India: Impact Of Immigration On Corporate Transactions- U.S. Perspective

Last Updated: 9 March 2016
Article by Zeenat Phophalia

Whenever a corporate transaction involves a business whose employees include foreign nationals, a proper HR due diligence is necessary.  Most work visas for foreign nationals are employer specific, changes in a company's structure could put the validity of the work visa into question. Dismissing immigration due diligence could potentially lead to employees losing their jobs and lawful status in the U.S., not to mention penalties and sanctions that a company could face.  Inheriting immigration glitches in a corporate transaction is no longer a mere inconvenience for a company and immigration consequences should be taken seriously.

There are immigration issues that apply to most corporate transactions-stock or asset acquisitions, mergers, consolidations, initial public offerings, spin-offs, restructuring and the relocation of an employer or its employees.  For instance, take the case of an acquisition where a Japanese executive on a L-1A visa (granted to intra-company transferees) is sponsored by the U.S. subsidiary of a Japanese parent abroad.  If the U.S. subsidiary is acquired by another U.S. company, the executive's U.S. employer will no longer be a subsidiary of the foreign parent, thus terminating the "qualifying relationship" as required under a L-1 visa and, consequently, rendering the executive's visa invalid.  In this article, we set out the basic structure and nuances of various U.S. work visas and how a corporate transaction can affect the status of a foreign worker and the company. 

Key Concerns: I-9 Compliance

One of the most important but often overlooked factor that an employer should take into account at the time of a corporate restructuring is the I-9 compliance.  All employers in the U.S. are prohibited from hiring unauthorized employees.  The I-9 compliance requires all U.S. employers to verify and confirm work authorization of each employee.  

To ensure that employers comply with the above, the law imposes some harsh penalties. These penalties are not only restricted to employing workers who are unauthorized to work but also extend to the failure to properly execute and retain records of employees, whether U.S. citizens or not. These penalties can range from $110 - $1,100 per record for not maintaining the proper documentation with additional sanctions that may include bars to filing for any immigration benefit.

Some work visas, for example, the L-1 intracompany transferee visa is linked to the existence of an overseas parent or subsidiary company.  In the absence of an I-9 due diligence, a U.S. entity acquiring a U.S. subsidiary of a foreign Indian IT company may discover after the closing of the corporate deal that key foreign Indian engineers on L-1 visa transferred over from the Indian parent, may no longer be able to work.  Therefore, during the due diligence process or prior to the closing of a transaction, the I-9 compliance of an entity should be examined carefully.  In a merger case where the acquiring entity is a "successor-in-interest,"- where the rights, interests, duties and obligations of the target entity are taken over by the acquirer- new I-9s are not needed.  

It is good practice for an acquired or merged entity to get all of their employees to complete new I-9s on the date of closing in order to ensure that past violations are not continued and also to ensure that they have a handle on which employees have a temporary employment authorization document that will require reverification at a later time. 

I-9 non-compliance is taken rather seriously as evidenced by the $1 million fine settlement that the Immigration and Customs Enforcement reached with clothing retailer Abercrombie & Fitch in 2010 for lapses in their I-9 compliance software.

What immigration law concepts come into play? --Different Visas, Different Implications

There are immigration issues that apply to most corporate transactions-stock or asset acquisitions, mergers, consolidations, initial public offerings, spin-offs and reorganization, etc.  In the U.S., there are two visa classifications for a foreign worker: (i) non-immigrant; and (ii) immigrant. Non-immigrant workers usually fall under the H, L, TN and E visa categories, while immigrant workers are those who have obtained lawful permanent status or are in the process of doing so.  

The consequences of a merger or acquisition or other corporate transactions depend upon the type of nonimmigrant visas that the company's employees hold.

