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Do Employers Count Employees of Foreign Affiliates When Determining Eligibility Under the Paycheck Protection Program?

Applicants in the Small Business Administration’s (SBA) Business Loan Programs (which include the Paycheck Protection Program (PPP)) are generally subject to the affiliation rule in 13 CFR Section 121.301, subject to certain statutory waivers.  These rules provide that in determining a concern’s size, the SBA counts the employees of both the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.  Based on this language, an employer would be required to count all employees (including those of foreign affiliates) in determining whether an entity has 500 or fewer employees for the PPP.

Yet in an Interim Final Rule, the SBA has indicated that an entity generally is eligible for the PPP if it, combined with its affiliates, has 500 or fewer employees whose principal place of residence is in the United States.  This language in the Interim Final Rule directly conflicts with the way employees are counted under the affiliation rules in 13 CFR Section 121.301.

We are hoping that the SBA will provide clarifying guidance, but it appears (at least for now) that domestic entities with a foreign affiliate(s) who previously thought they did not qualify for the PPP because of being required to count foreign employees may indeed be eligible for loans under the PPP.

Jackson Lewis P.C. © 2020National Law Review, Volume X, Number 95

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About this Author

Melissa Ostrower, Employee Benefits Attorney, Jackson Lewis Law Firm, qualified retirement plans
Principal

Melissa Ostrower is a Principal in the New York City, New York, office of Jackson Lewis P.C. She counsels clients in a broad range of employee benefit matters, including general compliance and administration of qualified retirement plans and nonqualified retirement plans.

Ms. Ostrower assists clients with welfare plan issues involving cafeteria plans, health plans, flexible spending accounts, COBRA and the Affordable Care Act. She regularly speaks on all benefits issues including federal health care reform, fiduciary...

(212) 545-4000
Robert R. Perry, Jackson Lewis P.C., labor, employment, benefits, lawyer
Principal

Robert R. Perry is a Principal in the New York City, New York, office of Jackson Lewis P.C. He has more than 20 years of experience in the area of employee benefits law.

Mr. Perry’s practice includes counseling clients on all aspects of employee benefits and executive compensation. Mr. Perry also advocates on behalf of clients in benefits-related disputes, as well as in administrative proceedings before the Internal Revenue Service, the United States Department of Labor and the Pension Benefit Guaranty Corporation.

212-545-4000