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The city ordinance also requires employers to check the status of would-be hires using E-Verify, a flawed federal electronic verification program that Congress has repeatedly declined to make mandatory. The ACLU's lawsuit charged that Fremont’s law is at odds with the federal government’s sole authority under the constitution to regulate immigration, and has a discriminatory effect on those who look or sound "foreign." After the ACLU filed suit, the city council voted to suspend enforcement of the ordinance pending the outcome of the district court litigation.

On February 20, 2012, the district court permanently enjoined two provisions of the ordinance: one that prohibits landlords from "harboring" unlawfully present immigrants, and another that requires the city to revoke the rental licenses of any tenant the federal government finds to be unlawfully present in the United States. The district court allowed the remainder of the ordinance to stand, including the E-Verify mandate. Both sides appealed parts of the decision to the Eighth Circuit Court of Appeals. The Fremont City Council voted to continue the suspension of the ordinance's housing provisions during the course of the appeals, but permitted the E-Verify mandate to go into effect.

On June 28, 2013 a divided panel of the Eighth Circuit issued a decision upholding the ordinance and concluding that it is not preempted by federal authority over immigration law. The three-judge panel issued three separate opinions, including a strong dissenting opinion by Judge Myron Bright. As Judge Bright's dissent points out, the panel's decision conflicts with every other decision by federal courts that ruled on similar housing and harboring laws passed by local and state governments, and is inconsistent with Supreme Court precedent. The ACLU petitioned the court to rehear the case en banc and the petition was denied on October 17, 2013. The ordinance took effect on April 10, 2014.