PPP Question Answered: How Does it Work With Payroll Protection Program if I Re-Hire Laid-Off Employees?
Employment attorney, Chisa Chervenick, answers several questions about the Payroll Protection Program (PPP) and loan forgiveness.
My business was approved for a PPP loan, and we'll be putting employees back onto payroll that had been laid off. How will this work with the changes to unemployment from the CARES Act? Will employees still be eligible for unemployment if we have to lay them off again after the 8-week loan period? Will they still be able to get the extra $600 per week?
The CARES Act provides for two changes to unemployment compensation relevant to this question:
1. An additional $600 per week in unemployment compensation (in addition to the state's standard unemployment compensation rate):
The additional $600 per week only applies to unemployment claims for weeks of unemployment through 7/31, so while the Act provides "up to 4 months", the end date for the $600 will be 7/31, regardless of whether the employee becomes eligible for unemployment benefits in April or in July.
This time period will correspond with the covered period of the PPP loan, which is the 8-weeks beginning on the date the funds are disbursed by the lender
2. An additional 13 weeks of unemployment benefits eligibility above and beyond the standard 26 weeks for a total of 39 weeks of benefits eligibility. This provision remains in effect for claims filed through the end of the year. The employee will be entitled to use any weeks of benefits they didn't use during the first lay-off period if they are brought back onto payroll and then must be laid off again.
Additionally, please note that employees on payroll during the covered loan period will not be eligible for unemployment benefits during those weeks they are on payroll. If they have to be laid off again after the covered loan period ends, they will be entitled to any remaining weeks of unemployment eligibility (up to a total of 39 weeks), but only at the state's standard unemployment compensation rate beginning 8/1; the extra $600 per week ends across the board on 7/31, whether they've received those extra funds for 2 weeks or 2 months. Depending on the employee's current rate of pay, it is entirely possible that an employee will be able to make more money on unemployment during the covered period of the PPP loan.
Please contact us with any questions.