This is one of the laws that the Obama administration opposes and is fighting against, claiming the state law tramples on federal authority.
The Supreme Court disagreed and ruled against that argument.
"Arizona has taken the route least likely to cause tension with federal law," wrote Chief Justice John Roberts. "It relies solely on the federal government's own determination of who is an unauthorized alien, and it requires Arizona employers to use the federal government's own system for checking employee status."
Roberts also said:
"Arizona went the extra mile in ensuring that its law tracks (the federal law's) provisions in all material aspects."
Those opposed to the Legal Arizona Workers Act claimed that federal law said states may not impose "civil or criminal sanctions" on employers, to which Roberts pointed out that another portion of that same law that opponents cited made clear that states were free to use their "licensing" laws to punish employers.
From the Ruling (Pages 5-6 of the 69 Page PDF)- Chamber of Commerce v. Whiting (09-115):
Federal immigration law expressly preempts “any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ . . . unauthorized aliens.” 8 U. S. C. §1324a(h)(2). A recently enacted Arizona statute—the Legal Arizona Workers Act—provides that the licenses of state employers that knowingly or intentionally employ unauthorized aliens may be, and in certain circumstances must be, suspended or revoked. The law also requires that all Arizona employers use a federal electronic verification system to confirm that the workers they employ are legally authorized workers. The question presented is whether federal immigration law preempts those provisions of Arizona law. Because we conclude that the State’s licensing provisions fall squarely within the federal statute’s savings clause and that the Arizona regulation does not otherwise conflict with federal law, we hold that the Arizona law is not preempted.
Score One For State Sovereignty- Hugh Hewitt
[Update] Arizona Governor Jan Brewer responds to the ruling (PDF):
Immigration Victory for Arizona as Supreme Court Upholds Employer Sanctions Law
“I could not be more gratified by today‟s decision by the U.S. Supreme Court to uphold the legality of the Legal Arizona Workers Act and the principle of federalism, more generally. Despite the Obama Administration‟s opposition at the U.S. Supreme Court, Arizona and all states are now free to take down the „Help Wanted‟ sign for illegal aliens in their states. Arizona‟s employer sanctions law allows the vast majority of businesses that want to play by the rules to comply with federal and state laws against hiring illegal aliens, and seeks to punish those employers who take advantage of the federal government‟s immigration failures. One result of the Legal Arizona Workers Act: Arizona employers now lead the nation in the use of the federal E-Verify system for determining the legal status of new employees.
“Today‟s decision also acknowledges that federalism is alive and well. The Court validated this long-standing principle by noting that „a high threshold must be met if a state law is to be preempted for conflicting with the purposes of a federal Act.‟ Likewise, Judge Carlos Bea‟s dissent in Arizona‟s appeal on S.B. 1070 to the 9th Circuit Court of Appeals stated that the intent of Congress was „to provide an important role for state officers in the enforcement of immigration laws …‟ While S.B. 1070 and the Legal Arizona Workers Act are obviously different laws, I am hopeful and optimistic that the U.S. Supreme Court will hear Arizona‟s future appeal of the 9th Circuit Court of Appeals‟ decision against S.B. 1070 and apply the same general principle of federalism by rejecting claims of federal preemption. “In light of today‟s decision, I am more adamant than ever that states do have a complimentary role in enforcing federal immigration laws, despite the Obama Administration‟s opposition at every turn. I want to assure Arizonans, and all Americans, that the State of Arizona will not rest until the federal government secures our border and enforces federal immigration laws.”