For decades, immigration compliance in corporate transactions was often relegated to a post-closing human resources task, secondary to intellectual property, environmental, and other operational diligence. That approach is no longer defensible. Intensified federal enforcement, expanded use of the successor liability doctrine, proliferating state law compliance obligations, and the growing dependence of U.S. businesses on foreign national labor all mean that immigration compliance must be central to any informed due diligence strategy and reflected in negotiated deal terms to effectively mitigate potential post-closing risk and protect investment value.
Recent enforcement actions signal a renewed and unprecedented focus on worksite compliance, Form I-9 audits, and joint-employer liability, including aggressive scrutiny of subcontractor workforces. At the same time, long-standing but often misunderstood immigration liabilities embedded in mergers and acquisitions (“M&A”) transactions—particularly those involving workforce continuity—have become increasingly visible to regulators, deal teams, lenders, investors, insurers, and other parties central to the dealmaking process.
Immigration due diligence is essential to evaluating deal value, ensuring continuity of operations, and assessing post-closing enforcement exposure, as well as allocating risk through negotiated deal terms. Parties that fail to engage at the right depth and stage of the transaction do so at their own operational and legal peril. This article briefly describes the diligence that every transactional attorney should be prepared to conduct—or outsource—on behalf of their client.
Red-Hot Immigration Enforcement Risk
The intensity of immigration enforcement has historically ebbed and flowed with presidential administrations, but the intensity exhibited by the current administration is unprecedented. Civil Form I-9 audits can result in millions of dollars in fines even when no unauthorized employment is found. If unauthorized employment is found, exposure escalates, and the penalties can be catastrophic: significant monetary fines, debarment from government contracting, business license impact, reputational harm, operational disruption, increased labor costs, and EBITDA compression are the best-case scenario. Indictments and criminal convictions—for both the organization and individual employees—are all on the table.
Immigration and Customs Enforcement (“ICE”) is no longer focusing on low-hanging fruit; instead, they are embracing complex investigations and prosecutions premised on joint-employer liability, successor liability, and subcontractor compliance. Exposure arising from a subcontractor’s violations is no longer hypothetical. Companies can no longer hide behind shell corporations or staffing agencies to circumvent Form I-9 requirements, and, absent a robust and well-negotiated subcontractor agreement with appropriate compliance and indemnification provisions, companies may find themselves on the hook for a third party’s compliance failures.
Deal Structure and Immigration Consequences
The form of an M&A transaction—asset purchase versus stock purchase—has profound immigration implications. A stock deal preserves the employing entity and often supports continuity of immigration sponsorship under successor-in-interest principles, but it also carries forward all historical immigration liabilities to the buyer. By contrast, an asset purchase may limit inherited liability but frequently disrupts visa sponsorship, requiring employers to refile or amend petitions, reverify employment authorization, enroll or re-enroll in E-Verify as required, and, in some cases, terminate employees who cannot promptly transfer or maintain status. These disruptions can undermine deal value by causing loss of critical talent and increasing transition costs.
Another important factor is how employees are treated at closing—for example, as new hires versus continuous employees. Organizations need to be able to defend this choice when the audit arrives, supported by clear, contemporaneous, nonprivileged documentation explaining the rationale and operational steps taken. As part of diligence, buyers should, at minimum, obtain and conduct a privileged review of a risk-based sample of Forms I-9 (and, where applicable, review E-Verify compliance), with escalation to broader review where red flags appear. Sellers should be prepared to facilitate that review, remediate curable defects before closing, and align on transition plans to preserve lawful status and work authorization for key employees. Identified Form I-9 issues may justify purchase price reductions, indemnities, or escrow holdbacks, as well as additional negotiated deal terms (including representations, warranties, covenants, and conditions), and they may potentially implicate required disclosures on corresponding schedules. Additionally, such issues may result in potential exclusions from any representation and warranty insurance (“RWI”) policy.
Hidden Form I-9 Liability in Corporate Transactions
Form I-9 compliance represents one of the most frequently overlooked risks in M&A transactions. When a buyer acquires a workforce through a merger or acquisition, it must either adopt existing Forms I-9 or treat employees as new hires.
Adopting legacy Forms I-9 means inheriting all defects—substantive and technical—associated with those forms. Errors in Forms I-9 are common and can result in fines assessed on a per-form basis. In large transactions, this liability can quickly become material. The risk, however, is not cabined to monetary penalties. The larger risk is that the buyer entity may inherit a partially or wholly unauthorized workforce, thus creating compliance and legal exposure as well as workforce continuity risk. This risk can also drive increased labor costs, particularly in sectors or geographies where labor availability is limited or otherwise commands a premium.
Treating employees as new hires can reduce historical exposure but must be handled carefully. If this avenue is chosen, all new Forms I-9 must be completed no later than three business days from the closing effective date. While some transactions include a pre-closing announcement that provides additional runway to complete the new Forms I-9, many sellers resist pre-closing disclosure to the workforce because of confidentiality obligations, the risk of employee flight, union requirements, customer or vendor instability, or competitive harm if the deal does not close. As a result, buyers often have little to no advance access to the workforce, making it necessary to stand up a rapid, post-closing onboarding process. Attempting to reverify an entire workforce within the first three days after close is a difficult, but not impossible task.