Impact on H-1B Filings:

The most popular and commonly used temporary work visa is the H-1B visa.  For a company with H-1B employees, the questions to consider are whether the transaction will result in a new employer and to what extent will the new entity assume the interests and liabilities of the target company.  Where the new employer is a "successor-in-interest" that assumes the interests and the obligations of the prior employer which includes the assertions the former employer made on its labor condition application (LCA), filing a new H-1B petition is not necessary.  This may therefore allow H-1B workers to continue employment without any interruption.  Having said that, any material changes accompanying corporate changes will require action steps, for example, relocation of the employee and/or a substantial change in the employee's duties will require filing of an updated LCA and, in most cases, also an amended H-1B petition.  

An issue likely to come up and affecting only a small percentage of companies, is the loss of eligibility of H-1B cap exempt status.  Certain employers such as governmental research organizations, non- profits, certain colleges and universities are exempt from the H-1B quota cap.  Depending on the corporate change, the cap-exempt status could be lost by the new employer, for example when a non-profit entity is replaced by a for-profit entity as a sponsoring employer.  This loss of status could render an employee unauthorized to work if his/her H-1B was granted on the basis of the cap-exempt status.  Thus, it is important to take this factor into account prior to closing.

Impact on L-1 Visas:

For an L-1 visa, the law requires a qualifying relationship between the U.S. entity and the foreign entity from which the employee will be transferring and the relationship must be that of either a "parent, branch, affiliate or subsidiary."  A merger or acquisition resulting in change in the ownership structure of either entity could terminate the qualifying relationship as required under the L-1 visa, thereby invalidating the visa, as explained earlier.  If it can be proved that the qualifying relationship remains intact, only an amended petition is required.

Impact on Green Card Applications:

A lawful permanent residence (green card) application can be broken down into 3 steps- labor certification, filing the I-140 petition and filing of the adjustment of status application.  Companies that fall within the successor-in-interest requirements generally are allowed to continue the green card application filed by the predecessor company.

For a labor certification that is filed by the former employer, as long as the new employer assumes all rights, duties, liabilities and obligations of the former employer, the labor certification will remain valid, provided the job position and location of the employee remain unchanged.  However, if there are any changes in job position or location, or if the new employer does not qualify as a successor-in-interest, the pending labor certification will be invalidated and the new employer will have to file a new labor certification. This could affect the lawful status of a foreign worker who has relied on a pending labor certification in order to extend his or her H-1B visa.  An employee could also lose his priority date thereby significantly delaying the already lengthy green card process.

During the I-140 stage, if the I-140 is pending, but the adjustment of status application is not filed at the time of the corporate change, then the new employer will have to file an amended I-140 demonstrating the successor-in-interest relationship.  On the other hand, when a corporate change comes into effect after the I-485 adjustment application is filed, an amended I-140 may not be required.  This is because the American Competitiveness in the 21st Century Act (AC21) allows a foreign national to change employers if the I-140 has been approved and the adjustment of status application has been pending for 180 days or more, as long as the new position is in the "same or similar occupational classification." 

Immigration Due Diligence and Best Practices

As companies conduct a financial and legal due diligence in order to detect potential risks and liabilities, an immigration due diligence should also be performed to determine and resolve visa and immigration related issues of key employees and corporate executives, to ensure a smooth transition to the new company and avoid any last minute surprises.

Any immigration related issues should be addressed and incorporated into the representations and warranties of the key transaction documents.  It is a good practice to identify all employees on non-immigrant visas or in the process of applying for green card and understand future action steps to be taken to ensure continuation of their lawful status.  Some best practices for immigration compliance to be followed by corporates are: 

  • Corporates should adopt a best practice checklist for a corporate immigration program-  immigration policies should be in writing 
  • Corporates should ensure that approval of visas, extension of visa and transfer of employees across borders is done in a timely manner
  • Tone from the top- corporate policy should state clearly that the company will remain compliant with all immigration laws, such as timely completion of employment verification and provision of appropriate employment benefits. 

Conclusion

As pointed out, immigration concerns and issues, if ignored during a corporate transaction, could potentially cause problems for a company both from a reputational and financial standpoint.  Therefore, to make sure that a smooth transition occurs, any immigration disruption that could potentially affect the transaction should be identified ahead of time and resolved in the best manner possible. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions