On May 26, 2011, the U.S. Supreme Court in Chamber of Commerce v. Whiting,1 in a 5–3 decision, upheld the Legal Arizona Workers Act—a law that allows the state to revoke the business licenses of employers that knowingly hire illegal immigrants and requires employers in the state to use E-Verify. The Supreme Court held that Arizona's licensing law is not preempted by the Immigration Reform and Control Act (IRCA); therefore, Arizona may require beneficiaries of state business licenses to use E-Verify, without running afoul of federal immigration law.

Chief Justice John Roberts, writing for the majority, said that the licensing portion of the Arizona law is not preempted by federal law because it falls under the IRCA's savings clause, which permits state "licensing and similar laws." The state law is a "licensing provision" that "fall[s] squarely within the federal statute's savings clause" and "does not otherwise conflict with federal law." The Court also found that the mandatory E-Verify requirement does not conflict with the federal government's employment verification scheme.

The Supreme Court's decision affirmed a U.S. Court of Appeals for the Ninth Circuit 2009 decision in Chicanos por la Causa, Inc. v. Napolitano2—that upheld the Arizona law, rejecting arguments brought by a coalition of business and immigrant rights groups—including the U.S. Chamber of Commerce, Arizona Employers for Immigration Reform and Chicanos por la Causa, Inc., that contended the law was both expressly and impliedly preempted by federal law. The Supreme Court rejected the Chamber of Commerce's argument that the state E-Verify mandate impedes the purpose of the federal government's voluntary employment verification program.

In a dissenting opinion, Justice Breyer joined by Justice Ginsburg maintained that the Arizona law does not fit within the IRCA savings clause because it would broaden the definition of "license" to include articles of incorporation and partnership certificates that are not employment-related licensing systems. Justice Breyer also said the E-Verify mandate was preempted because "by making mandatory that which federal law seeks to make voluntary," the Arizona law stands as an "obstacle" to the purposes and objectives set out by Congress. In a separate dissent, Justice Sonia Sotomayor said that the majority reading of the law "subjects employers to a patchwork of enforcement schemes similar to the one that Congress sought to displace when it enacted IRCA."

The decision did not address Arizona's S.B. 1070, the high-profile Arizona immigration law that requires police to check the immigration status of individuals in certain circumstances. The main provisions of S.B. 1070 were successfully challenged in federal court on constitutional grounds and are on appeal in the Ninth Circuit.

Now that the Supreme Court has appeared to give state E-Verify requirements the green light, it may be anticipated that many localities and states, particularly in the South, may promptly try to enact statutes similar to Arizona's. As discussed below, Alabama enacted a mandatory E-Verify requirement for all employers on June 9, and several bills similar to that upheld by the Supreme Court are pending in Pennsylvania. Based on its decision in Whiting, the Supreme Court has also remanded another long-running immigration preemption case challenging a local Pennsylvania ordinance with similar licensing provisions, described below.

Employers should be aware of the rapidly changing E-Verify landscape and should conduct periodic audits of sites in states, counties and cities with mandatory E-Verfiy requirements, to ensure compliance.