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Will PPP loan forgiveness be reduced if the borrower offers to rehire an employee and the offer is rejected??

Posted by Megan Durst Posted on May 04 2020

In guidance issued May 3, 2020, the Treasury department posted FAQ 40 which states as follows:

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.

With this guidance, I believe the Treasury department mentioned a few things that need to be done.  

Offers to rehire employees should be done in writing - When an employer is ready to call an employee back to work, this should be done in writing either by email or formal letter.  The letter should include at a minimum the date of the rehire request, the date the employee is to start back to work, and the need to respond to the rehire request in writing.

In good faith - The employer doing the rehire request should make the request in good faith.  This likely means that rehire requests made at the last moment on the last day that rehires are allowed to be made, will not be allowed in good faith unless there is a valid business reason for doing so.

If you have any questions on this or other items related to PPP forgiveness, please see the FAQ's at or contact our office.