Look Before You Leap: How to Avoid Immigration Pitfalls Resulting from Corporate Restructuring ⋆ Borene Law Firm, P.A.

Look Before You Leap: How to Avoid Immigration Pitfalls Resulting from Corporate Restructuring

By Scott M. Borene*

Employment of foreign workers in the United States has increased to the point where the average U.S. employer’s foreign-born workforce may exceed 10% or more of its total employees. Even employers who have tried to hire only U.S. workers may find that they have some foreign workers on their payroll, perhaps even in key positions. If you are among the many employers contemplating a change in corporate structure, you may have foreign employees who will be affected by the restructuring.

Many types of corporate change can alter the employability of foreign workers, including moving the company from one area to another, changing the corporate name, changing ownership, buying a new company, selling the company, merging with another company, spinning off part of the company, or dissolving the company. Whatever the type of change, however inconsequential it may seem or how invisible it may appear to the public or employees, it can potentially have a dramatic impact on the legal status and employability of your foreign workers.

When an employer restructures, the foreign workers are not automatically included in the transfer of assets and operations. Depending on a foreign worker’s immigration status or type of employment authorization, an employer may need to take certain actions as a result of the restructuring plan to maintain the foreign worker’s legal employment authorization. Each type of foreign worker status or employment authorization has different rules relating to restructuring. In addition, different types of restructuring may lead to different immigration consequences.

Although not every foreign employee requires new visa processing, in those cases where formal action is required to preserve the employee’s legal status or employability, for the most part there is no legal grace period. Action is required prior to or contemporaneously with the entity changes.

Due Diligence

In order to prevent a disruption in the employment of foreign workers, it is essential that the employer consult with a qualified immigration lawyer as part of its preparations for restructuring. An important part of due diligence is assessing the possible immigration consequences of a restructuring event prior to completing the restructuring transactions. Under the direction of a qualified immigration attorney, the employer should complete a review of:

a) Relevant existing and draft corporate records including articles of incorporation, bylaws, resolutions, etc. for the affected entities;

b) All existing I-9 Employment Authorization Verification forms for affected employees regardless of employee’s citizenship or immigration status;

c) All H-1B LCA public disclosure files for the affected entities to determine compliance, since restructuring makes them a more likely target for INS or DOL audit;

d) The current and proposed job duties, location of employment, employer’s identity and compensation for all current non-U.S. workers in any of the affected entities, including those who hold TN, H-1B, L-1, O-1, F-1 or J-1 status, in order to compare the terms of employment to the terms authorized by the TN employer letter, H-1B petition, L-1 petition, O-1 petition, I-20 (CPT) or IAP-66.

I-9 Compliance

A new employing entity or entities may “take over” the I-9’s of a predecessor company in some cases. However, in a partial acquisition or spin-off restructuring, new I-9’s may be required. A prompt audit of the current I-9’s is advisable. In those cases where a new entity can take over the existing I-9’s of a predecessor, it will also inherit the immigration compliance liabilities; if new I-9’s are required, it is an opportunity to start fresh. In those cases where the new employer had to file new employment petitions, new I-9’s must be completed when the new authorization is obtained.

Although the above list of tasks may be unwelcome news, since restructuring is complex enough without the added component of immigration-related issues, it cannot be stressed enough that immigration compliance is an inescapable part of due diligence. Without an adequate immigration compliance plan, the employer’s worst-case scenario includes illegal and deportable foreign workers, and civil penalties for undocumented workers. Employment would be interrupted, delayed or terminated unless the new entity takes timely action to obtain the proper type of status or authorization for foreign workers.

Status-by-Status Review of Possible Restructuring Consequences

For Permanent Residents:

Those foreign employees who have already obtained Permanent Resident (“green card”) status generally do not present a challenge; for the most part, a restructuring will have no consequences to PR’s. It would be prudent to identify those who obtained PR status within the previous two years, and determine if action may be needed to prevent a loss of PR status.

For F-1 students:

F-1 students who are working during optional practical training with an EAD card have unrestricted employment authorization and usually no action is needed. However, any F-1 student working in Curricular Practical Training (internship) is authorized based on an endorsement of the Form I-20, showing the employer’s name. These F-1 employees should have the school endorse their I-20’s for employment with the new entity.

For J-1’s:

J status employees may be employed under a sponsoring organization such as AIPT or CIEE, or the employer may be an authorized J program sponsor. In any case, the program sponsor may be required to update the employing entity’s name in their records, but the entity change is not likely to create a status violation or disruption in employment.

For TN’s:

Canadians or Mexicans may be employed in TN status under NAFTA. The “successor in interest” rules have not been regularly applied under NAFTA. New authorizations would probably be required before the employee could work for the new entity. For Canadians, this could be done with a detailed employer letter presented to an INS inspector following a trip across the border. Mexican TN’s must be approved through a lengthier petition process.

