Business groups, including construction organizations and labor unions, are cheering a judge’s ruling barring the federal government from moving forward with tough new immigration regulations. They say the ruling underscores the need for congressional action on immigration.

The preliminary injunction issued on Oct. 10 by Judge Charles Breyer of the U.S. District Court for the Northern District of California prevents the Dept. of Homeland Security from implementing “no-match” rules aimed at cracking down on companies that systematically hire illegal immigrants. DHS says it is weighing all of its options, including an appeal. But it will be unable to enforce the rule until a trial occurs.

Industry officials who opposed the DHS rule say Breyer’s decision indicates wide-ranging immigration action is necessary. Freeman Smith, the American Subcontractors Association’s director for government relations, says, “What the ruling is really indicative of is the need to revisit comprehensive immigration reform on the federal level.”

Angelo Amador, U.S. Chamber of Commerce director of immigration policy, agrees that the ruling sends a strong signal that Congress must act. “It’s broader than just doing piecemeal enforcement with regulation,” he says.

Breyer wrote that the regulations “would result in irreparable harm to innocent workers and employers.” He said the threat of criminal prosecution of companies that do not comply with the rules “reflects a major change in DHS policy.”

Homeland Security chief says companies that respond to guidance in good faith will not face criminal penalties. Judge’s ruling may put new regulation in court, prompting calls for Congress to act.

Under the regulation, companies would have to terminate workers who receive no-match letters from the Social Security Administration if they cannot resolve a discrepancy between name and Social Security number within 90 days. The rules were to take effect on Sept. 4.

Opposition rose swiftly. The AFL-CIO, American Civil Liberties Union and other labor groups filed a lawsuit shortly after DHS published the final rule. In an unusual alliance, the U.S. Chamber of Commerce joined the AFL-CIO and ACLU in September.

Construction groups such as ASA and Associated General Contractors also oppose the regulations. They already face labor shortages and believe the potential of firing thousands of employees could further disrupt their workforce. “It really just layered on a lot more confusing requirements,” says Jenna Hamilton, National Association of Home Builders’ assistant staff vice president.

DHS Secretary Michael Chertoff says that companies that respond to the department’s guidance “in good faith” will not face criminal penalties from immigration and customs enforcement. But, he adds, an employer who “does nothing” to resolve a problem will be subject to stiff penalties or sanctions, including criminal charges.