| Bar Bulletin |
August,
2003 |
| MSBA News |
|
Immigration Law and
Corporate Restructurings
By Sheela
Murthy and Carla V. O’Donoghue
During most
corporate restructurings such as mergers, acquisitions or consolidations,
the parties seldom consider the impact of the corporate transaction on
their foreign national employees. This is an important issue to consider.
Corporate lawyers must ask parties to a potential merger or acquisition
whether they have any nonimmigrant employees. A nonimmigrant employee is
any person who is not a U.S. citizen or a “green card” holder. It is
important that the successor or new entity or entities that finally emerge
are willing to assume the immigration liabilities of the predecessor
entity in order for the foreign national to continue to benefit from the
immigration process.
Should the Successor
File a New H-1B Petition?
Nonimmigrant
employees are commonly in H-1B status. An H-1B is for a foreign national
employee who is in a “specialty” occupation for which a Bachelor’s Degree
is generally required. Doctors, lawyers, engineers and architects are all
considered eligible for the H-1B status. A nonimmigrant employee on H-1B
status is only allowed to work for the employer that sponsored him/her for
H-1B status in order to maintain H-1B status. Fortunately, Congress and
former President Clinton recognized that filing new H-1Bs after every
corporate restructuring would be unduly burdensome. As a result, the Visa
Waiver Permanent Program (VWPP) Act of 2000 added a new section of law to
the Immigration and Nationality Act (INA). §214(c)(10) now eliminates the
need to file an amended H-1B petition “where the petitioning employer is
involved in a corporate restructuring, including, but not limited to, a
merger, acquisition, or consolidation, where a new corporate entity
succeeds to the interests and obligations of the original petitioning
employer and where the terms and conditions of employment remain the same
but for the identity of the employer.”
The new company must
express their intent to continue the immigration liabilities relating to
the H-1B employee and put this written intent in the Public Access File (PAF).
This file requires the retention of certain documents, which any other
employee may request to review under certain circumstances. Ideally, the
new entity’s commitment to take over the immigration liabilities of the
predecessor entity should be in the restructuring agreement. The U.S.
Department of Labor (DOL) requires that the new entity must add such a
commitment to the PAF before the new entity permits the H-1B employee to
work for the new entity. It is important that the new entity employ the
H-1B employee with the same job duties and salary as the pre-restructuring
entity. The VWPP Act requires the “same” terms and conditions. Arguably,
this could mean a change in benefits such as the 401(k) plan or vacation
time would require a new filing. Fortunately, the Bureau of Citizenship
and Immigration Services (BCIS), the agency assigned to process H-1B
petitions, has taken the position, as a practical matter, that only when
there is a material change in employment must the new entity file a new
H-1B petition. However, since this is nowhere in any regulation, the
successor runs the risk of being in violation of the law with any change
in any term of employment for any of its foreign national employees who
worked with the predecessor entity.
Did the Predecessor
Comply with Immigration Laws?
As indicated above,
an H-1B employer must keep a PAF for each H-1B employee. Failure to
properly maintain the PAF, pay the prevailing wage for an H-1B employee,
post the Labor Condition Application in two conspicuous places for at
least 10 days prior to hiring the H-1B employee or require the H-1B
employee to perform duties substantially different than those listed on
the H-1B petition and related documents may result in liability for the
new entity. The DOL is usually the agency that imposes fines and
punishments for violations of the H-1B laws.
Has the Predecessor
Complied with Its I-9 Obligations?
In addition to
auditing the H-1B documentation, the corporate attorney should conduct or
order an I-9 compliance audit. The Bureau of Immigration and Customs
Enforcement (ICE) in the Department of Homeland Security has a new
compliance enforcement office that will investigate employers and their
compliance with I-9 requirements. Some employers believe that it is
permissible to employ a worker if they filed a labor certification or
I-140 petition for that worker prior to April 30, 2001. Section 245(i) of
the INA merely permits persons who are otherwise inadmissible to file for
their adjustment of status within the U.S. if they had a labor
certification, I-140 or I-130 filed by this date and will pay a $1,000
fine. The ICE has stated, however, that entities employing workers who are
not legally authorized to work in the U.S. and who are merely
§245(i)-eligible would be subject to penalties and fines.
Can the Successor
Complete Green Card Processing?
One or more
employers involved in a corporate restructuring may have been in the
process of applying for a green card for the nonimmigrant. There is no
requirement that the new entity actually continue the green card process.
If the new entity decides to move forward, it is important to determine
which stages of the green card process have been completed. Generally,
there are three stages in most employment-based green card applications:
1) the labor certification stage, 2) the I-140 stage and 3) the adjustment
of status or consular processing stage. It is usually fairly simple to
address this issue at any stage by providing the relevant documents on the
restructuring to the DOL or BCIS. If a person just obtained a green card
through one of the entities in the last year, the successor entity may
wish to provide documentation to the employee to demonstrate that the new
entity is a restructured incarnation of the original sponsoring employer
so that the employee will not face any issues pertaining to fraud when
s/he is ready to file papers to become a U.S. citizen.
Conclusion
Corporate due
diligence requires that the corporate lawyers appreciate and analyze the
immigration components in any corporate transaction before the parties
sign on the dotted lined. This will help to resolve potential problems
with immigration record housekeeping before a successor entity suddenly
finds itself subject to fines and penalties it never contemplated. In the
long run, such due diligence saves time and money for all concerned.
