Neglecting immigration compliance during mergers or acquisitions can expose firms to costly consequences.
There has been a flurry of merger and acquisition activity in the AEC industry in the last few years. There were 427 transactions announced in 2023, and AEC firms saw a 33 percent increase in M&A deals in Q3 of 2024, year-over-year. There appears to be similar momentum in the early months of this year.
Immigration is rarely the first item on the due diligence checklist for AEC firms engaged in merger or acquisition discussions. However, overlooking this aspect of compliance could cost significant resources, and lead to financial and even criminal consequences, particularly in the current environment of heightened employer enforcement.
Worksite compliance matters have been featured heavily in the news in recent months. These stories tend to focus on audits, raids and visits from the Department of Homeland Security fraud unit, all of which remain critical components of employer compliance given ongoing enforcement efforts. Shoring up these aspects of your internal business practices is essential.
However, the potential loss of key personnel or unanticipated costs to retain foreign national employees whose status is impacted by organizational restructuring through a merger or acquisition, creates its own significant compliance concerns. Lapses in work authorization or the inability to retain critical employees has the potential to delay project deliverables, add significant expenses, and hinder the continuity of services that can frustrate business development.
But with strategic planning, AEC firms can proactively assess and address compliance issues that allow for an informed plan to transition newly acquired foreign national employees, retain critical talent, and comply with regulations. Best immigration practices during the merger and acquisition process include:
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Conducting an immigration audit during due diligence. Corporate restructuring has immigration consequences for foreign national employees on temporary visas (H-1B, L-1, TN). Due diligence should include a complete review of all foreign national employees, particularly visa-sponsored employees, to determine the potential impact of their continued visa eligibility and work authorization.
Changes to corporate structure, location, and FEIN number, in addition to more complex considerations of the deal – such as whether it is an asset only sale, all factor into the ability and cost of retaining sponsored employees.
Experienced immigration counsel can help acquiring companies perform this pre-close audit. -
I-9 compliance and E-Verify considerations. Assuming another company’s Form I-9 records can be highly risky. Review of at least a representative sample provides the opportunity to gauge compliance with immigration laws as well as evaluate business practices in relation to employment discrimination laws, particularly given new enforcement plans under the Department of Justice Whistleblower program. This information will also inform future decisions on whether to consider their acquired employee as “new” or “continuing” as they plan their integration strategy.
Of note, I-9 audits are among the most common type of immigration worksite enforcement. Led by Homeland Security Investigations, officers will issue a Notice of Intent to Inspect and generally give companies only three business days to respond with the required documentation. Proactive review of existing and newly acquired records is essential as civil fines range from $200 to $2,300 per technical error.
According to research analyzed by Equifax, it is estimated that 60 percent to 80 percent of paper I-9s are missing, incomplete or have errors.
The purchasing company should also determine whether the entity they are acquiring uses E-Verify and whether they will need to do so moving forward. While not federally mandated, many state laws do require E-Verify enrollment depending on industry, and number of employees. -
Assessing “Successor-in-Interest” status. Acquisitions which result in the assumption of all liabilities and legal obligations by the purchasing company are deemed a “Successor-in-Interest” by USCIS.
This allows the most flexibility in the retention of visa-sponsored employees at the lowest cost. Knowing the critical roles such employees hold within the firm may factor into ongoing cost-benefit analysis and could provide additional negotiating leverage. - Identifying any high-risk employees. Some foreign nationals are at higher risk of losing status following a merger or acquisition. L-1 intracompany transferee visa holders are particularly vulnerable as their status is tied to a qualifying relationship with a foreign entity. Disruption of this relationship could eliminate their eligibility for this classification. This also holds true for E-1/E-2 sponsored employees whose status is linked to the nationality of their corporate ownership.
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Transition planning to minimize disruptions. Corpore structure changes can create unanticipated and unwelcome unpredictability for companies and key foreign national employees. Immigration considerations during the due diligence process assist companies with maintaining business continuity, critical talent, and compliance with federal regulations.
Post merger assessments often result in greater expenses and uncertainty for both management and employees. Clear communication of business policies by human resources and the transition team helps reduce uneasiness for current employees and identifies areas that require troubleshooting. -
Regulatory readiness. Increased government worksite visits and targeted enforcement of specific industries, including construction, require companies to be vigilant in their preparation. Immigration enforcement includes multiple agencies with officers from USCIS (United States Citizenship and Immigration Services), ICE (Immigration and Custom Enforcement), and HSI (Homeland Security Investigations) authorized to undertake investigations.
Companies should minimally have a designated point of contact for interaction with governmental agencies; understand the makeup of their employees and their immigration status; have their documents organized and accessible; inform staff and employees of their rights during a visit; and ensure their workplace meets OSHA standards, with all necessary notices displayed.
Overlooking immigration compliance during mergers or acquisitions can expose firms to costly consequences – including fines, workforce disruptions, and unforeseen legal liabilities. As AEC companies navigate restructurings, acquisitions, or other corporate transitions, engaging experienced immigration counsel is essential to assess risk, maintain workforce integrity, and ensure regulatory
alignment.
Nam Douglass, Esq., is a N.C. Board Certified Immigration Law Specialist and partner at Garfinkel Immigration Law Firm. Contact her at nam.douglass@garfinkelimmigration.com.