A federal court has upheld the legality of President Barack Obama’s executive order requiring certain federal contractors and subcontractors to use the Dept. of Homeland Security’s E-Verify system to ensure their workers are legally authorized to work in the U.S. The rule implementing the order goes into effect on Sept. 8 and applies to employers holding federal prime contracts of $100,000 or more or subcontracts worth $3,000 or more.

Several business groups, including the Associated Builders and Contractors and the U.S. Chamber of Commerce, had challenged the requirement, claiming broader use of the E-Verify program would expose contractors to potential liabilities and that the Obama administration had not adequately assessed the costs for small businesses.

But the U.S. District Court for the District of Maryland, Southern Division, on Aug. 26 ruled the executive order was legal and that DHS had sufficiently considered the costs E-Verify could have on small business.

“Obviously, we are disappointed with the decision, and we disagree with it,” says Bob Hirsch, director of legal and regulatory affairs for Arlington, Va.-based ABC. Hirsch says the groups involved in the lawsuit are evaluating the ruling to determine “what the next steps should be.”