ABCs of Immigration: The Impact of Mergers and Acquisitions on Physician Immigration

[This month’s ABCs of Immigration issue is adapted from Greg Siskind’s new book, co-authored by Elissa Taub, The Physician Immigration Handbook.]

ABCs of Immigration: The Impact of Mergers and Acquisitions on Physician Immigration

The health care industry has been experiencing consolidation for decades, the pace of merger and acquisition activity within the sector, however, has increased significantly within the past few years. Hospital systems have been purchasing independent hospitals, physician practices have been purchased by hospitals, and a doctor will often discover that the employer which hired him or her will change as a consequence of these corporate transactions.

The results of the transaction can be extremely severe and detrimental, if immigration issues are not attended to. Physicians can find themselves in a situation in which they are illegally present, resulting in their potential deportation and significant penalties and fines for their employers. Hospitals could potentially lose their business licenses, government contract access, and even face lawsuits from employees whose immigration status the hospitals ignored during the deal. Patients may also discover that needed health care professionals are no longer available due either to their immigration status being compromised or their departure to another company which has been proactive in managing the employee’s visa process.

The degree of impact of a corporate change will vary from foreign employee to foreign employee and is affected by the type of visa or status the individual holds and where in the immigration process he or she is.

Considering the potential risks, it would be safe to assume that immigration issues are commonly addressed in the pre-closing stage of a corporate transaction, but in reality the opposite is true more often than not, with issues going unnoticed until it is too late to prevent serious ramifications.

What issued need to be considered to determine if a deal impacts an immigrant physician?

When assessing the impact a transaction will have on an immigrant physician, the following questions should be addressed:

1. What type of deal is happening?
2. When will the deal be closing?
3. What type of visa does the physician have?
4. Is a permanent residency application pending?

What are the types of deals that can affect a physician’s immigration status?

Corporate changes commonly consequential to immigration status are stock or asset acquisitions, mergers, consolidations, initial public offerings, spin-offs, corporate name changes, changes in payroll source, and the relocation of an employer or its employees.

The type of deal in question is imperative. If the employing entity is removed from the equation, a new employee identification number could affect the visas of the acquired company’s employees. Some deals only involve acquiring specifically noted assets of the seller, while others are purchases of an entire company even that company’s debts. This is pertinent because government agencies will occasionally permit companies who are “successors of interest” to avoid new filings.

How does the timing of the closing affect a physician’s immigration status?

Though some deals are announced in the news and it may take many months for them to close, others are decided at a high level unbeknownst to the employees of the company and the broader public until much closer to the date the deal closes. This is noteworthy because dependent upon the type of visa, it may be necessary to file documents before the closing which could require sufficient lead-time.

How are H-1B visa holder potentially affected by a transaction?

In H-1B cases, important aspects to investigate are whether a corporate change results in a new employer, and if that is the case then to what extent are the interests of the target corporation being assumed?

Before December 2000, the Department of Labor (DOL) identified a change in an employer’s Federal Employer Identification Number (FEIN) as a qualifying reason to trigger a need to file a new Labor Condition Application (LCA). According to the regulations implemented on December 22, 2000, a new LCA will not be required only because a corporate reorganization results in a change of corporate identity, regardless of whether there is a change in FEIN, provided that the successor entity, prior to the continued employment of the H-1B worker, agrees to assume the predecessor’s obligations and liabilities under the LCA with a memorandum to the “public access file” kept for LCA purposes. Material changes in the responsibilities and job requirements of the employee and the employee’s relocation may necessitate a new LCA. Thusly, new LCAs will be required for H-1B workers who are relocated as the result of a merger or sale.

Though similar to the LCA, the rules which dictate the circumstances under which a new Form I-129, Petition for a Nonimmigrant Worker has to be filed with United States Citizenship and Immigration Services (USCIS) are not identical. Needing to file a new I-129 can be a relatively expensive undertaking. Each new employment petition requires the employer to pay the American Competitiveness and Workforce Improvement fee which is $1,500 for businesses with more than 25 employees and $750 for businesses with fewer employees. This is in combination with a fraud fee of $500, a base filing fee of $230, and for fast adjudication a $1,225 premium processing fee. This brings the total for each worker to $3,500, without accounting for attorney’s fees.

Within the Immigration and Nationality Act, an exemption from filing a new Form I-129 exists in cases of corporate restructuring where the new employer is a successor-in-interest which assumes the interests and obligations of the previous employer. This restates a USCIS policy which waives the need for a new or amended petition as long as an employer, for H-1B purposes, “assumes the previous owner’s liabilities which include the assertions the prior owner made on the labor condition application.” If exempted, the employer can wait before notifying USCIS when it files an extension petition for the employee.

