I-9 and E-Verify for Mergers and Acquisitions

Press Release from Clear I-9 | Cost-Effective & Remote Form I-9 Compliance

Merging with or acquiring another company can be an exciting time of growth in which your business is newly opened up to a broader range of verticals and markets. Even if your company is the one being acquired, you can benefit from access to opportunities and resources, however there are a number of precautions you must take as a company leader to help ensure the success of the reorganization your company is undergoing. 

The mergers and acquisitions process, which is already fairly complex, only becomes more complicated with the existence of employment eligibility compliance issues. All businesses involved must work to help ensure that their employee documents, including Form I–9, are both comprehensive and fully accurate, to help avoid the possibility of federal investigations that might lead to costly fines and other serious penalties.

Form I-9 review as part of the M&A process 

If your business is the party acquiring another, you won't be under any obligation to review the latter company's Form I-9 documents until the full acquisition is complete. If you're being acquired, you're not obligated to turn over the previously completed Form I-9s or any other documents beyond those legally necessary for the transaction before it's all over, and you become a subordinate of the parent company.However, it's best for I-9s to be requested and shared beforehand – not only in the interest of good faith, but so the parties involved can determine if any issues exist regarding employment  verification. This can help to address any such problems sooner rather than later.Essential steps for the audit process 

According to an article in The National Law Review,  the acquiring business should look for certain specific issues or warning signs when conducting an audit of the I-9s from its forthcoming acquisition. Form I-9 fines have recently increased and even minor errors can lead to finable offenses. If you're in the acquiring position, you may want to take some of the following steps:

  • Check to see if the total number of I-9s for the company you're acquiring matches up with a master list of all payroll employees.
  • Review each Form I–9 to see if it's complete and correct. 
  • Find any errors that are present and begin working to rectify them

After going through everything detailed above, you'll know the extent of the compliance issues you will be taking on with this new company and can then make choices about how to proceed.

Do you need to complete new I-9s? 

According to USCIS, employers who have acquired another company or have merged with another company may choose to treat employees who are continuing their employment as new hires, in which case a new Form I-9 must be completed for all employees or  employers can choose to continue employment, in which case employers must obtain the previously completed I-9 and maintain compliance with employment eligibility requirements. 

If choosing to complete a new I-9 for employees treated as new hires, employers can do so before the merger or acquisition takes place as long as the employer has provided a job offer and the new employee accepts. 

Timelines for I-9 completion should be met, such as ensuring Section 1 is completed no later than the first day of employment and Section 2 is completed within three business days of employment. It’s important to note that the “effective date” of the merger or acquisition needs to be included as the new employment date in Section 2 of each I-9.Employers who choose to keep existing I-9s that were previously completed assume responsibility for any errors or omissions on those forms. Employers may want to review each Form I-9 with the employee and update or reverify the employee’s information, as necessary.

U.S. Employers are required to complete a Form I-9  for employees hired on or before November 6, 1986. If employees who were hired before November  6, 1986  continue their employment, then they are exempt. However, if new employment begins those employees will need to complete a new Form I-9 -  the same as all other new hires.You should also keep in mind that by obtaining existing I-9s, you may also be assuming any risk related to errors in the acquired company's documents even though your team may not be responsible for overseeing those mistakes. This may also be an opportunity to revamp your I-9 compliance processes if your acquisition has an existing policy in place that's better than your company’s.I-9 compliance during a merger may be a bit more complicated. The newly unified company will be legally responsible for all employment verification paperwork, but leaders of both organizations will have to be involved in any audit process. What about E-Verify?

In addition to maintaining I-9 compliance during the acquisition process, employers who use E-Verify voluntarily or are required by state law must also run all acquired employees through E-Verify.

E-Verify Timelines for Mergers or Acquisitions

Employers who are already using E-Verify as required by the FAR E-Verify clause  must comply with the timelines listed below for verifying employees gained through merger or acquisition.

  • Employers who choose to verify their entire workforce will have 180 days from the effective date of the merger or acquisition to create an E-Verify case for each of the non-exempt employees acquired from the other company.
  • Employers who will not be verifying their entire workforce will have 90 days from the effective date of the merger or acquisition to create an E‑Verify case for each of the non-exempt employees who joined the company due to a merger with or acquisition of the other company.

Regardless of the timeline for creating cases for acquired employees, you must create cases for each newly hired employee who joins the company outside of the merger or acquisition process no later than the third business day after the employee begins work for pay.

Employers who are using E-Verify as required by the Federal Acquisition Regulation (FAR) clause may decide to verify, or reverify their entire workforce. If the company chooses that option, then they have 180 days to create E-Verify cases for each non-exempt worker. If the company chooses not to E-Verify the entire workforce, then they have 90 days to create E-Verify cases for each non-exempt employee acquired.

A new process for a new transition

Careful due diligence during M&A is essential for a successful transition and risk mitigation. Being prepared and implementing new processes and tools to streamline and reduce risks during the transition can be helpful.  Learn how  solutions like  Clear I-9  can help organizations during the merger or acquisition process.

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