Bipartisan talks aimed at producing a comprehensive immigration law - including a path to citizenship for undocumented immigrants and a new process for controlling the flow of temporary workers - have been underway for months and were close to producing a bill. There were conflicting versions of the disagreement.
According to one source who asked not to be identified, the eight senators involved in the discussions had tentatively agreed on a plan to govern wage levels for low-skilled foreigners who would be given visas to work in the United States temporarily.
The source said Democrats presented a plan and Republicans accepted it, but when senators showed it to the AFL-CIO, the labor union federation said no.
But, according to the AFL-CIO, Democrats presented Republicans with a plan and the Republicans rejected it.
The proposal would have borrowed language on wages for temporary workers from the "H2B" visa program for temporary, seasonal workers.
That specifies that the visas will only be issued if they do not drive down the wages of those doing the same job in the United States.
Also in dispute was the inclusion of construction workers in the plan, which business wants and labor does not.
As senators tried to wrap up the complex negotiations and then leave Washington for a two-week recess, business and labor groups traded accusations.
Randel Johnson, a senior vice president of the U.S Chamber of Commerce, Washington's largest business lobby, said "unions have jeopardized the entire immigration reform effort...because of their refusal to take a responsible stance on a small temporary worker program." Organized labor had a similarly angry characterization of the status of talks.
"There is an uncomprehending level of anger. We have conceded on so many different grounds. They (Republicans) want to pave the path to citizenship with poverty," said Jeff Hauser, a spokesman with the AFL-CIO.
In the midst of the labor-business dispute, senators were still voicing optimism for getting a deal. Support from organized labor and the chamber is considered crucial to getting any immigration law through the Congress.
Finding a solution acceptable to both has always been considered the most difficult challenge by the group of four Republicans and four Democrats involved in the negotiations.
On Friday, Republican Senator John McCain of Arizona, one of the eight, said that while he was "guardedly optimistic" about the negotiations, "we hit bumps every five minutes."
On Thursday, another member of the group, Democratic Senator Charles Schumer of New York, told reporters the bipartisan group would meet its end-of-month timetable for a deal.
Schumer said it would be "an agreement with a darn good chance of becoming law." While that was before negotiations between the Chamber and AFL-CIO spiraled into open warfare, a spokesman for Schumer late Friday said the senator stands by his statement.
The eight senators will continue talking during the congressional recess, according to aides.
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