A recent class-action suit against a well-known fast food chain highlights the importance of proper due diligence during any corporate merger, reorganization and/or acquisition.

Earlier this month a group of unauthorized immigrants filed a class-action suit in state district court in Dallas, Texas against Wendy’s International Inc. This lawsuit is a companion to a suit filed in September against Ohio based Wendy’s, its subsidiary Café Express, and a Houston-based business law firm. The class members allege, among other issues, that they were terminated when Wendy’s discovered that documentation for legalization was not properly filed with the United States Immigration and Naturalization Service and that they were therefore not authorized to work in the US. Wendy’s acquired Café Express and it was through this acquisition that the class members became employees of Wendy’s.

Regardless of the final outcome of this class-action lawsuit, this case raises an important issue regarding due diligence. Now more than ever corporations are engaged in corporate acquisitions and restructurings; mergers and asset purchases are commonplace. Due diligence during any kind of corporate restructuring is paramount. A complete and detailed audit of a company’s financial and legal assets should be conducted to determine potential risks. A corporation should also perform in-depth due diligence regarding the immigration status of prospective employees at the acquired corporation and should review all of the acquired company’s I-9 forms to ensure that all employees possess valid authorization to work legally in the U.S. In addition, the closing documents should include representations and warranties covering immigration liabilities.

As is often the case in corporate mergers and acquisitions, the workforce may be reduced. In the case of a termination of a foreign national worker, the termination must comply with the immigration regulations. Each and every visa category carries its own set of consequences for the employer and employee in the case of a termination. The most often utilized visa for most corporations is the H-1B visa. If an employer terminates an H-1B employee before the end of that employee’s period of authorized stay, the employer is liable for the "reasonable costs" of return transportation for the employee to his or her last country of residence. An employer’s liability does not extend to the cost of relocating family members or property. Immigration regulations require an H-1B employer to notify the U.S. Citizenship and Immigration Services (USCIS) of "any material changes in the terms and conditions of employment" affecting an H-1B employee. A termination is a "material change" in employment. The employer’s obligation is complete upon notifying the USCIS, via letter, of the termination. Immigration regulations do not set forth a means by which USCIS can enforce this provision against noncompliant employers.

However, the Department of Labor (DOL) has in the past enforced and continues to enforce this provision. DOL's Administrative Review Board recently ruled that an employer had not effected a bona fide termination of its H-1B employee, because there was "no evidence that the employer notified immigration that it had terminated (the H-1B employee) and that the company provided (the H-1B employee) with payment for transportation home." The Board ordered the company to pay the prevailing wage from termination until the expiration of the employee’s authorized period of stay for H-1B employment. See Amtel Group of Florida v. Yongmahapakorn, 04-087 (ARB 9/29/06).

Immigration law is complicated for any company, much less a company going through an acquisition. The immigration consequences for noncompliance with immigration laws can be severe. Employers may not only be subject to civil monetary fines exceeding $11,000 per employee for not having valid I-9's on file, but they may also be subject to criminal penalties and lawsuits brought by employees terminated and rendered illegal as a result of the company’s failure to file the necessary immigration documentation or for not terminating an employee properly. Therefore, due diligence in the area of immigration law prior to a corporate merger or other acquisition is essential in targeting the many potential risks including the immigration implications of the restructuring.

The Business Immigration and Compliance Group at GT can provide additional information on due diligence upon request.
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This Business Immigration Alert was written by Martha Schoonover, Patricia Gannon and Astrid Schmidt. For questions or further information, please contact Martha Schoonover schoonoverm@gtlaw.com <mailto:schoonover@gtlaw.com> , Patricia Gannon gannonp@gtlaw.com, your Greenberg Traurig liaison or any of the below members of the Greenberg Traurig Business Immigration Group:

Mahsa Aliaskari | Los Angeles | 310.586.7716 | aliaskarim@gtlaw.com

Kristin Bolayir* | Tysons Corner | 703.749.1373 | bolayirk@gtlaw.com

Gina Carias* | Tysons Corner | 703.749.1322 | cariasg@gtlaw.com

Patty Elmas* | Tysons Corner | 703.749.1300 | elmasp@gtlaw.com

Jennifer M. Fenton | Tysons Corner | 703.903.7578 | fentonj@gtlaw.com

Patricia Gannon | New York | 212.801.6703 | gannonp@gtlaw.com

Alfredo Gonzalez | Miami | 305.579.0621 | gonzalezal@gtlaw.com

Kate Kalmykov | Tysons Corner | 703.903.7582 | kalmykovl@gtlaw.com

Oscar Levin | Miami | 305.579.0880 | levino@gtlaw.com

Dawn Lurie | Tysons Corner | 703.903.7527 | luried@gtlaw.com

Alix Mattingly | Tysons Corner | 703.749.1300 | mattinglya@gtlaw.com

Laura Reiff | Tysons Corner & Washington D.C. | 703.749.1372/202.331.3100 | reiffl@gtlaw.com

Astrid Schmidt | New York | 212.801.2241 | schmidta@gtlaw.com

Martha Schoonover | Tysons Corner | 703.749.1374 | schoonoverm@gtlaw.com