BUYING OR SELLING A BUSINESS? IMMIGRATION AND WORKFORCE COMPLIANCE SHOULD BE PART OF DUE DILIGENCE

When buying or selling a business, most people focus on price, assets, contracts, leases, licenses, debts, taxes, employees, equipment, customer lists, and closing documents. Those issues are important, but they are not the only risks. In today’s enforcement environment, immigration and workforce compliance should also be part of due diligence, especially if the business employs foreign national workers or has a large hourly workforce.

A buyer may think it is purchasing a profitable company, only to discover after closing that the company has incomplete Form I-9 records, unauthorized workers, expired work authorization documents, E-Verify problems, H-1B compliance issues, public access file deficiencies, or foreign national employees whose work authorization does not automatically transfer to the buyer.

These problems can create immediate operational disruption. They can also expose the buyer to government audits, civil penalties, back wage claims, petition issues, employee loss, and post-closing disputes with the seller.

Immigration Due Diligence Is Not Just for Large Companies

Many small and mid-sized businesses assume immigration compliance is only an issue for large corporations or technology companies. That is not true. Immigration-related workforce issues can affect restaurants, gas stations, trucking companies, construction companies, hotels, cleaning companies, staffing agencies, franchises, healthcare providers, logistics businesses, manufacturers, retail stores, professional practices, and family-owned companies.

Any business with employees must comply with Form I-9 employment-verification requirements. Any business using E-Verify must follow E-Verify rules. Any business sponsoring foreign workers must comply with the terms of the relevant visa or petition. Any business acquiring another company must understand whether employee work authorization remains valid after the transaction.

A buyer should not wait until after closing to ask these questions.

Form I-9 Problems Can Become the Buyer’s Problem

Form I-9 is the basic employment-verification form that every U.S. employer must complete for each employee hired after November 6, 1986. It confirms the employee’s identity and authorization to work in the United States.

In a business acquisition, I-9 records should be reviewed before closing. A buyer should know whether the seller completed I-9s properly, whether documents were reviewed on time, whether reverification was completed where required, whether expired documents were accepted incorrectly, whether records are missing, and whether the company has a history of government audits or notices.

Depending on the structure of the transaction, the buyer may have to decide whether to rely on the seller’s existing I-9s or complete new I-9s for continuing employees. That decision should be made carefully and consistently. A rushed or inconsistent process can create legal risk.

The buyer should also consider representations, warranties, indemnity provisions, document-delivery requirements, and closing conditions related to workforce compliance. If the seller’s employment-verification records are defective, the purchase agreement should address who bears that risk.

E-Verify Must Be Reviewed Separately

E-Verify is not the same as Form I-9. It is an electronic system used by enrolled employers to confirm work authorization based on information from Form I-9. Some employers are required to use E-Verify because of state law, federal contracting requirements, or internal policy. Others use it voluntarily.

In a transaction, the buyer should determine whether the seller is enrolled in E-Verify, whether E-Verify was used consistently, whether cases were created on time, whether tentative nonconfirmations were handled properly, whether the business has federal contract obligations, and whether a new E-Verify account or profile update is required after closing.

A buyer should not assume that E-Verify compliance is automatic just because the seller used a payroll provider or HR software platform. The employer remains responsible for compliance.

Foreign Worker Sponsorship Requires Case-by-Case Review

If the target business employs foreign national workers, the buyer should identify each worker’s immigration status, petition type, work authorization expiration date, job title, worksite, salary, sponsoring entity, and whether the employee’s authorization depends on the current employer.

This may include H-1B, L-1, TN, E-1, E-2, O-1, F-1 OPT, STEM OPT, J-1, H-4 EAD, L-2 work authorization, asylum-based EAD, TPS-based EAD, adjustment-based EAD, or other categories.

