Form I-9 in mergers and acquisitions: complete new forms or inherit the old ones?

When one company acquires or merges with another, the employees who carry over do not automatically need new Forms I-9. USCIS gives the acquiring employer a choice: treat everyone as a new hire and complete fresh forms, or treat them as continuing in their employment and keep the previous owner's forms. The second option is less work on day one and more risk afterward, because every error on an inherited form becomes yours. The decision belongs in deal planning, not in the week after close.

The two options

Option B rests on the continuing-employment rule in 8 CFR 274a.2(b)(1)(viii), which treats continuing employment with a "related, successor, or reorganized employer" as no new hire at all, as long as the employer obtains and maintains the previous employer's records and Forms I-9. That condition is easy to overlook. If the target cannot hand over a form for someone, Option B has nothing to rely on for that person, and you need a new form.

What inheriting forms really means

USCIS's wording is direct: if you keep the previous owner's forms, you accept responsibility for any errors or omissions on them. A late Section 2 from four years ago, a missing document number, or an expired EAD that was never reverified are all yours on the day the deal closes. If ICE inspects you a year later, the inspection does not distinguish forms your team completed from forms you bought.

That makes I-9 diligence a real part of the deal. A sample review of the target's forms before signing tells you which option makes sense:

• Can the target produce a form for every current employee, and for terminated employees still inside the retention period?
• Were Sections 1 and 2 completed on time, with document details recorded?
• Are there forms with expired List A or List C documents that were never reverified?
• Did the target use the DHS alternative procedure for remote document review, and if so, does it have the required copies and was it eligible to use it?
• Does the target use E-Verify, and are case numbers recorded on the forms?
• Are forms kept electronically, and does that system meet the regulatory standards?

The I-9 audit checklist works as a diligence script. If the sample turns up systemic problems, Option A starts to look cheaper than the risk. Note that ICE's current inspection fact sheet treats many missing fields as substantive violations, which do not get a correction window; see I-9 penalties for what that costs per form.

If you choose Option B: review and correct

Keeping the old forms is not the same as ignoring them. USCIS recommends reviewing each acquired form with the employee and updating it as necessary, and the M-274 says you and the employee should make corrections on the existing form. Corrections follow the usual rules: the employee corrects Section 1, the employer corrects Section 2, each change is initialed and dated, and nothing is obliterated or backdated. See how to correct common I-9 mistakes for who may fix what.

Two follow-on obligations transfer with the forms:

• Reverification. Any acquired employee whose employment authorization or List A or List C document has an expiration date must be reverified on Supplement B by that date. Build those dates into your own tracking on day one; the target's reminder system may not survive integration. See I-9 reverification.
• Retention. The original hire date on the inherited form still drives the retention calculation, so you need those forms for as long as the formula says. Decide with counsel who holds the forms for people who left before the deal but are still within their retention period. See I-9 retention rules.

If you choose Option A: timing and consistency

New forms follow the normal deadlines. The employee completes Section 1 no later than the first day of employment with the new employer, and Section 2 is due within three business days. USCIS allows the new forms to be completed before closing, as long as the employee has been offered and has accepted a job with the acquiring company, and the effective date of the merger or acquisition goes in Section 2 as the first day of employment. For a large workforce, that pre-close window is the practical way to avoid a three-day scramble across every location.

Each acquired employee chooses which acceptable documents to present, just as a new hire would. And the choice of option has to apply to everyone. E-Verify's guidance says new forms for acquired employees must be completed without regard to actual or perceived citizenship status or national origin. Completing new forms only for employees who look or sound foreign, or only for noncitizens, invites a discrimination charge.

E-Verify after a deal

E-Verify adds its own constraint: participants generally cannot create cases for existing employees. E-Verify's FAQ says only federal contractors with the FAR E-Verify clause may verify existing employees. That makes the Form I-9 decision and the E-Verify decision the same decision:

• Option A and you use E-Verify: acquired employees are new hires, so create a case for each one within three business days of their first day of employment with you. Cases can be created before the deal closes if the offer has been made and accepted.
• Option B and you use E-Verify: the employees are continuing, not new, so you do not create cases for them, unless you are a federal contractor with the clause.
• Federal contractors: E-Verify's supplemental guide gives 180 days from the effective date to create cases for acquired non-exempt employees if you verify your entire workforce, or 90 days for acquired employees assigned to a covered contract if you do not.

If the acquiring company is in a state that requires E-Verify and the target was not, or the reverse, confirm which hiring sites must participate after the deal; see E-Verify requirements by state.

Employees hired before November 7, 1986

Employees hired on or before November 6, 1986, who are continuing in their employment and have a reasonable expectation of employment at all times, are exempt from Form I-9 and cannot be verified in E-Verify. In a deal involving a long-established business, a handful of these employees may exist. Under Option B they stay exempt. The M-274 notes that if such an employee is not continuing in employment, they may be required to complete a form, so document your reasoning for each one.

A worked example

This scenario is illustrative. A regional distributor with 900 employees agrees to buy a competitor with 140 employees, closing on March 2. A sample of 30 of the target's forms finds eight with Section 2 completed late and five with no document expiration date recorded, plus two employees for whom the target cannot find any form.

The buyer chooses Option A. It extends offers to all 140 employees in February, and once each offer is accepted, the employee completes Section 1 and HR completes Section 2 with March 2 as the first day of employment. Because the buyer uses E-Verify, it creates a case for each one within three business days of March 2. The target's old forms are kept with the transaction records, and the buyer applies the same process to all 140 people. Had the buyer chosen Option B, it would have owned the late Section 2 problems and still needed new forms for the two employees with nothing on file.

A deal checklist

• Add Form I-9 and E-Verify review to the diligence request list, with a sample size you can defend.
• Decide Option A or Option B before signing, and apply it to every acquired employee.
• For Option A, schedule Section 1 and Section 2 completion between offer acceptance and close.
• For Option B, get physical or system custody of every form, review each one, and correct errors properly.
• Load every acquired employee's reverification date into your own tracking.
• Confirm E-Verify participation and hiring sites for the combined business.
• Agree in the deal documents who keeps the target's forms, including those for former employees, and for how long.