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Update on Mergers and Acquisitions: Congress Toys with the H-1B
by Angelo A. Paparelli and Susan K. Wehrer


What is it about the H-1B category that has prompted Congress to make it the Tinkertoy®1 of nonimmigrant work visas? The Immigration Act of 1990 (IMMACT 90) began the playful manipulation. Several legislative and regulatory adjustments followed.2 Now, the latest plaything in the H-1B toy chest is § 401 of the Visa Waiver Permanent Act, a gift from Congress sent two months before the end-of-year holidays.3 As will be shown, this unexpected but welcome provision, introduced and passed without benefit of traditional committee hearings or reports, or prior consultation with the INS, takes away much, but not all, of the paperwork drudgery associated with immigration-related compliance obligations in corporate restructurings that involve H-1B workers.4


The INS' H-1B regulations have long provided that a new or amended H-1B petition must be filed if a material change occurs in the terms and conditions of the H-1B nonimmigrant's employment.5 In a 1992 memorandum to INS personnel, Executive Associate Commissioner for Operations, James J. Hogan, attempted to identify and describe specific changes that are or are not "material."6 The memorandum stated that "changes in the ownership structure of the petitioning entity do not require the filing of a new or amended [H-1B] petition."7 The memorandum noted, however, that if a corporate merger creates a new legal entity, an amended petition must be filed.8

The Department of Labor (DOL), another agency with enforcement authority over the H-1B category, has historically taken a more formulaic approach toward immigration-compliance obligations when corporate restructurings arise that affect H-1B workers. Under the DOL's historic approach, a new Labor Condition Application (LCA) was required if another corporate entity takes over H-1B employment and there is a corresponding change in the employer identification number (EIN) used to report payroll for federal income tax purposes.9 In many cases, this "new-EIN/new-LCA" requirement has been the driver in determining whether a new or amended H-1B petition must be filed. Almost by default, the INS took a knee-jerk position that if a new LCA must be filed, then a new or amended H-1B petition must be filed and approved before a change of employer could occur.10

The agencies' hard-line positions thus imposed an extremely burdensome process on H-1B employers, particularly if the transaction involved the transfer of a large number of H-1B workers. Despite repeated efforts by immigration counsel to persuade DOL to dispense with the "EIN" test, or to persuade INS to permit a streamlined or bulk-filing process, the two agencies would not acquiesce. As a result, officials at the INS Regional Service Centers and at Headquarters had generally been reluctant to dispense with the amended-petition obligation. Moreover, until the publication of final regulations,11 the DOL had been unwilling to budge on the requirement of new LCAs. Hence, many a year-end holiday season (which often coincided with the year-end calendar for tax-driven M&A transactions12) was made less festive because of the need to file and secure approval of numerous amended H-1B petitions.

· Recent Statutory and Regulatory Changes

On October 30, 2000, Congress provided relief to H-1B employers in the form of an amendment to the INA.13 The Visa Waiver Permanent Act contained a surprise provision, § 401, which amended INA § 214(c) to state that "[a]n amended H-1B petition shall not be required where the petitioning employer is involved in a corporate restructuring, including but not limited to a merger, acquisition, or consolidation, where a new corporate entity succeeds to the interests and obligations of the original petitioning employer and where the terms and conditions of employment remain the same but for the identity of the petitioner."14

Shortly thereafter, the DOL, in its interim final rule implementing the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA),15 addressed H-1B employers' LCA obligations in the event of a corporate restructuring. The interim final rule provides that "[w]here an employer undergoes a change in corporate structure," the employer must make the following documents available for inspection by the public: "a sworn statement by a responsible official of the new employing entity that it accepts all obligations, liability and undertakings under the LCAs filed by the predecessor employing entity, together with a list of each affected LCA and its date of certification, and a description of the actual wage systems and EIN of the new employing entity."16 In the preamble to the interim final rule, the DOL offered a clarifying interpretation, but with a troubling proviso. A new LCA will not be required "merely because a corporate reorganization results in a change of corporate identity, regardless of whether there is change in the EIN and regardless of whether the IRS definition of single employer is satisfied, provided that the successor entity, prior to the continued employment of the H-1B nonimmigrant, agrees to assume the predecessor entity's obligations and liabilities under the LCA."17

