The Mysteries of Mergers & Acquisitions :
Basics of Immigration Due Diligence
Posted Nov 21, 2008
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This article was written by the attorneys of the Murthy Law Firm for Murthy's Corporate Bulletin. If you are an employer or HR manager, interested in the services offered by our firm, contact our Corporate Services Manager.
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The Murthy Law Firm Corporate Teleconference series for November 2008 turned its focus to immigration matters requiring attention when a business undergoes a corporate change. While such transformations are commonly referred as mergers and acquisitions (M&A), the immigration law can have a different impact, depending upon how a business changes. Despite the individual traits of each M&A deal, the due diligence generally required includes examining and determining compliance with regard to I-9 forms, LCA public access files, as well as assessing the impact on the continuing employment eligibility of foreign nationals. During this teleconference, attorneys at the Murthy Law Firm discussed possible immigration-related effects of different kinds of corporate transformations, such as mergers, asset purchases, and spin-offs. We continue to emphasize the importance of a proactive approach to examining these matters, to allow for smooth workforce transition.
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Question 1. What are the common transactions that could have an immigration law consequence?
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Because the immigration law generally connects a specific employer to a foreign national worker, most corporate changes, such as forward & reverse mergers, acquisitions, assets purchases, and spin-offs, will have some kind of impact. Depending upon the type of transaction, the exact steps that need to be taken may vary.
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Question 2. What is a successor in interest?
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In the context of the immigration law, a “successor in interest” is generally an entity that assumes the immigration-related liabilities of an original employing entity. It is important to evaluate a corporate transformation under the state of the law to determine whether the new / surviving entity can qualify for this treatment.
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Question 3. Does the new employer have to complete new I-9 forms?
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As discussed in Form I-9 Compliance & Working with ICE, originally published in the September 2008 edition of Murthy’s Corporate Bulletin, an I-9 form must be completed for newly-hired employees. If a new entity is created from the corporate transaction (merger, spin-off, consolidation), I-9 Employment Eligibility Verification forms must be retained by the business keeping the employees. Typically, the new employer is liable for any mistakes in the I-9s previously completed by the old corporate entity. If, however, the predecessor’s employees are treated as new hires, the company will have to complete new I-9 forms.
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Question 4. What happens to the Labor Certifications filed by the predecessor company?
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The U.S. Department of Labor does not allow modification of a pending Application for Permanent Employment Certification (Labor Certification or LC). It generally is advisable for the successor-in-interest company to wait until the labor certification decision. If it is approved, then the case can continue with the successor company filing the Form I-140 with the USCIS. This I-140 filing would be accompanied by the labor certification as well as evidence that the company is a successor- in- interest to original LC filing company.
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Question 5. What happens if the Form I-140 Petition is pending with or approved by USCIS and the filing company does not exist any longer?
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Generally, the successor-in-interest company is required to file a new I-140, whether the I-140 previously filed is pending or approved. The new entity needs to show how it qualifies for this treatment and the USCIS makes its determination based on the evidence filed.
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Question 6. Do new H1B Petitions have to be filed with USCIS when there is an M&A?
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Typically, the answer to this question is no. The new entity must assume all liabilities of the H1B Petition and continue to keep the Public Access File with H1B-related documentation affected worker. Additional information on the Public Access File and the requirements entailed in filing a Labor Condition Application as part of the H1B Petition can be found in H1B LCAs & DOL Investigations : Understanding the Basics of Compliance, originally published in the August 2008 edition of Murthy’s Corporate Bulletin.
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Question 7. Is there ever a time when a new H1B Petition is required because of an M&A?
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Generally, a new or amended petition must be filed when there is a change there are certain changes in the job duties, or there is a material change in other terms of the employment of the individual. A change in location of work may require a new Labor Condition Application (LCA.) If a new LCA is required, it must be completed prior to the relocation of the employee to avoid the need to file an amended H1B petition. Otherwise, if this issue is overlooked, the H1B petition will need to be amended.
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Question 8. Can the new company continue employing foreign workers with E or L status?
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An M&A can adversely impact the ability of a foreign worker in E or L status to continue working for the new company. Eligibility for E status depends on the nationality of the foreign worker and the employer. Any change in ownership can have the effect of changing the nationality of the entity. A new petition usually must be filed with the USCIS when there is a fundamental change to the employer’s basic characteristics.
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Eligibility for L status depends on the existence of certain relationships that qualify the employer to request the L status for the foreign worker. In certain M&A transactions the relationship may be terminated. When such a relationship qualifying the company to ask for the L status for a foreign national exists but has been changed or the worker is moved to a different related entity, a new petition may need to be be filed with the USCIS to amend the prior approval.
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Question 9. If a company simply gains employees as part of an asset purchase, what steps need to be taken?
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An Asset Purchase would generally be treated under the immigration law in the same way as one where a new entity is created. It is necessary to undergo an examination of how employees are to be transferred to the new company, if at all, and consequently what steps need to be taken to ensure workers continue to maintain their lawful status in the United States.
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Conclusion : Murthy Law Firm Advises Businesses on Immigration for M&A
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In the normal course of business, the Murthy Law Firm’s team of experienced attorneys works with employers who undergo corporate restructuring, such as mergers, acquisitions, asset purchases and divestitures. These steps are often taken in order to take advantage of business opportunities or to consolidate and become leaner during an economic downturn. A proactive approach is the best strategy to benefit both employers and employees to ensure compliance with the immigration law. The essential principle of most business-related immigration matters is that immigration status and employment authorization are related to a specific employer. As a result, when there are changes to that entity’s identity, it can impact - sometimes adversely - the permission of the company to employ the individual and for the foreign national to remain in the United States. The Murthy Law Firm successfully advises clients on the steps that can ensure the continuing permission of their employees to remain in the U.S. without interruption to their employment. We look forward to continuing to work with our clients, to helping them through the changes that are necessary to facilitate and enhance their ability to meet their business goals.
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