model to accommodate off-premises and online ordering, decreasing the need for servers and other workers. Additionally, sustained social distancing protocols will alter restaurant operations, which will reduce revenue opportunities and staffing levels. Given these economic realities and other existing programs, we suggest this express authority be used to exempt small businesses from loan forgiveness reduction if they have made good faith efforts to recruit and retain FTEs who nevertheless decline the employer’s offer during the covered period. There should be a safe harbor so that both parties can be held harmless during this time of unprecedented economic turmoil.”

In late March, the Association outlined this guidance for potential reduction of loan forgiveness. So there are a lot of moving parts, but Monday’s change is still a positive step.

“The amount forgiven of the Loan will be reduced “proportionally” by any reduction in employees retained compared to the prior year.  This needs to be a “sliding scale” rather than a strict ratio. In an industry, where recruitment and retention is the top challenge, with 100% turnover year over year, it is impossible for restaurants to maintain the precise number of 2019 FTEs during a massive economic disruption. The retention level must reflect that reality. The hiring levels also reflect the realities of hiring or rehiring during a pandemic situation where many previous FTEs may elect to care for family members or observe quarantine protocols. o Pursuant to the Exemption section (p. 49), the SBA Administrator and the Treasury Secretary may prescribe regulations granting de minimis exemptions from the requirements under this subsection. This provision offers the SBA and Treasury expansive authority on the forgiveness parameters, which must be illustrated clearly for potential borrowers.