COVID-19 AND THE CONSTRUCTION INDUSTRY

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SBA Guidance Sheds Some Light on PPP Loan Forgiveness

Before the first round of small business loan funding ran out, an incredible 1.6 million loans had been approved by the Small Business Administration (SBA). Paycheck Protection Program (PPP) loans are incredibly popular largely because 100 percent of the loan can be forgiven, so long as employers follow guidance imparted by the SBA. Unfortunately, this guidance has been anything but clear, and construction employers who took out loans weeks ago are now wondering how much of their loan will actually be forgiven. 

Below, our attorneys discuss new guidance released by the SBA that sheds some light on loan forgiveness. The SBA continues to update its PPP FAQ page, but they’ve yet to release any formal guidance. Hopefully, this article will answer some of your questions regarding your PPP loan. For further assistance with your PPP loan, consult one of our Nashville construction law lawyers. 

Rehiring Laid-Off Employees 

PPP loans are designed to cover payroll expenses incurred over an eight-week period, and with that eight-period winding down, employers wonder how exactly they’re permitted to spend that money. For instance, what happens if a laid-off employee refuses an offer to come back to work? Will the loan forgiveness amount be reduced? No, not as long as you made a “good faith, written offer of rehire” and documented the rejection. Of note, a laid-off employee who rejects an offer to return to work could forfeit eligibility for continued unemployment benefits. 

Related: 5 Tips for Navigating Your Way Through the Paycheck Protection Program

Determining Forgiveness With “Full-time Equivalent Employees” 

Another question that has employers stumped is how to determine whether or not they successfully maintained headcount. Do all employees count or just full-time employees? This is especially tricky because the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, which established the PPP, defines employees as “individuals employed on a full-time, part-time, or other basis.” However, the PPP FAQ clarifies that, for the purposes of loan forgiveness, only “full-time equivalent employees” will be considered. 

Related: Advice for Contractors About the Paycheck Protection Program

Essentially, during your eight week loan period, your full-time employee headcount must be equal to or greater than your full-time employee headcount during a pre-COVID-19 period (from January 1, 2020 through February 29, 2020, or from February 15, 2019, through June 30, 2019). If your full-time employee headcount is lower, your loan forgiveness will be reduced. 

Doing the Best You Can

Without formal guidance from the SBA, construction companies across the nation are heading into uncharted territory. Until that time, we recommend that contractors do their best to maintain headcount and abide by the guidelines set by the SBA. For assistance with your SBA loan or HR practices, including hiring practices and workplace reductions, consult an attorney with our Nashville construction law firm

If you would like to speak with a Nashville construction law lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.