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What are the I-9 requirements when employees are acquired in a merger or acquisition?

By September 12, 2022Immigration
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What is the Form I-9?

When an employer hires an employee in the United States, the employer is immediately required to verify the employee’s identity and work eligibility by completing the Form I-9 employment verification process.

The purpose of the I-9 verification process is to require employers to verify that the people they hire are authorized to work, and to impose penalties on employers who either fail to do so, or who otherwise employ individuals who are not authorized to work in the U.S.

The main way that an employer verifies that an individual is authorized to work in the U.S. is to complete the USCIS Form I-9, Employment Eligibility Verification, for each person the employer hires. The process, in general, consists of the employee providing to the employer documents that prove 1) the employee’s identity, and 2) that they are authorized to work in the United States.

What is the relevance of a merger or acquisition to the I-9 process?

At times an employer will receive employees as a result of a merger, acquisition, reorganization, or purchase of stock or assets. In this post, we will call such employees “acquired employees.”

Let’s look at a common scenario: Predecessor Corp. has existed for decades and employs ten employees who have been good and loyal workers. Predecessor Corp.’s owners are ready to retire and are looking to sell the company. They want to make sure that the company’s ten employees don’t lose their jobs in the sale of the company. Successor Corp. is looking to expand its operations and has offered to purchase Predecessor Corp. and to keep all ten of its employees (the “acquired employees”).

In this post we consider how the successor company (Successor Corp. in our example) can navigate the I-9 employment verification process. In this case, the successor company has two options: it can either require new I-9 forms from the acquired employees, or it can obtain and maintain the acquired employees’ existing I-9 forms from the prior employer. We will consider each option.

Option 1: The successor company requires that the acquired employees complete new I-9 forms.

The successor company has the option of treating all acquired employees as new employees and requiring that they all complete new I-9 forms. The “first date of employment” listed on the form would be the effective date of the merger or acquisition. If the successor company chooses this option, it is strongly recommended that the employer require that all acquired employees complete I-9 forms as new hires in order to mitigate the risk of engaging in discrimination. It should not ask only certain acquired employees to complete new I-9 forms while not requiring other acquired employees to do so.

Option 2: The successor company obtains and maintains the acquired employees’ I-9 forms from the prior employer.

The successor company is not required to complete new I-9s for employees who are acquired, and may instead treat all acquired employees as employees continuing in their uninterrupted employment status. To do so, the successor company must retain the I-9 form for each acquired employee.

In this scenario, the employment of the individuals is considered to be “continuing employment,” and a hiring is not considered to have taken place as long as  the employees are continuing to be employed and have a reasonable expectation of employment at all times. A reasonable expectation of employment can be shown if the individual “was employed on a regular and substantial basis” in comparison to other workers similarly employed by the employer.

In this case, the successor company can rely on the I-9s that were completed by the predecessor company. The successor company should confirm that the I-9s are not deficient or defective, and should take steps to correct any omissions or errors on the I-9 forms of acquired employees. The successor company could be liable if the predecessor company’s I-9s have any errors or omissions.

What steps can the successor company take if it chooses Option 2 but finds errors or omissions in the I-9 forms?

If the employer finds any errors or omissions in the Form I-9 of an acquired employee, it can take the following steps to correct them.

In order to correct any errors or omissions in Section 1, the employer should ask the acquired employee to correct the error or omission. The employer cannot make corrections to Section 1 – only the employee (or their preparer or translator) can do so. The employee should draw a line through the corrected information, add the correct information, and initial and date the correction. It is recommended that the employer also add a written explanation of why it determined that the information was either incorrect or missing.

In contrast to Section 1, the employer is allowed to make corrections to Section 2 or Section 3 of the Form I-9. To do so, the employer should draw a line through the incorrect information (corrected information should not be erased, since any corrections or edits should be recorded), add the correct information, and initial and date the correction. As with corrections to Section 1, the employer should add a written explanation of why it determined that the information was either incorrect or missing.

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