ARE YOUR FOREIGN EMPLOYEES' WORK VISAS AT RISK IN LIGHT OF M&A?

In the dynamic landscape of today's business environment, mergers and acquisitions (M&A) have become commonplace, driving corporate growth and market expansion. However, amidst the strategic maneuvering and business restructuring, the fate of foreign employees' visas or work permits is often overlooked or underestimated by Human Resources (HR) departments. The potential impacts of M&A on foreign employees' immigration status can be significant, ranging from visa complications to jeopardizing employment authorization.

It is crucial for organizations engaging in M&A activities to proactively address the immigration aspects, ensuring that foreign employees are safeguarded against potential disruptions and that the transition is managed seamlessly. Planning ahead and considering the implications on foreign workers' visas is essential to mitigate adverse effects and prepare for regulatory changes that might arise during or after the merger process. M&A activity can significantly impact the immigration landscape for both the company being acquired and its foreign workforce. Here’s why:

1. Visa Validity

One of the immediate concerns during M&A activity is the validity of work visas for employees of the acquired company. Any changes in ownership or structure might trigger visa complications, potentially rendering these employees' visas invalid. Work visas are typically tied to a specific employer. In the case of an acquisition, employees may find themselves without an employer sponsor, raising questions about their legal status to work in the new organization.

2. “Successor-in-interest”

The concept of “successor-in-interest” in the context of immigration law refers to a situation where one business entity takes over another through a merger, acquisition, or similar structural change. When this happens, the new entity often assumes the rights, responsibilities, and obligations of the old one, including those pertaining to existing foreign employees' immigration status. In simpler terms, if a company A buys or merges with company B, the employees of company B might continue working for the new entity without losing their work visas or permits, as long as certain legal conditions are met. This concept aims to ensure that employees' immigration rights are protected during business transitions, allowing them to continue their employment with the new entity without disruption to their immigration status.

USCIS Policy Memo states:

When a company is bought, merged, changes corporate structure, or significantly changes owners, the new or reorganized company may demonstrate to USCIS that it can be considered a successor in interest (successor) of the original company to assume the predecessor’s prior immigrant benefits requests.

Traditionally, establishing a successor-in-interest required the successor entity to demonstrate a substantial assumption of the interests, obligations, assets, and liabilities of the original employer while continuing the same type of business. Determining whether a company met these requirements was and still is best done on a case-by-case basis. Recent legal changes have relaxed this stringent and sometimes impractical standard. Presently, successor in interest determinations hinge on whether the new entity has explicitly assumed the immigration-related obligations and liabilities of the original employer.

Here's an overview of how mergers and acquisitions (M&A) can affect different types of visas and green card sponsorship in the context of the successor-in-interest concept:

a. TN Visa

The TN visa, available under the USMCA (previously known as the NAFTA agreement) for Canadian and Mexican professionals, is employer-specific. In the event of a merger or acquisition where the employer changes, TN visa holders may risk losing their visa status. However, if the new employer qualifies as a successor in interest, the TN visa status for employees should remain unaffected. If the new employer fails to meet the criteria as a successor-in-interest, or if there are significant changes in the employees' job functions, individuals would need to reapply for the TN visa under the new employer, ensuring they meet all eligibility criteria.

b. L Visa

L-1 visas for intra-company transfers might encounter complications during M&A. This visa type requires that the U.S. and foreign entities have common ownership and control. However, an M&A is likely to alter the ownership and control of both the foreign entities and the U.S. entity, potentially jeopardizing the qualifying relationship necessary for these visas. Even if the L-1 status is not terminated, corporate restructuring often necessitates employees filing an amended petition to reaffirm the ongoing existence of a qualifying relationship for best practice.

c. E Visa

E-1 and E-2 visas, designated for treaty traders and investors, could face uncertainties during M&A. Alterations in the ownership structure might impact the qualifications related to the treaty country. Treaty visas necessitate the employer(s) with the treaty national to maintain at least a 50% ownership. In cases where employees share the same nationality as the treaty country employer, a merger or acquisition might result in the reduction of ownership of the treaty country employer to below 50%. This change could potentially cause the affected employees to lose their treaty trader or treaty investor status.

d. H-1B Visa

H-1B visa holders might face challenges if their employer changes due to an acquisition. If the new employer is a successor-in-interest to the acquired entity and will continue to employ H-1B employees in the same job function and duties located in the same Metropolitan Statistical Area (MSA), then it is not required to file amended H-1B petitions or new Labor Condition Applications. The employer must, however, update the Public Access Files for each Labor Condition Application with a corresponding H-1B employee who will continue to be employed by a new entity after the merger or acquisition.

If the employer does not qualify as a successor in interest, the H-1B employee might leverage the “portability” provisions to begin working for the newly established or restructured entity. Nevertheless, navigating these portability provisions can be complex, and employees might inadvertently violate their status if they fail to adhere to the proper procedures. The new employer must file an H-1B amendment petition, and if the job roles differ significantly, it might affect visa status or eligibility.

e. O-1 Visa

Like H-1B visa holders, individuals holding O-1 visas (granted due to extraordinary ability in fields such as science, business, education, arts, athletics, etc.), might encounter complications during employer changes resulting from mergers or acquisitions. If the acquiring company does not qualify as a successor in interest, O-1 visa holders may need to undergo a visa reapplication. Unlike H-1B visa holders, O-1 visa holders cannot benefit from the portability rule. They must await approval of the new O-1 visa before being authorized to work.

3.  Impact on Green Card Applications

Employees in the process of obtaining a green card might face interruptions or delays due to M&A activity. Changes in employment status or company structure could influence their application process and timeline. For employees in the process of obtaining a green card (EB-1, EB-2, EB-3, etc.), M&A can affect the sponsorship. Changes in employment terms, employer structure, or job roles might require reapplication or updates in the green card process. If the new employer qualifies as the successor-in-interest, depending on the immigration stages of the petitions, the below actions need to be taken:

· If Permanent Labor Certifications (PERMs) are pending from the previous employer for their employees, the new employer does not need to re-file the PERM, instead, it can submit I-140 with evidence of the merger to move the case forward, till the PERMs get approved.

· If the previous employer has pending or approved I-140, the new employer will need to re-file a new I-140 with merger information;

· If the employees have pending I-485s indicating the previous employer, and it has been pending for over 180 days, than American Competitiveness in the Twenty-First Century Act of 2000 (“AC21”) portability works here, and the approval notice can be transferred to the new employer. If it is less than 180 days, there might be need to amend the I-140.

4. Compliance with Regulations

Compliance with immigration laws and regulations is crucial during M&A events. Mishandling or overlooking visa-related matters might lead to legal repercussions, affecting both employees and the acquiring company.

5. Communication and Transparency

Maintaining open communication with affected employees and providing clarity regarding their visa statuses during and after the M&A process is essential. Transparency builds trust and enables employees to navigate potential uncertainties.

Needless to say, navigating the complex intersection of M&A and immigration requires strategic planning and careful execution. Companies involved in such transactions should prioritize addressing the impact on their foreign employees' work visas. Seeking legal counsel specializing in immigration law early in the M&A process can help mitigate risks and ensure compliance, safeguarding the interests of both the employees and the acquiring company.