Poster put up in town hall illustrates potential impact of new laws which are now subject of appeal by federal government

The poster is mildly worded, but carries a very big punch. "Attention to all water customers," it begins. "To be compliant with new laws concerning immigration you must have an Alabama driver's licence …"

And then comes the hit: "… or you may lose water service."

The warning, posted in the offices of a public water company in the small town of Allgood in Alabama, is the most graphic illustration yet of the draconian new immigration law coming into effect in the state. Under section 30 of the new law, HB56, anyone who lacks proper immigration papers is deemed to be committing a crime if they try to enter into a "business transaction" with the "state or a political subdivision of the state".

The law does not spell out what constitutes a "business transaction" or what particular state bodies are implicated, but judging from the poster put up by the Allgood Alabama Water Works company it is being interpreted widely enough to include the basic essentials of life.

"This demonstrates the cruelty of the new law by denying the most basic facilities to people. It's designed to make life so miserable that people self-deport, and this poster is a vivid example of what that looks like," said Jessica Karp of the National Day Laborers union.

Allison Neal, legal director of the Alabama branch of the American Civil Liberties Union, said: "If you want to see the harm that the law will cause, then you can't get much clearer than cutting off water services."

The mayor of Allgood, who is responsible for the town's water supply, was unavailable for comment. It is believed that the poster is still prominently displayed within the town hall.

It is thought to have been put up several weeks ago while HB56 was still being debated in the Alabama assembly. The Montgomery Water Works and Sanitary Sewer Board is also understood to have made moves to oblige water customers to prove their legal immigration status.

A coalition of local groups as well as the federal Department of Justice are trying to have the new law put on hold pending appeals. The DoJ lodged its call for a stay with the 11th circuit appeals court on Friday, but earlier this week a judge in Alabama allowed several key provisions of the act to go ahead.

In addition to section 30, with its prohibition on undocumented people from entering into "business transactions", the newly effective provisions include a requirement on Alabama police officers to investigate the immigration status of anybody they have stopped for traffic violations or other infringements wherever the officers have a "reasonable suspicion" that the individuals might be illegally present in the state.

Again, what constitutes a "reasonable suspicion" is unspecified. Fears are spreading among immigrant groups that it will lead to racial profiling of Hispanics.

Already, almost 2,300 children have been taken out of Alabama schools by families fearful that the new law will force teachers to enquire about the kids' immigration status as well as that of their parents.