Thus, in the DOL's view, the statutory dispensation on the submission of amended I-129 petitions will only result in a corresponding elimination of the obligation to file new LCAs in a limited category of cases. Relief from the obligation to file new LCAs would only be allowed where the sworn statement is placed in the public access folder before the H-1B workers are transferred to the new employer. Even though the statute would appear to authorize uninterrupted employment under extant H-1Bs when corporate restructurings occur, the DOL seems to call for continuing LCA compliance if the required sworn statement does not make its way to the public access folder in advance of the transaction.18 As will be shown below, the DOL's position on the timing of the required compliance activities is questionable and probably a subject for legal challenge.

Aside from the timing issue, however, the remaining DOL compliance procedures are consistent with the agency's traditional approach to LCA oversight and are fairly straightforward. The interim final rule provides that the new employing entity must maintain a list of the H-1B nonimmigrants transferred to the employ of the new employing entity. Additionally, each public access file must contain: (1) a list of each affected LCA and its date of certification; (2) a description of the new employer's actual wage systems applicable to affected H-1B nonimmigrants; (3) the EIN of the new employer (even if the same as that of the predecessor); (4) "[a] sworn statement by an authorized representative of the new employing entity expressly acknowledging such entity's assumption of all obligations, liabilities and undertakings arising from or under attestations made in each certified and still effective LCA filed by the predecessor entity" and including the new employer's "explicit agreement" to: (i) "[a]bide by the DOL's H-1B regulations applicable to the LCAs"; (ii) "[m]aintain a copy of the statement in the public access file (see 20 CFR § 655.760)"; and (iii) "[m]ake the document available to any member of the public or the Department upon request."19

Copyright © 2001 Paparelli & Partners LLP. An earlier version of this article appeared in 2001-02 Immigration & Nationality Law Handbook, vol. II (AILA 2001), at 1-7.

