Justices Uphold Immigrant Law

By JESS BRAVIN And MIRIAM JORDAN

WASHINGTON—The Supreme Court Thursday upheld an Arizona law that can put employers from fast-food chains to farms out of business for hiring illegal immigrants, sparking fears among businesses that they will be hamstrung by a patchwork of state regulations.

The 5-3 ruling split the business community from immigration hardliners who hailed it as an affirmation of states' rights to crack down on illegal migrants.

The Legal Arizona Workers Act requires employers to use a federal system called E-Verify to check employees' legal status. It says the state can revoke charters or licenses from employers that repeatedly hire noncitizens lacking work permits. Signing the legislation in 2007, then-Gov. Janet Napolitano called it the "business death penalty."

"The growing patchwork of state and local immigration laws is a serious obstacle to doing business across state lines," said Robin Conrad, director of the U.S. Chamber of Commerce's legal arm, which challenged the Arizona law. She called on Congress to outlaw "employment-related state immigration laws" like Arizona's, as part of a broader immigration overhaul.

The legal battle over the E-Verify requirement and the threat of losing a business license scrambled familiar political alliances. The Chamber of Commerce teamed up with civil-rights groups and the Obama administration to argue that Arizona had undermined federal immigration law by creating a parallel state enforcement system that penalized employers beyond what Congress thought reasonable. Social conservatives, including lawmakers backed by the tea-party movement, contended that Congress meant to give states discretion over business licenses, although states can't levy criminal or civil penalties on businesses that hire illegal immigrants.

The Supreme Court, voting 5-3 along ideological lines, agreed. To deter illegal immigration, "Congress expressly preserved the ability of the states to impose their own sanctions through licensing," Chief Justice John Roberts wrote for the court.

Conservative justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito joined all or most of the Roberts opinion. The dissenters came from the court's liberal wing, while Justice Elena Kagan, who was solicitor general while the suit was pending, recused herself.

"Not only is this law constitutional, it is common sense. American jobs should be preserved for Americans and legal workers," said Rep. Lamar Smith (R., Texas), chairman of the House Judiciary Committee. He said he plans to introduce a bill mandating nationwide use of E-Verify, which is currently voluntary.

Several states, including Utah and Mississippi, already have laws requiring certain employers to use E-Verify, and West Virginia last year passed a law that enables the state to permanently revoke licenses from businesses that are found to employ illegal workers knowingly.

Other states are studying the idea, and each state's details vary from the others. For instance, some states put the restrictions only on businesses that have state contracts.

The ruling could result in a "crazy quilt of immigration laws across the nation," said Arizona Chamber of Commerce and Industry spokesman Garrick Taylor. "I don't think any businesses want to go into a legislative environment where the goalposts are constantly being moved when it comes to hiring and worker verification."

The Legal Arizona Workers Act spurred Maricopa County Sheriff Joe Arpaio to conduct raids of Phoenix businesses suspected of having illegal immigrants. The raids have sometimes followed anonymous tips left by citizens on a county hotline. While the raids have led to the arrest of hundreds of undocumented workers, only three businesses have been charged under the law.

One, a Phoenix sandwich shop called Danny's Subway, agreed to shut its doors for two days after its owner admitted helping an unauthorized worker use fake identification to complete employment documents. A person answering the telephone at the office of owner Dan Rose said he was away and no one else was authorized to comment.

A complaint accusing a furniture maker, the Scottsdale Art Factory, of hiring an illegal worker, is pending in court. The reason the state has prosecuted so few cases is that proving an employer knowingly hired an undocumented worker is difficult. "We have lots of raids and people taken from the work force but companies aren't prosecuted under the law. The state can't prove the 'knowingly' standard," said Julie Pace, an attorney for Scottsdale Art Factory.

An even bigger fight is brewing over a separate Arizona state law, called SB 1070, that requires police to question and detain an individual during a routine stop if they have reasonable suspicion the person is in the U.S. illegally. Federal courts have blocked that law, finding it conflicts with federal immigration law, and the battle may ultimately be decided by the Supreme Court.

Because Thursday's decision concerns a specific provision in federal law regarding business licenses, it doesn't necessarily foretell SB 1070's fate. Nonetheless, Chief Justice Roberts's opinion suggested sympathy for state immigration enforcement, provided it doesn't directly contradict federal law.

Sheridan Bailey, chief executive of steel fabricator Ironco Enterprises LLC in Phoenix, said SB 1070 and the broader climate in Arizona have hurt businesses. "It soils our reputation in the global environment," said Mr. Bailey, who leads a group of state businesses that opposes the state immigration restrictions and wants a federal overhaul. "People don't want to build here. They don't want to raise their kids here."

Backers of tighter laws say businesses are trying to get cheap labor at the expense of law-abiding American citizens. "With this opinion, the Supreme Court has dealt a game-changing blow to special interests that have misused federal pre-emption claims to impede meaningful immigration enforcement at the local level," said Dan Stein, president of the Federation for American Immigration Reform, which lobbies to curb immigration.

The 1986 Immigration Reform and Control Act, the last major federal effort to overhaul border control, supplanted a maze of state and local laws that sought to discourage illegal immigrants. It expressly superseded "any state or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ…unauthorized aliens."

Seizing on that parenthetical exception, the Arizona law defined corporate charters and partnership certificates as business licenses and said they could be revoked from employers that hire illegal workers.

Dissenting Justice Stephen Breyer, joined by Justice Ruth Bader Ginsburg, agreed with the Chamber of Commerce that Arizona had exploited a minor exception to "eviscerate" the federal immigration scheme.

In a separate dissent, Justice Sonia Sotomayor argued that only federal authorities, not state officials, could lawfully determine immigration violations.

Challengers had argued that Arizona's law, focused purely on enforcement, upset the balance Congress had struck among competing interests of border control, fairness to employers and preventing discrimination against those of foreign appearance.

But "Arizona went the extra mile in ensuring that its law closely tracks [the 1986 federal law's] provisions," Chief Justice Roberts wrote. He said Arizona imposes sanctions "only when an employer's conduct fully justifies them."

Write to Jess Bravin at jess.bravin@wsj.com and Miriam Jordan at miriam.jordan@wsj.com