Business owners who found themselves the recipient of the PPP loan funds, but with their businesses still mandated closed, can breathe a bit of a sigh of relief as the PPP program was amended and borrowers now have 24 weeks, not 8, to use the funds and seek forgiveness. The Paycheck Protection Program Flexibility Act of 2020, which was just signed into law by President Trump, includes several important updates to the PPP program design to help business owners maximize the use of the funds and forgiveness.
I. Covered Period Maybe Extended to 24 Weeks Following the Loan Disbursement
Under the original PPP Act, borrowers could only seek forgiveness on funds used on eligible expenses in the 8 weeks after the loan funds were disbursed. As many businesses remained closed during this 8-week period, the program, as initially designed, was not practical. In response, the program was amended, and borrowers may apply for forgiveness on any funds used in the 24 weeks after the loan funds were disbursed. Although the covered period has been extended to help maximize loan forgiveness, borrowers may elect to continue to use the 8-week period following the loan disbursement as the covered period.
II. Borrowers Are Not Penalized For Employees That Refuse to Return to Work
Under the PPP, borrower’s forgiveness is reduced in proportion to the reduction in the number of full-time employees compared to the number of full-time employees that were working in 2019. Under this new statute, borrowers are not penalized to the extent the borrower is able to document in good faith:
- (i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and
- (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
III. Borrowers Are Not Penalized if They Are Unable to Return to the Same Level of Business Activity
Borrowers will also not be penalized for the reduction in their full-time workforce, if the reduction in the workforce is due to the borrower’s:
- inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19. (emphasis added).
IV. The Proportion of Funds That Must Be Used on Payroll Expenses Reduced to 60%
Further, the amended PPP permits borrowers to use up to forty percent (40%) of the loan funds may be used on: (a) mortgage interest; (b) rent; and (c) eligible utilities, which encompasses business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. Sixty percent of the loan funds must still be expended on payroll costs to be eligible for forgiveness.
As with the initial PPP rollout, we anticipate that the Treasury Department and SBA will provide amended guidelines and rules that will help clarify these new program requirements.
The attorneys in Forchelli Deegan Terrana Employment & Labor practice group will continue to keep you updated on any changes to your requirements as an employer as updates become available. Should you have and questions, do not hesitate to contact me (GLisi@Forchellilaw.com or 516.248.1700).
Battling the novel Coronavirus is difficult for everyone. We are here if you need us. With best wishes for your, and your family’s health and safety.