By Robert Barnes
Washington Post Staff Writer
Wednesday, December 8, 2010; 2:15 PM

The Supreme Court sounded conflicted Wednesday about whether Arizona's attempt to revoke the licenses of businesses that knowingly employ illegal immigrants violates federal law or complements it.

The case pits Arizona against an unusual coalition of challengers that includes the U.S. Chamber of Commerce, civil rights groups and the Obama administration. The challengers contend that the state law is an intrusion into the federal government's power to enforce the nation's immigration laws.

Both the state and the challengers agree that Congress generally meant for the 1986 federal Immigration Reform and Control Act to preempt state efforts to control immigration by sanctioning employers. But Arizona has taken advantage of a parenthetical clause in the statute - "other than through licensing and similar laws" - to go after companies that knowingly hire illegal immigrants.

The law being challenged, the Legal Arizona Workers Act, imposes tougher sanctions than federal law for hiring illegal workers, and could result in a company losing its business license - a "death penalty," in the words of Washington lawyer Carter G. Phillips, who represented the chamber of commerce.

It was passed in 2007, and signed by then-Gov. Janet Napolitano, now President Obama's homeland security secretary.

It is different from a more recent Arizona law that the Obama administration is battling in lower courts. That law contains a provision that requires local law enforcement officials to check on the immigration status of people they stop, and to detain them if they were suspected of entering the country illegally.

A federal judge has blocked enforcement of that requirement and the law is under review in the U.S. Court of Appeals for the 9th Circuit.

The Supreme Court's decision in the illegal-worker case, though, might give some indication of how willing the justices are to allow states to come up with their own solutions for trying to curb illegal immigration. The Obama administration argues that it is a usurpation of power that belongs only to the federal government.

Phillips said the federal law is important in heading off a proliferation of conflicting state laws on employer sanctions. He said the statute was "carefully calculated" to ban the hiring of illegal workers and make sure that companies were not discouraged from hiring those legally in the country.

Acting Solicitor General Neal K. Katyal said there could be no doubt that Congress meant to reserve enforcement of such employer sanctions for the federal government, and the licensing exception was not meant as a way around that.

But the conservative justices sharply questioned that. Justice Antonin Scalia said Congress might not have envisioned the licensing exemption to be used in such a way, but neither would it have been clear in 1986 that federal sanctions have "simply been not enforced" by the government.

At the time the law was enacted, Napolitano said, "immigration is a federal responsibility, but I signed HB 2779 because it is now abundantly clear that Congress finds itself incapable of coping with the comprehensive immigration reforms our country needs."

Justices Stephen G. Breyer and Sonia Sotomayor seemed most supportive of the view that the law intruded on federal responsibilities.

Sotomayor, the only one among her colleagues who referred to "undocumented" rather than "illegal" immigrants, questioned whether Congress had intended for state flexibility on licensing only after federal authorities decided whether an employer had violated the law.

Arizona Solicitor General Mary R. O'Grady said the state's ability to revoke the license of an employer who has twice violated the prohibition on hiring illegal workers was in the "mainstream of state police power." She noted that the state relied on information from the federal government about who is authorized to work.

The state law requires Arizona employers to use the federal E-Verify system to ensure that all employees are eligible to work in this country. But that program's reliability has been questioned, and Congress has said that the program should be voluntary. The administration argues that that means Arizona cannot make it mandatory.

Justice Elena Kagan is recused from the case because of her previous work on the issue when she was the solicitor general. That makes the case even more difficult for challengers of the law.

Because the law was upheld by the 9th Circuit, it would mean persuading five of the remaining eight justices to overturn the law. A tie vote would uphold the lower court's decision, although it would set no precedent.

The case is Chamber of Commerce v. Whiting.