When businesses are merged, acquired, or undergo other corporate restructurings, immigration-related issues are often overlooked during due diligence. Indeed, immigration issues typically come to light only after a deal has closed—or a corporate restructuring is finalized—and the consequences have materialized. To avoid any negative impacts on a business, or its employees, it is important to address certain immigration concerns during due diligence. Below is a brief overview of a few immigration considerations that should be explored during a merger, acquisition, or similar corporate restructuring.
1. Employer Obligations Relating to Nonimmigrant Foreign Nationals
1.1 L-1 Visas
Employees in L-1 status (intracompany transferees) can be seriously and adversely affected by a corporate restructuring. Employees in L-1 status rely entirely upon a “qualifying relationship” between their previous foreign employer and their U.S. employer (e.g. parent, subsidiary, branch, affiliate). A detailed analysis of the corporate transaction is usually required to determine whether a corporate restructuring terminates the qualifying relationship. Even when the L-1 status is not terminated, the corporate restructuring often requires that the employee file an amended petition to reaffirm that an ongoing qualifying relationship exists.
L-1 visas are particularly troublesome in the context of a merger or acquisition. Employees can easily lose their L-1 status as the result of a corporate restructuring—which is usually quite detrimental to the company because these employees are, by definition, high-level managers or executives.
1.2 TN Visas
Employees holding TN visas are not usually affected by, or cumbersome to, a corporate restructuring. If a merger or acquisition does not result in a different employing entity (i.e., the successor company qualifies as a “successor-in-interest”), then filing a new TN petition is not necessary. If the corporate restructuring results in a different employing entity, or the TN employee will change job functions or duties, then it is recommended that a new TN application be filed.
1.3 H-1B Visas
The H-1B visa is the most prevalent employer-sponsored visa—and is most utilized in the information technology sector. A common mistake made by attorneys involved in corporate restructurings is that their analysis begins and ends with 8 U.S.C. § 1184(c)(10), which states that “[a]n amended H-1B petition shall not be required where the petitioning employer is involved in a corporate restructuring, including but not limited to a merger, acquisition, or consolidation, where a new corporate entity succeeds to the interests and obligations of the original petitioning employer.” However, an H-1B employer is still subject to certain obligations that must be addressed during due diligence—such as continuing to pay the “prevailing wage” to the employee and maintaining the employee’s “public access file.” What’s more, an amended petition may still need to be filed if there is a change to the employee’s job location or duties.
If the employer is not a successor-in-interest, the H-1B employee may rely on the “portability” provisions that allow them to start work for the newly formed or restructured entity. However, these portability provisions can be tricky to navigate, and employees can be deemed to have violated their status if proper procedures are not followed.
In the H-1B context, addressing immigration issues in a timely manner is very important. Public access files should be updated and compliant prior to any closing; and employees can fall out of status—under certain circumstances—if petitions are not filed at the right time. An immigration attorney should be consulted if there are H-1B employees working for businesses involved in a merger, acquisition, or similar corporate restructuring.
1.4 E-1/E-2 Treaty Traders and Treaty Investors
Issues relating to E-1 and E-2 visa recipients do not arise often during a merger or acquisition, but when they do, they can be difficult to identify. E-1 and E-2 visa holders include executives, managers, and essential skills employees who come to the United States under a treaty between their country and the United States. This visa can be dependent upon the nationality of a foreign entity; and a merger or acquisition can impact the nationality of a successor company, which will sever the ability for an E-1 or E-2 visa holder to maintain their status.
1.5 O-1 Visas
Foreign nationals of extraordinary ability in the sciences, education, or business (among other areas) may be employed under an O-1 visa. Employees in O-1 status will be affected by a merger or acquisition if the new corporate entity is not a “successor-in-interest.” Indeed, if the new entity is not a successor-in-interest, then a new O-1 petition will be required. Significantly, employees in O-1 status are not able to take advantage of any “portability” mechanisms. This means that the employee will not be able to begin working for the new entity until after a new O-1 petition is approved.
2. Employer Obligations Relating to Employment-Based Green Card Holders
A merger, acquisition, or corporate restructuring can affect an employee’s permanent residency application—depending on the stage of the green card application process. The impact a corporate restructuring will have on an employee’s permanent residency application hinges on whether the newly formed entity is considered a “successor-in-interest” to the former employer.
The timing of the merger or acquisition dictates the employer’s obligations. For example, if a Form I-140 petition is pending or approved but a Form I-485 Adjustment of Status has not been filed at the time of the merger or acquisition, then the new entity must file a Form I-140 petition with USCIS and prove that it is a successor-in-interest employer. Also, where a Form I-485 Adjustment of Status application is pending at the time of a merger or acquisition, “portability” laws permit the employee to transition to a new employer, as long as the Form I-485 application has been pending for over 180 days and the employee’s job function and duties are the same or similar to those with the original employer. However, if the Form I-485 has been pending for less than 180 days at the time of the merger or acquisition, then the new entity should file an amended Form I-140 petition.
3. Employment Eligibility (I-9 Verification)
An acquiring busines typically assumes the liabilities of the businesses it acquires. This general proposition is true as it relates to an employer’s Form I-9 obligations. And while a company’s employee files and document processes may appear complete and compliant upon initial review, damaging noncompliance issues may be lurking.
Section 274A(b) of the Immigration and Nationality Act (INA), codified in 8 U.S.C. § 1324a(b), requires employers to verify the identity and employment eligibility of all individuals hired in the United States. The Employment Eligibility Verification Form I-9 is the means of documenting this verification. See 8 C.F.R. § 274a. Employers are required, by law, to maintain for inspection original Form I-9 records for all current employees. Failure to properly maintain these records can result in significant civil fines. Depending on the nature of the transaction and the businesses involved, a Form I-9 compliance review could range from a simple spot check to a company-wide audit. An immigration attorney can help identify these issues and ensure compliance.
Employers, corporate decision-makers, and even seasoned transactional attorneys often overlook the importance of immigration law compliance during a corporate restructuring. Such an oversight can be detrimental, as proper planning and due diligence can help employers avoid common, costly pitfalls—and ensure that foreign national employees (sometimes high-level executives) retain their ability to work in the United States.