In the realm of health care more so than other industries, it is far more common to lose eligibility for cap-exempt status. Cap-exempt employers who are acquired by cap-exempt companies face additional challenges.

If an employee’s H-1B status is predicated by that employee’s status as exempt from the quota limitations, the physician will want to assess whether cap=exempt status is lost after closing. A loss of cap-exempt status would render continued employment by the succeeding entity as an H-1B status holder impossible. Though USCIS has never explicitly stated that a loss of H-1B cap exemption status is a material change requiring an amendment, the issue would definitely need to be ameliorated at the time of an extension.

The timing of filing H-1B visas in such a case or the timing of the closing of the transaction can be affected by visa availability. Attempting to secure visa numbers while still available, a number of employers try to file new cap-subject petitions as early as possible, which can be as early as 180 days prior to the start date for an employee. In the case of an acquisition, this is generally the closing date. In certain cases, the acquiring entity might lack flexibility if a new subsidiary entity is being created for the acquisition. Other employers might aim to time the closing of the acquisition in accordance with when visa numbers are available.

Teaching hospitals similarly face the problem of having residency programs that annually begin on July 1, which is a time of year in which H-1B cap numbers are extremely unlikely to be available, even in a down economy. Additionally, medical residents are generally selected only a few months prior to that date, so filing far enough in advance for an H-1B might not be practical. When faced with such a situation, some employers might decide to use the J-1 exchange program to employ medical residents and fellows. Teaching hospitals may be concerned, however, that they could potentially lose some of their best prospects if using the J-1 program exclusively, though the proportion of J-1s gas increased in recent years in relation to H-1Bs.

In the past, numerous for-profit employers have maneuvered the cap-exemption challenge by creating a new nonprofit subsidiary entity and re-establishing an appropriate association between the entity and a qualifying university or nonprofit research institution. Beginning in 2011, USCIS controversially started contesting the affiliations of many employers, including numerous teaching hospitals, which claimed cap-exemption status. USCIS decided to pull back on pursuing so aggressively, releasing a memorandum which stated that entities, having previously been granted cap-exempt status, would be given difference, as long as the employer had filed an H-1B cap-exempt petition after June 6, 2006. The memorandum does not address, however, successor-in-interest situations, so employers would possibly face close scrutiny in order to determine if the affiliation qualifies.

Acquisitions can also affect physicians who are completing their three-year service requirement in H-1B status following a J-1 waiver. If it is a new H-1B petition that is being files and the employer is changing, then the physician is required to demonstrate that a number of requirements are still valid. The physician will need to prove that he or she is still working in an underserved area, that he or she has a contract for the balance of the three-year service requirement, and that extenuating circumstances exist which justify the change in employers. An acquisition would generally constitute such a circumstance. There is a caveat that should be addressed; states are permitted up to 10 “flex” slots annually for J-1 waiver applicants. These applicants are allowed to work in areas not federally recognized as shortage areas, provided they are able to demonstrate that they are providing care to patients from shortage areas. Unfortunately prohibited are transfers from one flex location to another, so USCIS could potentially deny the change of employer petition if the work is not being done in a federally designated shortage are even if the work location remains unchanged.

What does the corporate reorganization memorandum for the employee’s public access file need to say?

Below is a sample corporate reorganization memo:

CORPORATE REORGANIZATION STATEMENT

Full name of New Employer: ABC Health System, LLC

Federal Employer Identification Number (FEIN): _________

Actual Wage System

On January 1, 2015, there were ____ [number] Pulmonary and Critical Care Medicine Specialists employed by ABC Health System, LLC in XXX, Washington.

Their salaries range from $_____ to $_____. The salaries of individuals holding this position were determined on the basis of a number of criteria, including:

• Level of education;
• Years of experience in the specific field of occupation;
• Specific responsibilities and duties involved; and
• [any other criteria specifically relevant to the position]

Salaries of employees are adjusted on an ______ [annual, periodic, etc.] basis, based upon [performance reviews, cost of living adjustments, etc.].

Please note that the employer applies the same methodology to all U.S. and H-1B employees in the classification when determining the actual wage, based upon the above referenced criteria.

Sworn Statement

I, _____, am an authorized representative of Employer, and make the following statements pursuant to 20 CFR §655.730€(iv):

1. Employer assumes all obligation, liabilities and undertakings arising from or under the attestations made in each certified LCA, and still effective LCA, filed by XYZ Health Services on behalf of the employees transferring to Employer;
2. Employer agrees to maintain a copy of this statement in the public access file;
3. Employer agrees to abide by DOLS’s H-1B regulations applicable LCAs; and
4. Employer agrees to make the document required under 22 CFR §655.730(e) available to any member of the public and the Department of Labor upon request.

I declare that the above is true and correct, executed this ____ day of ____, in the city of ____, ____ [state].