Some employees may continue working after a transaction with minimal disruption. Others may require amended petitions, transfer petitions, new employer filings, updated LCAs, new I-9s, new E-Verify cases, or careful review before the transaction closes. The answer often depends on the deal structure.

An asset purchase may create different immigration consequences than a stock purchase or statutory merger. A worker sponsored by the seller may not automatically be authorized to work for the buyer if the employing entity changes. For H-1B workers, successor-in-interest rules may help in certain transactions, but only if the legal and regulatory requirements are satisfied and properly documented.

H-1B Compliance Is a Common Trap

H-1B employees create special due diligence issues because the employer’s obligations do not end when USCIS approves the petition. H-1B employers must comply with wage obligations, worksite requirements, Labor Condition Application terms, public access file requirements, and notice rules.

A buyer should review whether H-1B workers are being paid the required wage, whether their job duties match the petition, whether their worksites match the certified LCA, whether remote work has been handled correctly, whether public access files are complete, and whether any corporate change requires documentation or a new filing.

If the transaction changes the employer, worksite, job duties, salary, or corporate structure, immigration counsel should review whether the H-1B workers can continue working without interruption. A mistake can affect both the employee’s status and the company’s ability to retain key personnel.

Immigration Issues Can Affect Business Value

Immigration and workforce compliance problems are not just technical issues. They can affect the value of the business.

If a company depends on foreign national employees and those employees cannot continue working after closing, the buyer may lose key managers, engineers, professionals, specialized workers, or operations staff. If I-9 records are defective, the buyer may inherit audit exposure. If H-1B wages were underpaid, back wage liability may exist. If a worksite change was not handled properly, a petition may be vulnerable. If a seller used unauthorized workers, the business may face disruption, reputational harm, and legal exposure.

These risks should be considered when negotiating purchase price, indemnity, escrow, closing conditions, employee transition plans, and post-closing integration.

Sellers Should Prepare Before Going to Market

Sellers should not wait for a buyer to discover immigration compliance problems. A business preparing for sale should conduct an internal workforce-compliance review before marketing the company or entering serious negotiations.

That review should include Form I-9 records, E-Verify compliance, visa-sponsored employees, work authorization expirations, foreign worker files, public access files, wage compliance, remote-work arrangements, and pending immigration petitions. If problems exist, the seller may be able to correct or explain them before they become deal obstacles.

Clean records make the business more attractive to buyers. They also reduce the chance of post-closing disputes.

Buyers Should Ask the Right Questions

A buyer should request information about the seller’s workforce early in due diligence. Important questions include whether the company has completed I-9s for all employees, whether it uses E-Verify, whether it has received any government notices or audits, whether any employees require visa sponsorship, whether any employees have expiring work authorization, whether any immigration petitions are pending, and whether any employees work remotely or at client sites.

The buyer should also ask whether any sponsored employees are essential to operations. A key employee’s immigration issue can become a business-continuity issue.

Purchase Agreements Should Address Immigration Risk

The transaction documents should not ignore workforce compliance. Depending on the deal, the purchase agreement may need representations and warranties regarding employment authorization, I-9 compliance, E-Verify compliance, visa sponsorship, government audits, worksite compliance, wage compliance, and pending immigration matters.

The agreement may also need indemnity provisions for pre-closing violations, covenants requiring cooperation on immigration filings, conditions requiring delivery of records, and post-closing obligations related to sponsored workers. Where foreign national employees are critical to the business, the parties should plan how those employees will transition legally and without interruption.

Conclusion

Immigration compliance should not be treated as an afterthought in business acquisitions. A buyer may inherit more than assets, contracts, and customers. It may also inherit workforce compliance risks that can affect operations immediately after closing.

At Elkhalil Law, P.C., we help business owners, buyers, sellers, and employers evaluate legal risks before transactions close. For any business with employees, and especially any business with foreign national workers, immigration and workforce compliance should be part of due diligence from the beginning. A careful review before closing is far less costly than discovering a problem after the deal is done.