By: Nadine Chen
Immigration compliance is usually an afterthought in corporate transactions, but failure to comply can lead to penalties for the U.S. employer and put the immigration benefits of foreign employees at risk. The topic of how a merger might affect the continued lawful employment of foreign workers, or how an acquisition might result in the assumption of immigration liabilities, is often not broached, or broached too late. A prudent employer performs due diligence on the compliance practices and visa sponsorship activities of the parties involved in the transaction pre-closing and ensures that necessary paperwork is updated and processed post-closing per the requirements imposed by U.S. Citizenship and Immigration Services (USCIS) and U.S. Department of Labor (DOL).
Depending on the nature of the transaction, parties may choose to negotiate indemnity for immigration liabilities that arise after closing. Parties may also consider incorporating successor-in-interest provisions in the transaction documents for immigration purposes. Full and complete records of the transaction, along with both parties’ financials, should be retained and will prove handy in evidencing successor-in-interest and ability to pay in employment-based green card scenarios.
If the intent is to keep either/both parties’ workforces intact after the transaction, a review of the relevant party’s I-9 compliance practices will determine whether new I-9s should be completed after closing or if the successor or surviving entity should accept the existing I-9 records as a “continuing employer.” A review of the other party’s Public Access Files (PAF) (if they sponsor H and E nonimmigrants) and Program Electronic Review Management (PERM) audit files (if they sponsor green cards) will likewise be helpful in assessing compliance level and potential exposure to risks. The successor or surviving entity can add a Corporate Change Memorandum to the predecessor’s PAF to indicate its acceptance of the obligations, liabilities, and undertakings of the predecessor’s Labor Condition Applications (LCAs), or file new LCAs for all impacted personnel. A review of all pending and certified PERMs and recruitment audit files should inform of any material changes that necessitate new recruitment, or if the successor or surviving entity can take over as “successor-in-interest.” If successor-in-interest cannot be established, the costs associated with restarting the green card process can be substantial for employers with a sizeable foreign national workforce.
Taking stock of the foreign worker population, including the number and visa classifications of workers who have employer-sponsored work authorization and those who have received green card sponsorship, is necessary for workforce planning. Case-by-case legal analysis will be required to determine whether changes to the employer or conditions of employment (job description, work location, reporting structure etc.) will impact each foreign worker’s employment eligibility. Portability analysis should be conducted for both nonimmigrant workers and workers with pending or approved immigrant petitions to plan for the filing of amendments before closing. Staggering the start dates of nonimmigrant employment under the new employer may be an option if more time is needed to make appropriate arrangements. For workers with pending I-485 applications, AC-21 portability analysis should be conducted to evaluate the need to file Supplement J. In the event of layoffs, H-1B employers should follow specific steps to effectuate bona fide termination to cease their obligations for back pay.
In corporate transactions, the focus is first and foremost the economics. Employers must not, however, overlook their obligations under the rules and regulations set forth by USCIS and DOL. Making the right inquiries early on to identify issues from an immigration standpoint allows for proactive strategizing that will not only minimize legal liability and workforce disruption, but maximize the value of the transaction. For assistance handling immigration matters in corporate transactions, contact the trusted Chugh, LLP team.