Paycheck Protection Program Loan Forgiveness: Mandatory OSHA Compliance
- The U.S. Small Business Administration, which administers Paycheck Protection Program (PPP) loans and the forgiveness of those loans, issued an interim final rule last month, which addresses PPP loan forgiveness requirements.
- The interim rule does not address a buried provision in the PPP borrower application form, which requires applicants to certify compliance with Occupational Safety and Health Administration (OSHA) standards and regulations for the life of the PPP loan.
- PPP borrowers should be diligent in their compliance with OSHA's standards and requirements to ensure that PPP loans are waived.
- This Holland & Knight alert addresses the key considerations for employers seeking forgiveness of PPP loans.
Employers are potentially eligible for a new round of Paycheck Protection Program (PPP) loans through the U.S. Small Business Administration (SBA). The SBA PPP loan application requires borrowers to certify that they are, to the best of their knowledge, "in compliance with the applicable OSHA requirements, and will remain in compliance during the life of the [PPP] loan."
While not explicit, this language suggests that failure to abide by the Occupational Safety and Health Act (OSH Act) requirements could impact the borrower's eligibility for loan forgiveness. On Feb. 5, 2021, the SBA issued an interim final rule regarding loan forgiveness requirements. While there is no indication at the present time that the SBA will independently investigate compliance with Occupational Safety and Health Administration (OSHA) regulations, the SBA may look to OSHA's investigative findings and/or citations to identify employers who have not been compliant. This Holland & Knight alert addresses key considerations for employers to consider concerning OSHA compliance in the context of PPP loan forgiveness.
Overview of OSHA Citations
Citations from OSHA are classified as willful, repeat, serious, other-than-serious and other. Willful violations are defined as violations in which the employer either knowingly failed to comply with a legal requirement or acted with plain indifference to employee safety. Willful violations are the most severe and carry the heaviest penalties and greatest liability exposure, including potential for individual liability. By contrast, other-than-serious citations, the least serious citation issued by OSHA, are typically issued for administrative or recordkeeping violations. Even though other-than-serious citations do not result in the highest of the monetary penalties, such administrative and recordkeeping requirements nevertheless fall within the scope of the PPP application's certification of OSHA compliance.
As discussed further below, employers should be aware of OSHA's citations and how they relate to COVID-19. Even though OSHA has not codified a COVID-19-specific OSHA standard, it has still issued citations to employers for failure to meet OSHA standards relating to personal protective equipment (PPE) availability, training and use, as well as general workplace safety protocols to address COVID-19.
Under the plain language of the application certification, which requires compliance "to the best of the [employer's] knowledge" the most obvious risk area for employers is if OSHA determines that an employer engaged in willful violations of its policies. A willful violation is one that, by definition, contradicts the required PPP loan attestation. Willful violations could arise in a variety of circumstances. For example, if an unsafe and unhealthy workplace condition is brought to the attention of the employer by OSHA, an employee or worker, and the employer deliberately or intentionally ignores that unsafe and unhealthy workplace condition then the employer may be cited for a willful violation. Such unsafe and unhealthy workplace conditions should always be promptly corrected or remediated when brought to the attention of the employer. Now, employers may run afoul of the PPP certification if they do not.
Likewise, employers cited for a repeat offense during the life of a PPP loan would be at increased risk for SBA rejection of their loan forgiveness application. OSHA may issue a repeat violations when an employer is cited for "the same" or a "substantially similar condition" as the previous violation. Importantly, when considering whether a repeat citation is warranted, OSHA has a five-year look back period and in some cases longer, according to certain courts. Consequently, if an employer has a previous citation on its record from OSHA, and receives a citation for a "substantially similar" condition during the life of the PPP loan, the employer's eligibility for loan forgiveness may be in jeopardy. Employers would be wise to review their previous OSHA citations, if any, and ensure that repeat violations do not occur.
As explained in previous Holland & Knight alerts, OSHA has issued substantial guidance for employers to address COVID-19 concerns in the workplace. Failure to implement recommended safety protocols per OSHA guidance exposes employers to OSHA findings based on violations of the General Duty Clause. Therefore, if an employer has no processes in place for social distancing, workplace sanitization and cleaning, respiratory PPE and related training, other personal protective equipment, COVID-19 written policies and procedures, for example, and it receives a violation from OSHA for those health and safety violations during the life of the PPP loan, then the employer's ability to obtain loan forgiveness from the SBA may be impacted and possibly denied.
Employers should continue to monitor SBA guidance as well as the guidance from OSHA. For more information or assistance on this topic or with any other COVID-19 matters specific to your organization, please contact the authors or other members of Holland & Knight's OSHA, Workplace Safety and Whistleblower Claims Team.
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.