Changes in corporate ownership through mergers, acquisitions (both stock and asset), IPO, or other corporate transaction can cause its nonimmigrant and immigrant employees to lose work authorization and subject the employer to serious I-9 (mandatory employment eligibility verification) compliance violations. In order to avoid the possibility of losing essential foreign employees and facing possible civil and criminal liability, companies should carefully consider the implications of the transaction on foreign workers and plan accordingly before the closing of a transaction. Advance planning will, in most cases, enable the employer to retain its key workforce and avoid liability.
We have outlined some issues for employers to consider when negotiating a corporate transaction and performing the due diligence process.
Temporary Work Authorization of Foreign National Employees
In a corporate transaction involving foreign national employees, one of the first concerns should be whether or not such affected foreign national employee will be able to retain his or her work authorization. Most work visas are employer, job and location specific, so it is critical to evaluate how corporate changes due to the transaction will effect certain foreign national employees and to vet any possible issues before the closing of the transaction. Depending on the structure of the transaction, the new employer may be required to file new or amended petitions. If such petitions are not timely filed, the employee faces termination of work authorization and possible removal from the United States, while the employer can face possible civil and criminal liability.
Foreign National Employees in the Permanent Resident Process
Like work visa cases, most employer-sponsored permanent residence cases are employer, job and location specific. If, due to a corporate transaction, the employer of a foreign national changes, the new company may be able to (and be required to) advance a “successor-in interest” argument (see below). In such cases, the employer must demonstrate that the new employer acquired the assets, liabilities, rights and obligations of the original employer and may be required to file new and/or amended documents. If the employer is not a successor-in-interest for immigration purposes, the new employer will likely be required to start the process again, which can be costly and time consuming.
In some corporate transactions, the new employer may qualify as a successor-in-interest (if it has assumed all of the seller's immigration related assets and obligations) to the prior employer, which will preserve many permanent resident processes and could reduce filing obligations and filing fees for temporary work visas. In order to qualify as a successor-in-interest, the acquiring company should be made aware of successorship requirements and include necessary language in the deal documents before they are signed.
In 1986 the Immigration Reform and Control Act ("IRCA") was passed to provide additional security measures to keep U.S. employers from hiring illegal immigrants. IRCA mandates that all U.S. employers are responsible to document that each employee hired after November 6, 1986 (including U.S. citizen employees) has proper employment authorization and that each employee's identity is consistent with their employment eligibility documents. Since 2006, the Department of Homeland Security has increased its enforcement of the IRCA and has increasingly been investigating possible violations. Therefore, it is vitally important that companies engaged in corporate transactions are especially diligent with regards to this issue. In instances where the employer can be considered a successor-in-interest, the employer should be extremely careful when reviewing the predecessor company's I-9 files as well as ensuring that the predecessor company responded to any "no match" letters issued by the Social Security Administration that indicate a discrepancy between the social security number and the database. If the new employer is not a successor-in-interest or simply wants added security, it will have to conduct a full, new I-9 process upon closing.