Name

Title:____

List of each LCA Affected by Corporate Reorganization with Name, ETA Number, and Date of Certification.

How are physicians on J-1 visas affected by major corporate transactions?

Luckily, acquisitions do not commonly affect the continuance of working without disruption for J-1 visa holders. This is due to the Educational Commission on Foreign Medical Graduates (ECFMG) being the petitioner in a J-1 case and not the actual teaching hospital. Though ECFMG does expect to receive notification in the event of an institution changing hands, the Form DS-2019, Certificate of Eligibility for Exchange Visitor (J-1) Status, which each J-1 physician possesses usually notes only the name of the hospital, making altering the existing DS-2019 forms unnecessary as long as the hospital’s name remains unchanged in the transaction.

How are green-card applications affected by mergers and acquisitions?

The first step in acquiring a green card for most physicians is seeking a labor certification from the Department of Labor (DOL). DOL’s perception of a corporate transaction in terms of the impact on a labor certification application

DOL holds a liberal view of when a new labor certification petition needs refiling. After an inquisition, if a new owner remains the worker’s employer and has assumed all of the past owner’s obligations, then the new owner should qualify as a “successor-in-interest” and a labor certification will survive.

In a June 2009 memorandum in which it addressed successorship and I-140 petitions, USCIS eased the requirements and laid out a process employers can follow in successor-in-interest situations. Employers do not need to demonstrate that all of the assets and liabilities have been assumed, rather an August 2009 USCIS memorandum instructs USCIS examiners to consider three factors in determining whether an employee is a successor-in-interest:

“(1) whether it’s the same job; (2) if the successor has established eligibility for the requested visa classification in all respects; and (3) if the successor has adequately detailed the nature of the transfer of rights, obligations, and ownership of the prior entity. If a business can establish these three factors, it is possible to find a valid successor-in-interest relationship even in situations where a successor does not wholly assume a predecessor entity’s rights, duties and obligations.”

Successor employers must submit an I-140 amendment reaffirming the labor certification and including documentation of the three aforementioned factors.

Petitions which are self-sponsored by the physician, including regular national interest petitions and EB-1 extraordinary ability cases, are not usually affected by major transactions. In select cases, however, an employment relationship is how an applicant show that he or she plans to work in the field upon approval of permanent residency. If the transaction would result in an employee losing the position, the employee’s ability to qualify for EB-1 or EB-2 status could potentially be affected.

In the August 2009 Neufield memorandum, USCIS stated that permanent residency petitions which do not require a labor certification, including EB-1 and EB-2 cases, do not require an I-140 amendment. According to the memorandum, EB-1 outstanding researchers or professors, EB-1 multinational managers and executives, and employer-petitioned physician National Interest Waiver cases all require new I-140 petitions. The employee would keep, however, the priority date of the previously filed I-140 approved in the same category.

Doctors have the ability to pursue permanent residency through a national interest category, which would entail working five years in a medically underserved area. These physician national interest cases can be sponsored either by the employer or self-sponsored by the doctor. There would be a new I-140 required in a successor situation for employer-sponsored cases, but physicians who self-sponsor generally do not need to file a new I-140 since the petition is not based upon an employer’s petition.

Even if an employer fails to qualify as a successor-in-interest, employees who have pending adjustment-of-status applications can have another option for maintaining a permanent residency application. Adjusting applications which are pending for at least six months will remain active as long as an employee finds new employment in the same or similar occupation. However, due to the length of green card backlogs, most applicants are unable to fila a Form I-485, Application to Register Permanent Residence or Adjust Status. Since this is the case, the applicant might find his or her petition to be nullified if the original job offer is revoked.

What immigration issues does an employer need to consider in a major corporate transaction?

As previously mentioned, understanding the severity of potential risks, in a corporate transaction, immigration issues need to be carefully assessed. Employers generally should:

