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Angelo A. Paparelli, May 15, 2020
"Much like patient vintners, federal immigration agencies often take time to offer up a grand cru. One such agency, U.S. Citizenship and Immigration Services (USCIS), the Homeland Security component that administers the legal immigration system, just produced a long-awaited, delectable quaff. On May 5, it issued a policy memorandum that anointed as binding precedent an administrative appellate decision which at long last blesses modern practices in business transformations.
USCIS will now allow eligibility for employment-based immigration benefits previously secured by one company to be preserved by a successor entity even if the predecessor goes out of business. The decision, Matter of F-M- Co., Adopted Decision 2020-01, issued by the USCIS’s Administrative Appeals Office (AAO), recognized the principle of immigration “successorship in interest” in mergers, acquisitions and other forms of corporate restructuring.
USCIS’s actions are significant and historic.
The agency has now provided a predictable path to preserving precious employment-based immigration benefits for many foreign managers and executives transferring from abroad who might otherwise have lost eligibility because of a corporate restructuring over which they had no control. These noncitizens, so-called “intracompany transferees,” qualify for an “L-1A” work visa (for up to seven years) and an “EB-1C” employment-based green card as a “priority worker” if the manager or executive sponsored by an employer to work in the U.S. had been employed abroad for at least one of the last three years by a “qualifying organization” or “multinational” enterprise. (To meet this entity-relationship test, both the foreign employer and U.S.-based petitioning entity must be a parent, branch office, affiliate or subsidiary within a group of entities under common ownership and control.)
Before the recent USCIS actions, the path to immigration eligibility for these managers or executives has long been beclouded. The problem has persisted since at least 1989 (as I described in “Life After Mergers and Acquisitions: The Immigration Impact on U.S. Employers and Alien workers,” my first of several co-authored articles on the topic), and later made worse by a gratuitous comment in an August 6, 2009 USCIS policy memorandum.
This memo, Memorandum of Donald Neufeld, Acting Associate Director, Domestic Operations, USCIS, ‘Successor-in-Interest Determinations in Adjudication of Form I-140 Petitions; Adjudicators Field Manual (AFM) Update to Chapter 22.2(b)(5), without explanation or analysis, purported to deprive intracompany managers and executives (as well as “outstanding professors and researchers”) of employment-based green-card eligibility following a corporate restructuring, even though longstanding agency practice had been to recognize their entitlement based on immigration successor-in-interest principles.
To be fair, Mr. Neufeld’s memorandum was still quite helpful. It recognized that immigration successor-in-interest determinations in major corporate restructurings should no longer be guided by Matter of Dial Auto Repair Shop, Inc., 19 I&N Dec. 481 (Comm. 1981), a case involving the transfer of an automotive technician from one car repair shop to another. Dial Auto Repair created an inflexible test for immigration successorship (requiring the assumption by a corporate successor entity of all assets and all liabilities of the predecessor) in green card cases involving “labor certification,” i.e., where an employer must first prove that U.S. workers are unavailable.
Fortunately, however, the 2009 memorandum acknowledged that the predecessor immigration agency, the Immigration and Naturalization Service (INS), had long applied a “very restrictive reading” of Dial Auto Repair and its test for successorship. The 2009 memorandum therefore noted:
USCIS recognizes that business practices change over time, particularly in the areas of acquisitions, mergers, and transfers of assets and liabilities between entities . . . [Corporate] entities do not always wholly assume the assets and liabilities of entities they acquire or merge with and that businesses may choose not to assume certain assets or liabilities in connection with a perfectly legitimate transaction.
Writing in Business Law Today, I welcomed the newly relaxed standard for successorship in “Bothersome immigration buzz spells trouble for M&A deals: New homeland security memo complicates employee transfers,” but whined over the agency’s elimination of inherited immigration benefits for intracompany managers and executives, stating:
USCIS has not explained why it views immigration successorship “principally” through the lens of the labor certification procedure. The agency and its predecessor, the Immigration and Naturalization Service, have long accorded successor-in-interest designation to a host of nonimmigrant work visa categories that are exempt from the labor certification requirement. Similarly, both agencies have historically granted the designation to the EB1 Multi-National Executive or Manager immigrant visa classification, a kissing cousin of the L-1 nonimmigrant visa . . . .
USCIS is wrong to proclaim in a memorandum drafted without stakeholder consultation that only certain foreign workers whose employers are involved in new business combinations (those holding labor certifications) are allowed to continue their pursuit of permanent residence in the United States while other noncitizen employees (likewise affected by corporate restructurings, but in different immigrant visa categories) are precluded.
USCIS should not limit eligibility by a wooden view of immigration successorship while proclaiming an intention to adjust to changing business practices. The memorandum speaks a good game, but the agency’s newfound flexibility is difficult to discern.
Happily for this class of aspiring citizens, USCIS’s recent actions on May 5 have at last softened its “wooden view of immigration successorship.” Thus, the AAO in Matter of F-M- Co., has finally ruled:
The Neufeld Memorandum, which recognized changes in business practices in the areas of acquisitions and mergers, was issued “to allow flexibility for the adjudication of I-140 petitions that present novel yet substantiated and legitimate successor in interest scenarios.” . . .
In the event a corporate restructuring affecting the foreign entity occurs prior to the filing of a first preference multinational executive or manager petition, a petitioner may establish that the beneficiary’s qualifying foreign employer continues to exist and do business through a valid successor entity. If these conditions are met, USCIS will consider the successor-in-interest to be the same entity that employed the beneficiary abroad.
Matter of F-M- Co. involved a merger and absorption of one foreign company into another. What remains to be decided is what test for immigration successorship will be applied outside of the merger context. Far more common is the assumption of assets but not necessarily liabilities.
Legacy INS had informally relaxed the Dial Auto Repair requirement and determined that the assumption of only a portion of the liabilities of a division of a target company would be sufficient for immigration successorship to be recognized. (See, e.g., the Bednarz-Bravin correspondence published in 70 Interpreter Releases 1568 [Nov. 22, 1993].) Over time, in practice, INS and USCIS have often approved immigration successorship deals where the assumption involved only immigration-related liabilities. This trend seems to have benefited by the enactment of Immigration and Nationality Act § 214(c)(10) which allows H-1B employers to dispense with the filing of a new or amended petition following a corporate restructuring if a “new corporate entity succeeds to the interests and obligations of the original petitioning employer . . .” However, Mr. Neufeld’s memorandum, again in the context of a labor certification, phrased the test differently, stating:
[A] valid successor-in-interest relationship may still be established in certain instances where liabilities unrelated to the original job opportunity are not assumed by the successor, e.g., where the successor does not assume the liability of a pending or potential sexual harassment litigation, or other tort obligations unrelated to the job opportunity in the labor certification.
Still, USCIS’s actions are welcome. They essentially stand for the proposition that a cousin, however distant, remains part of the extended family even though her parent has died or disappeared.
Depending on your calculation, it only took 32 years (by my count) or 11 (since the 2009 USCIS memorandum). Better late than never."