SAN FRANCISCO (Legal Newsline)-A three-judge federal appeals court panel is considering whether Arizona has the legal authority to impose its own requirements on employers to prevent undocumented immigrants from being hired.

The 9th U.S. Circuit Court of Appeals will decide if federal law bars local government from enacting immigration restrictions allowed under a 1986 law.

Specifically, the panelists are deciding the constitutionality of the state's Legal Arizona Workers Act. It is unknown when the panel might rule on the case.

Arizona's law, which has been in force since January, establishes penalties for employers who have been found to have hired illegal workers.

Under the law, a company found to have hired an illegal immigrant could have its business license suspended, while a second violation could mean a permanent loss of the state-issued business license.

The law was upheld in a February by Judge Neil Wake of the U.S. District Court for the District of Arizona.

Critics of the state law say if allowed to stand the statute would be burdensome for employers and workers alike.

"The central issue is whether every state and locality can enact its own laws (on hiring), thereby balkanizing our immigration laws and dramatically increasing the burden on employers," attorney Jonathan Weissglass told the three judges at a hearing Thursday.

Arizona Solicitor General Mary O'Grady told the judges that the state is only using the worker verification system that Congress devised.

She noted President George W. Bush recently issued an executive order requiring all companies that do business with the federal government to check the status of their workers through the E-Verify system.

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.