1. Ensure the transference of visas to a new employer before closing when a closing will affect the visa’s validity, or consider moving a transaction’s closing date if it will significantly impact the employees’ ability to keep working.
2. File amendments prior to or shortly after closing, unless regulations prohibit filing after closing.
3. Move employees to new visa categories before the closing when they will no longer be eligible in a particular category after closing.
4. Start green-card processing early in order to minimize the number of nonimmigrant visas requiring attention.
5. Incorporate immigration inquiries into the due-diligence inquiry, and incorporate representations and warranties addressing immigration issues into the transaction documents.
6. Conduct an employee-by-employee analysis to determine what actions must be taken, once the acquiring employer identifies all of the employees on nonimmigrant visas or in the process of applying for permanent residency.
7. Transactions can induce a great deal of anxiety amongst employees and human resource professionals. Once the plan for the workers is determined, both the current and the acquiring employer should facilitate joint communication with affected workers to discuss what the transaction will mean for their immigration status and what procedures will be undertaken ensuring the maintenance employee’s status without adverse consequences. While it is impossible to guarantee that no adverse consequences will occur, that information should also be disclosed to employees.
8. Employers may want to weigh various options for communicating with employees. A preferable option is to prepare a written explanation in which common questions are addressed. One-on-one meetings or group meetings or phone calls with the employees and the acquiring company’s immigration attorney can also be beneficial.
9. In the time following a closing, any employee attempting to travel can be cumbersome. Though an employer can meet the successor-in-interest tests which ensure new petitions are not required, this does not guarantee an employee will be free from issues when seeking a visa stamp or entering an airport or land point of entry. It can be a good idea for employers to consider having their immigration counsel prepare travel packets for each employee that include a letter to the U.S. Customs and Border Protection or consular officer explaining what has happened and what immigration law specifically requires of the employer for a particular employee, documentation of successorship-in-interest, and any additional relevant documents (an H-1B corporate reorganization memorandum for example). If a new position needs to be filed for an employee, like in the event that a successor-in-interest test is not being met, employees should be advised that they might find travelling before the closing to be a more beneficial plan, or they may face a delay in re-entering the United States if a new visa stamp must be issued.
10. Immigration and transaction counsel should remain engaged in regular communications; this is particularly important because closing dates are often delayed and required filings could be needed to be timed to coincide with the closing.

What immigration-related documents should be requested in a due-diligence checklist?

It is important for any company involved in a major corporate transaction to have a thorough understanding of the other company’s immigration issues before the transaction’s closing. There are certain documents that, as a result, should be included in a due-diligence checklist of requested documents to review in the time leading up to the closing of the deal. The following are immigration documents to request in a due-diligence checklist:

1. Provide an exhaustive list of employees who are not U.S. lawful permanent residents or citizens. These employees should be broken down by visa category, work authorization expiration date, number of years in a particular visa category, the employee’s worksite and whether any nonimmigrant visa applications or extension petitions or permanent residency petitions are pending or promised. It is also important to note any augmentations made to job responsibilities, location or salary that will result from the transaction.
2. For the list of employees mentioned above, provide a copy of all documents relating to such employees’ immigration status, including, but not limited to:
   1. Nonimmigrant visa applications and extension petitions;
   2. Employment authorization documents;
   3. I-9 Forms;
   4. Labor certification and immigrant visa applications and supporting documentation;
   5. Approval notices and correspondence with any government agencies;
   6. I-94 forms and passport visa stamps;
   7. Visa documentation for the employees’ spouses and minor children; and
   8. H-1B public access files.
3. Supply all copies of correspondence with the Social Security Administration relating to the “mismatch” of Social Security numbers for any employees.
4. Provide copies of any correspondence with agencies of the Department of Homeland Security, Department of Labor, Department of Justice, or Department of State regarding compliance with the country’s immigration laws.
5. Provide a copy of all I-9s required to be kept by the employer. [Provide a list of all employees of the company employed since 1986. Counsel will select ____ employees from the list and request their I-9s be provided].

What language should be included in the corporate transaction documents to ensure immigration issues are addressed?

The following sample language might be considered for inclusion in the transaction contract documents:

Contract Representation and Warranty

Immigration. All necessary visa or work authorization petitions have been timely and properly filed on behalf of any employees requiring a visa stamp, I-94 status document, employment authorization document, or any other immigration document to legally work in the United States. All paperwork retention requirements with respect to such applications and petitions have been met. No employees have ever worked without employment authorization from the Department of Homeland Security or any other government agency that must authorize such employment and any employment of foreign nationals has complied with applicable immigration laws. I-9 forms have been timely and properly completed for all employees hired since the establishment of the company or the effective date of the Immigration and Control Act of 1986, whichever is earlier. I-9 forms have been lawfully retained and re-verified. There are no claims, lawsuits, actions, arbitrations, administrative or other proceedings, governmental investigations or inquiries pending or threatened against the Company relating to the Company’s compliance with local, state, or federal immigration regulations, including, but not limited to, compliance with any immigration laws except for employees named in schedule __.

There have been no letters received from the Social Security Administration (SSA) regarding the failure of an employee’s Social Security number to match his or her name in the SSA database. There have been no letters or other correspondence received from the Department of Homeland Security or other agencies regarding the employment authorization of any employees. If the Company operates in a state or has contracts with a state or federal agency that requires or provides a safe harbor if an employer participates in the Department of Homeland Security’s e-Verify electronic employment verification system, the Company has been participating in e-Verify for the entire period such participation has been required or available as a safe harbor or as long as the Company has been operating in such state or contracting with such agency.

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