A federal appeals court on Wednesday upheld an Arizona law that penalizes businesses that knowingly hire illegal immigrants and requires them to verify the employment status of their workers.

The 9th U.S. Circuit Court of Appeals decision rejected a challenge by business and civil-rights groups that contend the law infringes on federal immigration powers.

The law, intended to lessen the economic incentive for immigrants to sneak into the country, imposes civil penalties on employers by suspending or revoking their business licenses when they are found to have knowingly hired illegal immigrants.

While it upheld the law, a three-judge panel of the court left the door open for other challenges, saying no one has been accused of violating the law since it took effect nine months ago.

Republican state Rep. Russell Pearce of Mesa, the author of the law, said the ruling is a big win for the movement to get state and local governments to crack down on illegal immigration.