INS Guidance on Amending H1B When Division Acquired
Posted Apr 05, 2001

According to INS, an amended H1B petition is not needed when a company acquires a substantial portion of a division of the original employer. Efren Hernandez III, Director, Business and Trade Services, Office of Adjudications at INS Headquarters, provided this information on March 22, 2001 in an opinion letter in response to an immigration attorney in Dallas, Texas.

The attorney's question arose from the following situation. Company E acquired a "substantial portion" of the information technology division of Company S, including taking over any existing contracts. Company E will state expressly that it will assume all the obligations of the Labor Condition Applications (LCAs) that Company S filed for its H1B workers, who would now be working for Company E. The attorney asked whether it was necessary to file amended H1B petitions in Company E's name for the affected workers.

Mr. Hernandez replied that where a company "assumes substantially all the assets and liabilities" of the acquired company, it is not necessary to amend the H1B. He also clarified that the type of liabilities to be assumed are immigration-related liabilities only. Of course, if there are other changes to the employee's work situation, such as different job duties, location, duration of assignment, etc., then an amended petition may have to be filed for those reasons. However, the acquisition itself would not necessitate an amendment.

The March 22, 2001 letter correctly indicates it has always been the INS position that if an acquisition takes place, and immigration related liabilities assumed, there is then no need for an amendment. The acquiring company would be a successor in interest, as opposed to an entirely new employer. Please note, however, that the U.S. Department of Labor (DOL) requirements have at times conflicted with INS rules. DOL is responsible for the Labor Condition Application (LCA) process for H1Bs, so employers of H1Bs are bound to comply with both INS and DOL. DOL has insisted that if the employer's name or tax ID # changes, then in essence there is a new employer, and the employer must file a new LCA. Furthermore, INS confirmed in a 1997 opinion letter that where a new LCA is needed due to a new tax ID#, then an H1B amended petition is also necessary. That is to say, no amendment is needed unless DOL says a new LCA is needed. Therefore, many or most companies have still erred on the side of playing it safe and filing H1B amendments when there was a sale or acquisition even though the INS would say that no H1B amendment is required.

It is not quite clear whether the March 22, 2001 letter changes the above policy of a new LCA triggering the need for an H1B amendment. DOL's interim final rule published on December 20, 2000 appears to no longer require a new LCA, but does require an express statement from the successor entity that it is assuming all obligations of the LCA filed by the prior company, and may require additional, detailed documentation in the file on that point. DOL is still accepting comments on the interim regulation up to April 23, 2001, so the rule is not yet finalized.

As we described in previous MurthyBulletin articles, the law passed in late October 2000 extending the visa waiver program for certain short term visitors also contained a short provision stating that H1 amendments are not needed when a reorganization such as a merger or acquisition takes place, so long as the terms of employment have not changed. The March 22, 2001 INS letter says that law merely restates INS' policy on this issue, but actually prior INS policy would have required an amended petition in the case of a merger, i.e. where a new entity is created, as opposed to an acquisition.

Please note that while Mr. Hernandez stated that an amendment is not legally required, he did suggest that if employees need to travel abroad it might be more convenient to have an approval issued in the name of the new employer. Therefore, the employer may still choose to file the H1B amendment. Another possibility may be to provide the employee with a letter regarding the new entity, including a statement that the successor has agreed to assume all the rights and obligations with respect to the foreign national's employment in the U.S. If an amendment is not filed, then the information on the new company would be provided at the time of filing for extension of the employee's H1B status.