1Depending on the reader's childhood era, the manipulable toy noted in the text could instead be an Erector Set®, Play-Doh®, Legos® or K'Nex®. The point of Congressional tinkering with the H-1B category nonetheless remains the same.
2See the Miscellaneous and Technical Immigration and Naturalization Amendments Act of 1991 (MTINA), Pub. L. No. 102-232, 105 Stat. 1733; American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), enacted as tit. IV of the Omnibus Consolidated and Emergency Supplemental Appropriations Act for Fiscal Year 1999, Pub. L. No. 105-277, 112 Stat. 2681; and the American Competitiveness in the 21st Century Act (AC21), Pub. L. No. 106-313, 114 Stat. 1251.
3Visa Waiver Permanent Program Act, Pub. L. 106-396, 114 Stat. 1637, amending INA § 214(c). The legislation was reported on in 77 Interpreter Releases 1562, 1563-64 (Nov. 6, 2000).
4For a more complete discussion of the impact of corporate restructurings on other immigration processes, see Paparelli, Tafapolsky, Chiappari, Cohen, and Yale-Loehr, "It Ain't Over Till It's Over: Immigration Strategies in Mergers, Acquisitions and Other Corporate Changes," Bender's Immigration Bulletin (Oct. 1, 2000 and Oct. 15, 2000); Tafapolsky, Paparelli, Vázquez-Azpiri and Wehrer, "Thriving on Change: How to Solve Immigration Problems in Merger & Acquisition Deals," New Rules for the New Millennium (AILA 2001).
58 CFR § 214.2(h)(2)(i)(E).
6INS Central Office Mem. CO 214h-C, CO 2141-C (Oct. 22, 1992), reprinted in 69 Interpreter Releases 1448 (Nov. 9, 1992). See also INS Central Office Memo, HQ 70/6.2-P (Aug. 27, 1996), reprinted in 73 Interpreter Releases 1231 (Sept. 16, 1996).
8Id. See also INS Proposed Rule regarding Petitioning Requirements for H Nonimmigrant Classification, 63 Fed. Reg. 30419, 30422 (June 4, 1998), reported on and reproduced in 75 Interpreter Releases 808 (June 8, 1998). Although never finalized, the proposed rule cited the examples provided in the Hogan Memorandum regarding what constitutes a "material change" requiring an amended H-1B petition.
9Letter from James Norris, Chief, DOL Division of Foreign Labor Certifications, to attorney Donald H. Freiberg (Mar. 4, 1997), reproduced in 74 Interpreter Releases 1095 (Jul 14, 1997) (if an individual is working for an employer with a different tax identification number than the one on the original H-1B form, the employer must file a new LCA).
10Letter from Isaiah Russell, Jr., Acting Branch Chief, Business and Trade Service Branch, Benefits Division, to lawyer Donald H. Freiberg (Mar. 19, 1997), reproduced in 74 Interpreter Releases 1097 (July 14, 1997). See also INS Proposed Rule regarding Petitioning Requirements for H Nonimmigrant Classification, supra note 8. 11In its Notice of Proposed Rulemaking interpreting the ACWIA, the DOL stated that "an employer who merely changes corporate identity through acquisition or spin-off need merely document the change in the public file (including an express acknowledgment of all LCA obligations on the part of the successor entity), provided it satisfies the Internal Revenue Code definition of a single employer." 64 Fed. Reg. 629 (Jan. 5, 1999), reported on and reproduced in 76 Interpreter Releases 37 (Jan. 11, 1999); 76 Interpreter Releases 105 (Jan. 15, 1999). Fortunately, in its interim final regulations, the DOL backed away from its proposed requirement that the transaction be an acquisition or spin-off and that it satisfy the Internal Revenue Code definition of a single employer. 65 Fed. Reg. 80123 (Dec. 20, 2000), reported on in Vázquez-Azpiri & Paparelli, "Awakening a Slumbering Giant: The Department of Labor's Interim Final Rule on H-1B Dependency," 78 Interpreter Releases 685 (Apr. 23, 2001); reprinted in 78 Interpreter Releases 57 (Jan. 8, 2001). Many commentators had criticized the addition of the single employer standard as a prerequisite to a dispensation from the requirement that a new LCA and petition must be filed, arguing that the standard serves no useful purpose. 65 Fed. Reg. 80122-123 (Dec. 20, 2000).
12We use the term "M&A transactions" as a convenient shorthand reference to a wide array of business-entity transformations and forms of restructuring, including not merely mergers and acquisitions, but also spin-offs, consolidations, stock and asset purchases, joint ventures and strategic alliances, among others. A number of these restructuring forms are depicted in charts that accompany the articles referenced in note 4.
13Visa Waiver Permanent Program Act, § 401.
15Pub. L. No. 105-277, 112 Stat. 2681, reported on in 75 Interpreter Releases 1472 (Oct. 26, 1998). For a detailed summary of the ACWIA's provisions, see Paparelli & Robertson, "The Labor Department's Role in the H-1B Visa Program: Protector of Workers or Enemy of the Future?," 76 Interpreter Releases 785 (May 24, 1999).
1665 Fed. Reg. 80232 (Dec. 20, 2000).
1765 Fed. Reg. 80112 (Dec. 20, 2000) (emphasis added).
1865 Fed. Reg. 80124 (Dec. 20, 2000) ("The Department cautions that an employer which undergoes a change in structure and EIN, but chooses not to insert the required memorandum in the public access file is required to file new LCAs.") (emphasis added).
1965 Fed. Reg. 80213-214 (Dec. 20, 2000).

About The Author

Angelo A. Paparelli ( has been practicing business-sponsored immigration law for over 20 years, and is the managing partner of Paparelli & Partners LLP in Irvine, California. He is a nationally recognized speaker, published author and leading expert on cutting-edge business-related immigration issues, including the immigration consequences of mergers, acquisitions, reorganizations and other business changes, consular visa practice, audits of employers' compliance with immigration and labor regulations, and employment-based work visas. Mr. Paparelli is certified as a Specialist in Immigration and Nationality Law by the State Bar of California, Board of Legal Specialization.

Susan K. Wehrer is an associate in the law firm of Paparelli & Partners LLP. She is admitted to practice law in the State of California. Before joining the firm, she practiced labor and employment law and served in a senior editorial capacity with The Labor Letters Inc., a labor and employment law newsletter.

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