2015 was a record-setting year for mergers and acquisitions, with $4.304 trillion in M&A activity last year topping the previous record of $4.296 trillion in 2007. M&A activity was encouraged by increased confidence, cheap debt and increasing pressures to compete with consolidating rivals in a slow-growth economy. This trend likely will continue into the foreseeable future so companies should be versed in the immigration consequences that flow from M&A activity.
When companies merge, the transaction normally modifies the employment status of individuals who worked for either the purchased entity or the surviving company. Various levels of due diligence apply to any M&A transaction. However, an often-overlooked issue concerns the liability the successor employer may have with respect to I-9 violations that were committed by the predecessor employer before the merger is consummated. A common question is whether Forms I-9 should be completed for the surviving employees or whether the surviving entity can rely on the predecessor’s Forms I-9 and records.
Here are some practical employment/immigration-related considerations that should be observed as part of due diligence in the context of mergers and acquisitions.
• Merger/acquisition scenarios normally involve a change of employment status for the predecessor’s employees. If an individual is continuing employment with the successor entity after a merger/acquisition and has a reasonable expectation of employment at all times, then new Forms I-9 are not required if the previous employer’s records and Forms I-9 are retained. An employee has a reasonable expectation of continued employment in a merger/acquisition when:
◦ The individual was employed on a regular and substantial basis.
◦ The individual complied with the employer’s established policy regarding any absence.
◦ The employer’s past history of recalling absent employees for employment indicates a likelihood that the individual in question will resume employment within a reasonable time in the future.
◦ The former position held by the individual has not been taken by another worker.
◦ The individual has not sought or obtained benefits during his absence that are inconsistent with an expectation of resuming employment within a reasonable time in the future.
◦ The financial condition of the employer indicates the ability of the employer to permit the individual to resume employment within a reasonable time in the future.
◦ The oral and written communications indicate that the individual will resume employment within a reasonable time in the future.
Successor entities should inspect/audit the predecessor employer’s Forms I-9 as part of due diligence before the transaction is consummated. Potential Form I-9 contingent liability issues should be identified and resolve before the transaction is completed.
For more information concerning the Form I-9 due diligence that should be completed in the context of a corporate merger/acquisition, contact Brandon Davis at firstname.lastname@example.org.