The Mysteries of Mergers & Acquisitions: Basics of Immigration Due Diligence

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The Murthy Law Firm frequently receives questions on immigration matters that require attention when a business undergoes a corporate change. While such transformations are commonly referred to as mergers and acquisitions (M&A), these changes can have different results from an immigration law standpoint, 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 and LCA public access files, as well as assessing the impact on the continuing employment eligibility of foreign nationals. This set of Q&As addresses 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.

Question 1. What are the common transactions that could have an immigration law consequence?

Because immigration law generally connects a specific employer to a specific foreign national worker, most corporate changes, such as forward and reverse mergers, acquisitions, asset 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.

Question 2. What is a successor in interest?

In the context of 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 to determine whether the new / surviving entity can qualify for this treatment.

Question 3. Does the new employer have to complete new I-9 forms?

A new 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.

Question 4. What happens to the labor certifications filed by the predecessor company?

The U.S. Department of Labor does not allow modification of a pending ETA form 9089 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 I-140 form 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 the original LC filing company.

Question 5. What happens if the I-140 petition is pending with or approved by USCIS and there has been a corporate change to the filing company?

Generally, regardless of whether the previously filed I-140 petition is pending or approved, the successor-in-interest company is required to file an amended I-140. The new entity needs to show how it qualifies for this treatment and the USCIS makes its determination based on the evidence filed.

Question 6. Do new H1B petitions have to be filed with USCIS when there is an M&A?

Typically, the answer to this question is no. The new entity must assume all liabilities of the H1B petition and continue to maintain the public access file with H1B-related documentation relating to the affected worker. An authorized official of the new entity must prepare a notarized statement expressly assuming all liabilities relating to certified Labor Condition Applications (LCAs) filed by the original entity, and place a copy of this statement in each H1B public access file.

Question 7. Is there ever a time when a new H1B petition is required because of an M&A?

Generally, a new or amended petition must be filed when there are certain changes in the job duties, or there is a material change in other terms of the employment of the individual. Similarly, a change in location of work may require an H1B amendment to be filed prior to the relocation.

Question 8. Can the new company continue employing foreign workers in E or L status?

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. Usually, a new petition must be filed with the USCIS when there is a fundamental change to the employer’s basic characteristics.

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 filed with the USCIS to amend the prior approval.

Question 9. If a company simply gains employees as part of an asset purchase, what steps need to be taken?

An asset purchase generally is treated in the same way under immigration law as it is when 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.

Murthy Law Firm Advises Businesses on Immigration for M&A

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.

While some aspects of immigration have changed in significant ways in the years since MurthyDotCom began publishing articles in 1994, there is much that is still the same. From time to time, clients of the Murthy Law Firm are referred to articles, like this one, which remains relevant and has been updated for our readers.


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Disclaimer: The information provided here is of a general nature and may not apply to any specific or particular circumstance. It is not to be construed as legal advice nor presumed indefinitely up to date.