Union Leaders Oppose Small Business Loan Program Changes They Say Could Keep Workers off Payrolls

Union leaders are not happy with some of the changes being proposed by the House of Representatives to the Paycheck Protection Program.

In a letter sent Wednesday to Democratic leaders Nancy Pelosi and Chuck Schumer, more than a dozen labor unions argued that measures being considered in a standalone bill would do the opposite of what the small business loan program was created to do: keep employees on the payroll.

"Originally designed to keep people working by protecting their paychecks and continuation of benefits, the proposed industry-backed changes would make a mockery of that goal," the letter read. The document was first reported by Politico.

The union leaders added that the proposal "moves us in the wrong direction" and would create a "disincentive for employers to retain or rehire workers."

The bipartisan bill, which the House is expected to hold a vote for on Thursday, would scrap a restriction on how small businesses could use the loan money. Under the current rules, businesses can't use more than 25 percent of the money on expenses. The other 75 percent must be used on payroll if businesses want the full amount of the loan to be forgiven. Pelosi told reporters last week that the 75-25 rule was "debilitating."

"We're concerned about the lack of transparency and how the administration is carrying some of this out. And we saw a quick fix on how we could make this work better. We couldn't ignore that," she added during her weekly press conference.

Newsweek reached out to Schumer and Pelosi's offices about the union opposition to the proposal, but neither responded before publication.

The House legislation would also extend the loan forgiveness window in which businesses must use the funds from eight weeks to 24 weeks. It would also allow businesses to repay loans over five years instead of two.

"What we think is there is a general consensus—both House and the Senate—that the time frame that was set was too short, unfortunately," House Majority whip Steny Hoyer (D-Md.) told reporters on Monday.

The Senate tried to beat the House on making revisions to the Paycheck Protection Program. Last Thursday, lawmakers tried to rush a vote that would have doubled the time frame for businesses to spend loans. Their version of the bill also would have allowed businesses to use the funding for items other than payroll and rent, but the extension was limited mostly to personal protective equipment for employees and other investments needed to reopen safely.

Senator Susan Collins (R-Maine) said their version of the bill "builds on the success of the PPP by providing small businesses with additional flexibility so they can more effectively use these funds with state re-opening plans."

The Paycheck Protection Program as a key part of the historic $2.2 trillion CARES Act passed by Congress in late March. The program provides business owners with 500 or fewer workers low-interest loans to stay afloat amid the economic downturn caused by the coronavirus pandemic.

The program experienced a rocky rollout at first with technical glitches and application errors, but it's since proved to be incredibly popular. It ran out of its original $350 billion fund in a matter of days in early April. Last month, Congress had to approve an additional $310 billion for the program to stay afloat.

But the demand for loans appears to have tapered dramatically. Treasury Secretary Steven Mnuchin said last week that there was still more than $100 billion remaining in the second round of funding.

Mnuchin said he supported extending the loan forgiveness program, but didn't support making any other broader reforms.

"It's called the paycheck protection program, it's not called the overhead protection program," he told The Hill.