Whatever the buyer’s approach to Forms I-9, E-Verify participation must also be addressed early in transaction planning. If the buyer adopts legacy Forms I-9, it generally cannot create E-Verify cases for existing employees. If employees are treated as new hires, the buyer entity must create E-Verify cases within three business days of the closing effective date and be prepared to manage tentative nonconfirmations (which indicate Form I-9 data entered does not match the records that E-Verify checks against, but do not necessarily mean the employees are not authorized to work in the United States) without taking premature adverse action.
These Form I-9 considerations add risk to the already complex landscape of E-Verify for dealmakers. The decision to implement or terminate E-Verify participation can affect workforce onboarding, employee relations, and potential labor availability, and E-Verify noncompliance creates standalone risk. If acquired employees are assigned to qualifying federal contracts, they may become subject to E-Verify, even if not treated as a new hire for Form I-9 purposes. Moreover, in addition to federal law, a growing number of states and municipalities mandate E-Verify participation for certain employers. The failure to comply can result in business license impact, debarment, or monetary fines. Conversely, other states limit how employers may use E-Verify and have expanded antidiscrimination protections related to citizenship and immigration status, creating additional exposure if onboarding practices are applied inconsistently across locations. In certain sectors or geographies, client contracts may require E-Verify enrollment even if not required by applicable law. The failure to comply with contractual E-Verify requirements may jeopardize existing or prospective contracts or, at best, may result in reputational damage and loss of trust with clients. Thorough review of not only federal and state-level obligations, but also all material customer contracts, during diligence is critical to preventing these consequences.
At the end of the day, Form I-9 compliance is not merely an HR task to be parked on a post-closing checklist. It is a critical window into workforce integrity and the overall compliance culture, as well as a mechanism for identifying, quantifying, and mitigating risks to deal value, including exposure to fines, operational disruption, and EBITDA pressure. Buyers should conduct diligence that assesses not only financial risk, but also reputational, operational, and continuity risks embedded in the target’s workforce and verification practices. While many Form I-9 defects are a problem money can solve, risks such as reputational damage or loss of key labor can have far-reaching consequences that materially erode deal economics and undermine integration plans.
Subcontractors and Joint Employer Risk
Immigration enforcement increasingly targets subcontractor arrangements, particularly where buyers attempt to insulate themselves from liability. While employers cannot directly verify subcontractor employees’ work authorization, robust pre-closing diligence and strong contractual controls are necessary to mitigate joint employer findings. Diligence should extend beyond the target’s direct payroll to high-risk relationships—subcontractors, staffing agencies, and other sources of temporary workers—and include a review of subcontractor agreements for applicable immigration compliance, indemnification provisions, audit rights, and notice covenants for government inquiries or audits.
A Transaction’s Impact on Foreign National Employees
Foreign national employees are often central to a target company’s operations. Visa categories such as H-1B, L-1, E-1, E-2, O-1, and TN are highly sensitive to changes in corporate structure. Transactions that fail to account for these dependencies risk immediate work authorization gaps, costly refilings, or forced departures.
In addition, pending green card sponsorship creates long-term exposure. Labor certifications under the PERM regulations, immigrant petitions, and adjustment applications can be invalidated by changes in legal entity, geographic location, or job duties—resetting years of progress and harming employee retention.
Immigration Due Diligence as a Deal Standard
Immigration law is complex and nuanced. At a minimum, practitioners should review the following when conducting immigration due diligence for a transaction:
- Forms I-9:
- Ensure that a Form I-9 exists for each employee.
- Determine error rate on existing Forms I-9.
- Review electronic system (if used).
- Review I-9 retention practices, including purging.
- Determine any prior audits (state or federal) and their outcomes.
- E-Verify:
- Determine if target is an E-Verify participant and enrolled hiring sites.
- Determine if participation is mandatory or required by client contract.
- Determine level of compliance.
- Determine any prior audits (state or federal) and their outcomes.
- Subcontractors:
- Assess which workers are employed by subcontractors or staffing agencies.
- Assess if any temporary workers in operationally critical roles.
- Review subcontractor agreements.
- Assess if subcontractors used to circumvent E-Verify obligations or actual or constructive knowledge.
- Work with employment specialists to assess potential misclassification risk.
Conclusion
Immigration compliance is no longer a peripheral issue: It is a core transactional risk with direct financial, operational, and reputational consequences. As enforcement intensifies and global mobility becomes increasingly regulated, immigration due diligence has emerged as a required discipline in corporate transactions. Addressing these issues early in the transaction positions buyers to identify potential risks and adjust valuation, negotiate targeted indemnities or holdbacks, structure deal terms around identified risks, and sequence post-closing remediation to protect deal economics and continuity of operations.
For dealmakers and counsel, the question is no longer whether to conduct immigration due diligence, but how early and how deeply it is integrated into the transaction process—from preliminary risk screens and data requests at the letter of intent (“LOI”) stage, to targeted sampling and remediation planning during confirmatory diligence, through to integration playbooks and post-closing monitoring to protect the continuity of operations and minimize EBITDA pressure. The choice is simple: integrate immigration diligence into the deal, or potentially pay for it later.
