Gordon College, a Christian academic institution in Massachusetts, may have to repay a $7 million COVID-19 relief loan for reportedly violating a federal regulation that limited the number of employees recipient organizations can employ.
During the COVID-19 pandemic, Gordon College received a $7.046 million Paycheck Protection Program loan as part of the Coronavirus Aid, Relief, and Economic Security Act passed by U.S. Congress in 2020 but was denied loan forgiveness by the U.S. Small Business Administration.
In a decision released last month, U.S. District Judge Beryl Howell of the District of Columbia, an Obama appointee, rejected claims from the Christian college of religious discrimination or deprivation of constitutional rights. The judge also granted the government’s partial motion to dismiss.
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“[P]laintiff has failed to allege that having more than 500 employees is ‘essential’ to its ‘central mission,’ or to explain why the PPP’s 500-employee cap or defendants’ application thereof interfered with any ‘matters of faith and doctrine,'” Howell wrote.
“SBA has a legitimate interest in supporting small businesses, and ‘limiting eligible borrowers to those that employ no more than 500 employees is rationally related to the goal of assuring businesses receiving aid are indeed small,'” the judge added.
“Plaintiff has thus not plausibly stated that the PPP’s 500-employee cap offends the Free Exercise or Equal Protection Clauses, and plaintiff’s Free Exercise and Equal Protection claims are dismissed.”
Howell dismissed eight of the 11 reasons Gordon College argued for why it should receive loan forgiveness, leaving three still to be considered, according to The Roys Report, which noted that Gordon can still say that loan denial was a legal error that exceeded the authority of the SBA and that the SBA violated the 14th Amendment guarantee of due process.
The Christian Post contacted Gordon College and the SBA for comment on this story. While a response from Gordon is pending, an SBA spokesperson told CP that the agency “does not comment on pending litigation matters.”
Gordon applied for the PPP loan in April 2020 and for complete forgiveness in July 2021. The college’s request was denied in 2022.
Although it employed a combined 639 part-time and full-time employees, the college argued that it had “495.67” employees, basing the number on the full-time equivalent employee methodology.
According to Indeed.com, this is reached via counting” ‘hours worked’ rather than the number of employees to budget, forecast, staff and calculate wages.”
“For example, half-time workers are 0.5 because they work half the hours of full-time employees and they will receive 0.5 of a full-time salary,” explained Indeed. “To calculate the FTE value for a specific position, simply divide the number of hours worked by the number of hours considered to be full-time. If you use 40 hours as full time, someone who works 35 hours has a 0.875 FTE. Someone who works 30 hours has a 0.75 FTE.”
However, the SBA has maintained that loan recipient employers are to count their employees by headcount, regardless of if they are full-time or part-time.
After multiple appeals failed, Gordon filed a lawsuit in March 2023 against SBA, Isabella Casillas Guzman in her official capacity as an SBA administrator and the U.S. government.
The lawsuit argued that the denial of loan forgiveness “violate[s] Gordon College’s constitutional and statutory rights under the First and Fifth Amendments to the United States Constitution and under federal statutes and regulations, including without limitation the federal Religious Freedom Restoration Act of 1993.”
Founded as the Boston Missionary Training Institute in 1889, Gordon College developed into a liberal arts college with a graduate theological seminary. It sits on a 485-acre campus in Wenham, about an hour’s drive north of Boston. Today, it has an enrollment of nearly 1,300 undergraduate students and over 300 graduate students.
