Required compliace is often overlooked in routine business transactions.
Published in NH Business Review (12/19/2019)
U.S. immigration law is currently a popular topic. The state of the border wall, the fate of asylum-seekers, a continuous stream of executive actions and litigation challenging those actions, are never far from the headlines. While top-of-mind, business professionals may not recognize that immigration law impacts routine business transactions.
Immigration law non-compliance liability can be unwittingly assumed in business transactions.
The Immigration Reform and Control Act of 1986 (IRCA) prohibits U.S. employers from knowingly hiring, or continuing to employ, workers who are not authorized to work in the United States. In order to confirm a person’s work eligibility, employers are required to complete and maintain I-9 forms for all employees. U.S. Immigration and Customs Enforcement is charged with ensuring compliance with IRCA. ICE audits are disruptive and fines and penalties for violations have increased in recent years.
Liability arising from IRCA non-compliance may unwittingly be assumed in merger, acquisition or reorganization transactions. Where a business transaction results in a transfer of employees, for IRCA compliance purposes, the acquiring or surviving entity (successor in interest) may elect to treat the transferred employees as newly hired and verify their work authorization by completing new I-9s for each employee.
However, due to the size of a workforce, this may not be possible or practical. In such cases, the successor in interest may elect to treat the employees as continuing employment and retain the original I-9 records. In doing so, the successor in interest also assumes the liability for IRCA compliance inherent in the original I-9s and risks an ICE audit, fines and penalties.
In addition, the parties to a merger or target of an acquisition may employ foreign nationals that the successor in interest desires to retain. Similarly, in a reorganization, key foreign national employees may be transferred to an affiliate entity.
Such foreign nationals may be authorized to work in the United States pursuant to an immigration classification that may be based on certain qualifying relationships. If the transaction changes the relationships, the foreign employee may lose his or her work eligibility and even authority to remain in the U.S.
H-1B status, for example, allows U.S. employers to hire foreign national workers in specialty occupations requiring a bachelor’s degree or its equivalent. If a transaction results in a change in the employer, employee’s job role, duties or pay, at a minimum, the successor in interest may be required to update the required public access file containing employment information or file a new petition in order to continue employing the H-1B worker.
L-1 status permits U.S. employers to transfer executives, managers or workers with specialized knowledge from a foreign affiliate to a U.S. location. A merger, acquisition or reorganization may result in a change in ownership and sever the qualifying relationship with the foreign affiliate. The transaction may result in the loss of the foreign national’s ability to remain in the U.S. or work for the employer.
Other seemingly innocuous business activities may be impacted by immigration laws. Office relocations, name changes, layoffs and other ordinary business activities may trigger immigration requirements with respect to foreign national employees.
For example, U.S. employers can sponsor foreign national employees for employment-based permanent residency. Often this is a lengthy and costly process requiring the U.S. employer to demonstrate that no U.S. workers are qualified and available to fill a position to be offered to a foreign national and to obtain a determination from the DOL on the prevailing wage that should be paid for the position. The employer also will be required to advertise for the position within the area where the employee will work.
The name of the employer listed on the prevailing wage application should be consistent with the name of the employer that is listed in advertising for the position and in the labor certification application. If the employer changes its name or adopts a trade name during the process, the employer may be subject to a DOL audit.
A change in headquarters or office location can similarly affect employment-based permanent resident cases. If the office where the employee will work changes to a location outside of the metropolitan statistical area previously indicated, a new prevailing wage will need to be obtained.
Ramey Sylvester, an associate in the corporate department at McLane Middleton, can be reached at [email protected] or at 603-628-1355.