More broadly, immigration compliance should be a priority in any corporate restructure, whether it takes the form of an asset sale, a share acquisition, a merger, or an outsourcing arrangement. The consequences of non-compliance can include criminal liability, operational disruption, and the loss of key personnel.
In our latest instalment of our sibling rivalry series, we look at the immigration implications of a business restructure or TUPE transfer. If employment law and immigration law are occasionally uneasy bedfellows, then restructuring and a transfer of undertaking might be described as the mistress in the relationship, an often-overlooked third party that can dramatically complicate matters. Companies should not keep employment permits, or immigration permissions a dirty little secret during a business restructure!
Transfer of Undertakings
The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (the “TUPE Regulations”) safeguard employee rights in the transfer of a business in Ireland. On a transfer, the transferor's rights and obligations arising from a contract of employment existing on the date of the transfer are transferred to the transferee. While most people are familiar with the TUPE Regulations, the ways in which they interact with Irish employment permits and immigration law are sometimes less well understood.
As we outlined earlier in this series, the Employment Permits Act 2024 (“the 2024 Act”) prohibits a foreign national from working in any capacity in the State without permission. As a separate but related prohibition, an employer cannot employ or engage a foreign national without permission. Breach of these provisions is a criminal offence. On summary conviction, an employer can face a fine of up to €4,000 or imprisonment of up to 12 months, or both. On conviction on indictment, the fine increases to €250,000 and/or imprisonment of up to 10 years, or both.
As the TUPE Regulations operate to transfer all rights and obligations arising from existing contracts of employment to the buyer, the transferee inherits the transferor's position in respect of any employment permit or immigration issues. If the transferor employed a foreign national and allowed them to work in breach of the conditions of their immigration permission or without a valid employment permit, or had failed to comply with its record-keeping obligations under the 2024 Act, that liability will, in principle, pass to the transferee.
For this reason, companies would be well advised to undertake thorough due diligence on whether the seller of a transferring business has ensured that all foreign national employees worked in compliance with the conditions of their immigration permission, hold valid employment permits or that proper records have been maintained. The transaction paperwork (e.g. the asset purchase agreement) should address this issue in the form of appropriate warranties and/or indemnities.
Notification to the Department of Enterprise, Tourism and Employment
The 2024 Act says that where a TUPE transfer takes effect while an employment permit is in force, and the transfer results in a change to the name of the employer specified on the employment permit, the employer must notify the Department for Enterprise, Tourism and Employment (the “Department”) of that change. They do this using the Department’s prescribed Transfer of Undertaking Form. If the terms, conditions, description and location of employment stay the same, the Department will issue a new permit to the permit holder.
Failing to notify the Department could, depending on the circumstances, jeopardise the validity of the employment permit and, in turn, the lawfulness of the foreign national's employment. Both parties to the transfer must therefore keep in mind their post-completion obligations and the transaction agreements should be drafted accordingly.
Immigration considerations in M&A: warranties and indemnities
Beyond the specific transfer of undertakings context, immigration and employment permit compliance should form a key part of due diligence in any merger or acquisition. Working without valid immigration permission or employing a person without it is a criminal offence in Ireland. A buyer should seek warranties from the seller confirming that all foreign national employees hold valid immigration permission appropriate to the work they are performing and that all record-keeping and notification obligations under the 2024 Act have been complied with. A buyer should also seek indemnities to cover any losses arising from pre-completion non-compliance, for example, fines, penalties and legal costs. In share acquisitions, the buyer acquires the target company along with its liabilities, making it all the more important to verify that the company's immigration obligations are in order.
Looking ahead
Our webinar on the employment and immigration intersection takes place on Tuesday, 6 October. If you have not signed up already, you can sign up here.
