When the corporate structure of an organization changes, many attorneys focus on performing due diligence with respect to employment contracts, tax issues, and real estate and financial issues, but do not focus on the immigration issues which can carry serious consequences. Corporate changes that typically have immigration consequences are stock or asset acquisitions, mergers, consolidations, initial public offerings, spin-offs, corporate name changes, changes in payroll source and the relocation of an employer or its employees.
All employers in the United States are barred from hiring unauthorized employees and are required to maintain documentation (Form I-9) demonstrating that each of their employees is legally permitted to work in the United States. Companies may be required to file new paperwork regarding the status of all employees before the actual day of closing. Examining the Form I-9 before a corporate restructuring is imperative. “A successor-in-interest assumes the Form I-9 liabilities of a corporation. Failure to comply with Form I-9 requirements may result in costly sanctions running into the thousands of dollars per employee.” Suggestion: on the day of the closing, all employees should complete new I-9s. This way the company will have procedures in place for re-verification and ensuring that past mistakes are not carried over.
“If a company does not assume the liabilities of the acquired corporation, Forms I-9 are generally required of all employees, and in the case of a merged entity that is completely new, Forms I-9 may be needed for all employees of both entities.”
H-1Bs are greatly affected by a corporate change. Depending on the change, a new or amended petition may be needed. The corporate structure in which the new employer is a successor-in-interest that assumes the interests and the obligations of the prior employer, does not require a new filing. Another issue is if the employer changes from non-profit to for-profit status, which may require an additional filing. To determine whether or not the company needs to apply for a new H-1B, you should consult with an experienced immigration attorney. USCIS policy states that if an employer, for H-1B purposes, assumes the previous owner’s liabilities, which include the assertions the prior owner made on the labor condition application, then there is no need for a new or amended petition. With the permanent resident process, it will depend on the position and where the employee is in the process.
Below are some tips for properly conducting due diligence:
- Ensure that visas are transferred prior to a closing
- File timely amendments
- Review files of all employees on temporary work visas
- Review all I-9 documentation for current and terminated employees whose I-9s fall within the document retention requirements
- Review all written policies and procedures regarding the company’s I-9 compliance program
- Review all “no-match” letters received from the SSA
- Review employees’ files that are in the permanent resident process to determine timing of the process.
It is very important to perform due diligence prior to the closing of the business transaction. Please contact our office if your corporate structure is changing.