We are only one quarter into 2013, but this year has already seen a flurry of multi-billion-dollar mergers and acquisitions from some of corporate America's most recognizable names. In the past few months, airline giants American Airlines and US Airways announced they would be merging in an $11 billion deal, while Warren Buffett's Berkshire Hathaway and global investment firm 3G Capital announced the acquisition of the H.J. Heinz Company for $28 billion. Those deals came just a week after Dell Inc. announced that company founder Michael Dell had partnered with global technology investment firm Silver Lake Partners to acquire and privatize the company in a transaction valued at $24.4 billion.
Managing the legal aspects of corporate restructuring is a difficult task. For companies that employ foreign nationals, that task is even more complicated as there are significant immigration-related consequences that must be addressed prior to sealing the deal on a merger or acquisition. Because most work visas are employer-specific, changes in a company's structure could affect the validity of a foreign national employee's nonimmigrant visa status or pending green card application. In addition, a company's failure to recognize the immigration issues arising as a result of its restructuring activities can not only seriously impact its foreign national employees, but also have serious consequences for the company. Employers who fail to take the proper measures may find themselves being sued by foreign national employees for negligence in handling their immigration matters. For example, when a company's actions cause the foreign national employees to fall out of legal status, have problems pursuing permanent residency, or even potentially face bars on reentering the United States after travel abroad, those employees may seek action against the employer. Additionally, employers with immigration violations potentially face:
- Worksite raids and loss of business during the raid;
- Compliance audits;
- Significant fines;
- Criminal sanctions;
- Revocation of state business licenses and government contracts; and
- Negative publicity.
Worksite enforcement has become increasingly aggressive over the past few years and there has been a noticeable shift from monetary fines to criminal prosecution of employers with unlawful hires and paperwork violations.
In view of the recent crackdowns by federal and state governments on immigration compliance, the steady stream of lawsuits being filed by affected employees, and the media hype surrounding immigration reform, it is critical for companies that hire foreign nationals to include potential immigration consequences of a corporate restructuring as part of the due diligence process.
Issues Affecting Nonimmigrant Visa Holders
In these situations it is important to determine whether the employer after a corporate restructuring is the same employer that filed the approved visa petition with the U.S. Citizenship and Immigration Services (USCIS) or Department of State (DOS). The consequences of a merger or acquisition depend upon the type of nonimmigrant visas that the company's employees hold.
The most common temporary work visa is the H-1B visa, which is used by U.S. companies to temporarily hire foreign national workers for specialty occupations that require at least a bachelor's degree or its equivalent to perform the job duties. H-1B workers are authorized to work for a specific company in a specific geographic location in a specific position and for a specific salary. Companies that hire an H-1B worker are required to make an attestation to the U.S. Department of Labor (DOL) that they will pay the worker a salary that meets or exceeds the prevailing wage for the listed occupation in the geographic area of intended employment for the duration of the employee's status. This attestation is made in what is called a Labor Condition Application (LCA).
If an H-1B worker changes employers, the new employer must generally file a new H-1B petition with USCIS. However, if the new employer is a "successor-in-interest" to the previous employer, an amended petition may not be needed. USCIS requires an amended H-1B visa petition to be filed if there are any "material changes" in the terms and conditions of an H-1B worker's employment or eligibility (for example, a major change in the employee's job duties). However, USCIS does not automatically require the filing of a new LCA and amended H-1B petition where a new corporate entity succeeds to the interests and obligations of the original petitioning employer and where the terms and conditions of the employment remain the same but for the identity of the petitioner. In this situation, the new employer, called a successor-in-interest, must make available for public inspection a sworn statement that it accepts all the obligations and liabilities of the LCAs filed by the predecessor entity, a list of affected LCAs and their dates of certification by DOL, a description of the new entity's actual wage system, and the federal employer identification number (EIN). The new entity must provide this sworn statement before the H-1B employees are transferred to the new employer. If, however, there is a material change in the terms of an H-1B worker's employment as a result of a merger or acquisition, then a new LCA or amended H-1B petition may need to be filed. For example, if the new employer transfers an H-1B employee to another location, a new LCA may be required. In this case, the new LCA must be filed with DOL prior to the relocation of the employee in order to avoid filing an amended H-1B visa petition. Otherwise, if this issue is overlooked, an amended H-1B petition will need to be filed with USCIS, potentially costing the company thousands of dollars per employee.
One issue that often comes up in the situation of a successor-in-interest is when an H-1B employee needs to travel abroad. Generally, in order to reenter the United States, the employee must have a valid H-1B visa annotated with the petitioning employer's name. However, in this case, the visa annotation would list the predecessor employer, which could cause the employee difficulty when trying to reenter the United States. In addition, a new visa may only be obtained when the successor employer files an extension or amended H-1B visa petition with USCIS, and that petition is subsequently approved on behalf of the employee. Collaboration with an experienced immigration attorney prior to finalizing the corporate reorganization can help prevent these issues from occurring, thereby minimizing the stress to employees and human resource specialists.
Another potential issue with regard to H-1B visas is whether a merger or acquisition results in the new entity becoming H-1B dependent. An employer is considered to be H-1B dependent if it has fewer than 25 full-time employees, more than 7 of whom are on H-1B visas; 26-50 full-time employees with more than 12 on H-1B visas; or more than 50 full-time employees where more than 15 percent are on H-1B visas. This is a critical determination to make because H-1B dependent employers are subject to additional compliance and attestation requirements. For example, prior to hiring an H-1B worker, an H-1B dependent employer must make a good faith effort to recruit U.S. workers for the offered position through advertising, job fairs, and other forms of industry-wide recruitment. Furthermore, the employer must offer the job to any equally or better qualified U.S. worker who applies for the position and must not favor current nonimmigrant employees who have not yet obtained H-1B status (such as students currently working pursuant to Optional Practical Training). Because of the arduous process that H-1B dependent employers have to go through prior to hiring a foreign national, most companies try to avoid becoming H-1B dependent at all costs.
Another visa category commonly affected by a corporate transaction is the L-1 temporary work visa. The L-1 visa is useful for multinational companies that wish to transfer managers, executives, and specialized knowledge employees to serve in similar positions at a qualifying organization in the United States. In order to qualify for an L-1 visa, the employee must have been employed for at least one year in the past three years by a foreign parent, subsidiary, affiliate, or branch of the U.S. company. Therefore, if the merger or acquisition of a company alters the organizational structure so that there is no longer a qualifying corporate relationship between the U.S. employer and the foreign entity, L-1 employees in the United States may lose their eligibility. It is important to note, however, that the foreign entity that actually employed the L-1 transferee does not have to remain in existence as long as there is another foreign entity that has a qualifying relationship with the U.S. employer. A merger or acquisition that does not destroy the qualifying relationship merely imposes an obligation upon the employer to notify USCIS of the change in the organizational structure at the time of filing a petition for the extension of the employee's L-1 visa status. However, if the worker is moved to a different related entity, an amended L-1 petition may need to be filed with USCIS.