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Is Your Employer Abusing the Federal Paycheck Protection Program?

In April 2020 the federal government rolled out the Paycheck Protection Program a loan program providing $669 billion in low interest loans intended to provide economic relief to small businesses, not for profits, and independent contractors suffering adverse impacts from the COVID-19 pandemic. Under certain circumstances the recipients of the loans may also seek forgiveness of some or all of the loan amount, essential turning them into grants from the federal government.

In order to secure these loans, applicants are required to certify that they meet the eligibility requirements for the loan, that they would only use the loan for business-related purposes permitted by the program, that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”, and that the loan funds will be used to retain workers and other approved costs such as paying mortgages and leases. Forgiveness of the loans requires additional certifications. Applications for the loans are premised on “good faith” certifications by applicants and the program application makes clear that knowingly applying for and using loans in a manner inconsistent with the program requirements may constitute a violation of federal law and could lead to criminal prosecution, fines, and prison sentences. Therefore, for the most part the program entrusts applicants to act with honesty and good faith rather than verify the accuracy of applicants’ information in advance.

Employers who misrepresent information in order to secure a PPP loan and/or obtain forgiveness of the loan may also be engaging in fraud against the federal government in violation of the False Claims Act (“FCA”). The FCA provides the federal government with a civil remedy to recover money fraudulently obtained from the government along with substantial penalties and liquidated damages equal to twice the amount fraudulently obtained from the government.

Employees who become aware that their employer has fraudulently obtained a PPP loan or forgiveness of a PPP loan may have a basis to bring a claim under the FCA, also known as a Qui Tam claim, on behalf of the federal government. Employees who bring a FCA claim on behalf of the government are entitled to a share of the amount recovered on behalf of the government as well as other damages including reasonable attorneys fees and costs.

In addition, employees who oppose this type of fraud by their employer are protected from retaliation by their employer. Therefore, an employee who is terminated or otherwise retaliated against for opposing what they believe may be fraud against the government have recourse under the FCA and may be able to obtain reinstatement, payment of lost wages and benefits, liquidated damages, compensatory damages, and other relief.

The Employee Rights Group has successfully prosecuted claims under the FCA against employers for defrauding the government and retaliating against employees for opposing their employer’s fraud.

If you believe that your employer may have participated in the PPP program in bad faith or retaliated against you for opposing fraud, contact the Employee Rights Group to discuss your rights.