For L-1’s:

A corporate restructuring may alter the continued employment eligibility and immigration status of L-1 international transferees. In many cases amended petitions must be filed to show changes in the approved relationships between qualifying US and foreign entities.

For H-1B’s:

Although the Visa Waiver Permanent Act of 2000 amended INA 214(c) so no amended H-1B petition is required in many restructurings, INS has advised that amended petitions be filed to facilitate the reentry of H-1B employees who travel internationally. In addition, 20 CFR 655.730(e)(l) requires that a specific sworn statement by the new entity be placed in the LCA public disclosure file prior to the worker’s employment with the new entity.

For Employees being sponsored for “Green Cards”:

Those foreign employees who have pending I-485 applications for Adjustment to Permanent Resident status (based on a particular employer’s sponsorship) which were filed at least 6 months prior to the restructuring will likely not have negative consequences if they will continue in a “same or similar occupation”. The new employing entity should provide a letter or employment agreement drafted with the assistance of immigration counsel that could be interfiled with the pending adjustment applications.

Those foreign employees whose I-485 applications may have been filed less than six months prior to the restructuring event may be able to proceed with their adjustment applications, by showing that the new employing entity is the “successor-in-interest” to their original sponsoring employer. A detailed letter from the new employing entity to INS may be sufficient, but it is also possible that INS would request that the new entity file new I-140 petitions. (Note: the immigration rules regarding “successor-in-interest” are complex and ill defined. Great care should be taken with each affected worker’s immigration case in consultation with immigration counsel).

Foreign employees who have not yet filed I-485 applications based on the employer’s sponsorship will most likely not be able to proceed to adjustment unless the new entity provides new I-140 petitions, which may be filed concurrently with the I-485 applications. INS would determine if the new entity qualifies as a “successor-in-interest”. New I-140 petitions would also be needed for employees who apply for an immigrant visa at a U.S. consular office rather than filing an I-485 adjustment application.

Workers with pending I-485 adjustment applications are eligible for employment cards and advance parole travel documents. Even if the employee’s type of nonimmigrant status requires approval of a new employment relationship due to the restructuring, the employer may be able to sidestep many of the nonimmigrant status issues for employees who are in the PR process by relying solely on Advance Parole and Employment Authorization cards for work and international travel, allowing their nonimmigrant status to lapse.

Conclusion

Each foreign employee’s circumstances should be examined on a case-by-case basis to determine if the restructuring will “kill off” the employment authorization, and if so, what is the best solution for the particular worker. You may discover that you have highly placed workers in key positions that require special procedures in order to continue their work after the reorganization. Prevent unexpected disruptions in the employment of your workers, and the possible embarrassing publicity of having “undocumented” workers, by implementing immigration due diligence at the earliest stage of your restructuring plan.

*Scott M. Borene is the Founder and Managing Attorney of Borene Law Firm, P. A. The immigration lawyers now with Borene Law Firm have more than 70 years of combined professional experience helping clients with U.S. and global visa and immigration projects. Scott Borene was selected by other lawyers as 2018 Lawyer of the Year in Immigration Law as noted by The Best Lawyers in America and Minnesota Monthly magazine. He has been repeatedly recognized as one of the Top 20 Lawyers in the World “most highly regarded by other lawyers” in corporate immigration law. He is listed in the Best Lawyers in America and acknowledged as an Immigration Law Super Lawyer. He is often called upon to act as an “expert’s expert” to advise other experienced immigration lawyers on complex immigration matters. Scott Borene is a past Director and a past Member of the Board of Governors of the American Immigration Lawyers Association (AILA), the world’s largest professional organization of immigration lawyers. In 2002, he was the founder and Conference Chair of AILA’s Global Immigration Summit in New York City, the world’s largest conference of global immigration lawyers. He has written many articles on immigration law and is a frequently invited expert speaker on immigration topics at AILA National Conferences and other major national and international legal conferences. He is the Editor-in-Chief of many leading professional reference books for immigration lawyers including The Global Immigration Guide: A Country-by-Country Survey and The Global Immigration Guide: Crossing Borders for Business, AILA’s most comprehensive books on Global Immigration. He served as Editor-in-Chief of Immigration Options for Academics and Researchers (2005), AILA’s leading Expert Occupational Handbook on immigration issues in higher education. He is the author of Dr. Yes – Some Practical Strategies for the Diagnosis and Treatment of Immigrant Visa Cases of Health Care Professionals. Scott Borene attended Harvard University in Cambridge, Massachusetts as a National Merit Scholar. After graduation from Harvard, he attended William Mitchell Law School in Minnesota. Scott Borene has more than 30 years of experience helping employers obtain work visas for key international talent. Scott Borene can be reached at sborene@borene.com.