The governor of the US state of Arizona, Janet Napolitano, has signed into law legislation designed to deter illegal immigrant workers.
Arizona's governor acted where federal Congress did not
The law requires businesses to verify that all their employees are legally entitled to work in the US, or face the prospect of being closed down.
The tougher penalties were introduced days after President Bush's immigration reform bill failed in the Senate.
Arizona is one of the main gateways for illegal migration into the US.
Under the new legislation, an employer's first offence would be punished by a temporary licence suspension.
A second offence would be punished by what the governor's office called the "business death penalty" - the permanent revocation of a licence to do business in Arizona.
Ms Napolitano said she had acted because she believed Congress in Washington was incapable of tackling immigration reform on a nationwide level.
"Immigration is a federal responsibility, but it is now abundantly clear that Congress finds itself incapable of coping with the comprehensive immigration reforms our country needs", the governor said in a statement.
Arizona has one of the highest illegal immigrant populations in the country.
President Bush's attempt to overhaul US immigration policy collapsed last week when senators voted against a bill.
The proposed legislation set out ways for some of the around 12 million illegal immigrants to seek citizenship.