A majority of US Supreme Court justices appear to be supportive of an argument that Abercrombie & Fitch discriminated against a Muslim teenager.
Samantha Elauf argued she was denied a job because her headscarf conflicted with the company's dress code.
Abercrombie disputes the allegation, arguing Ms Elauf did not ask specifically for a religious exemption.
Questions from some of the justices were in favour of Ms Elauf, but their final decision will be made in May.
The clothing retailer has since changed its policy on headscarves but continues to fight the case in court.
In a statement on Wednesday, the firm said it had a "longstanding commitment to diversity and inclusion" and had "granted numerous religious accommodations when requested, including hijabs".
US law requires that employers must "reasonably accommodate" an employee's religious beliefs, as long as it does not provide an undue hardship to the business.
The US high court seeks to answer the question of whether a prospective employee must explicitly ask for a religious exemption.
The suit, which is being brought by the Equal Employment Opportunity Commission (EEOC), argues that Ms Elauf was denied the job because her headscarf clashed with Abercrombie's "East Coast" style.
During arguments on Wednesday, liberal and some conservative justices aggressively questioned the company's lawyer.
Justice Samuel Alito, considered part of the court's conservative wing, said there was no reason not to hire her unless the firm assumed she would always wear a headscarf to work because of her religion.
He added employers could avoid such situations by asking prospective employees if they are able to abide by work rules.
A lawyer for Abercrombie, Shay Dvoretzky, said the firm wanted to avoid precedents that would "leads employers, in order to avoid liability, to start stereotyping about whether they think, guess or suspect that somebody is doing something for religious reasons".
But Justice Alito said employers would not feign ignorance of potential employees wearing other religious clothing, including "a Sikh man wearing a turban", "a Hasidic man wearing a hat" or "a Catholic nun in a habit".
Asking employees if they planned to comply with work rules might be awkward, Justice Elena Kagan said, but would be far better than a situation that would lead to stereotyping anyway.
As she left the Supreme Court on Wednesday, Ms Elauf told reporters she wasn't just pursuing the case for herself, but to protect the rights of peoples of all faiths at work, BBC's Gary O'Donoghue reports from Washington, DC.
What is Abercrombie & Fitch 'Look policy'?
- natural looking make-up and no fingernail polish,
- slender figure
- tight denim
- no black clothing
- long hair for women
More: What is the Abercrombie look?
Ms Elauf applied for a sales job at a Tulsa, Oklahoma, store in 2008.
The woman who conducted the interview was impressed with Ms Elauf but was concerned about her headscarf. After consulting with a supervisor, she decided not to hire her.
The EEOC was initially successful in winning its case, and a jury awarded Ms Elauf $20,000 (£12,900) in damages.
However, a higher court threw out that ruling, noting that Ms Elauf never specified that she would need a religious exemption in her job interview, even though she was wearing her headscarf during the process.
"An employer cannot be liable for failing to accommodate a religious conflict unless it knows that the religious conflict exists," wrote Abercrombie's lawyers in court documents.
Ms Elauf's case is backed by a broad collection of religious groups - as well as gay and lesbian rights organisations.
Hijab controversies
France - The European Court of Human Rights upheld the country's ban on the niqab - the fully covering face veil. The court's ruled ban - and the resulting 150-euro fine - "was not expressly based on the religious connotation of the clothing in question but solely on the fact that it concealed the face".
UK - There is no ban in the UK on face-covering veils but schools are allowed to decide their own dress code after a 2007 directive which followed several high-profile court cases.
In January 2010, then Schools Secretary Ed Balls said it was "not British" to tell people what to wear in the street after the UK Independence Party called for all face-covering Muslim veils to be banned.
Turkey - A ban on all headscarves at universities was quietly lifted in 2010, and in 2013, the country lifted a ban on women wearing headscarves in the country's state institutions - with the exception of the judiciary, military and police - ending a decades-old restriction.
More: The Islamic veil across Europe
Continue reading the main story
- The word hijab comes from the Arabic for veil and is used to describe the headscarves worn by Muslim women. These scarves come in myriad styles and colours. The type most commonly worn in the West is a square scarf that covers the head and neck but leaves the face clear.
- The niqab is a veil for the face that leaves the area around the eyes clear. However, it may be worn with a separate eye veil. It is worn with an accompanying headscarf.
- The burka is the most concealing of all Islamic veils. It covers the entire face and body, leaving just a mesh screen to see through.
- The al-amira is a two-piece veil. It consists of a close fitting cap, usually made from cotton or polyester, and an accompanying tube-like scarf.
- The shayla is a long, rectangular scarf popular in the Gulf region. It is wrapped around the head and tucked or pinned in place at the shoulders.
- The khimar is a long, cape-like veil that hangs down to just above the waist. It covers the hair, neck and shoulders completely, but leaves the face clear.
- The chador, worn by many Iranian women when outside the house, is a full-body cloak. It is often accompanied by a smaller headscarf underneath.
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A legal brief on behalf of Orthodox Jews filed in the case argues that requiring job applicants to explicitly voice the need for religion-related special treatment makes them less likely to be hired without given cause.
Large state organisations as well as the US Chamber of Commerce are supporting Abercrombie & Fitch's case over concerns the court could set a precedent that would make them subject to more discrimination claims.
The retailer settled two other discrimination cases related to hijabs in 2013 and paid $40m to black, Hispanic and Asian-American college students a decade ago over discrimination in its hiring practices.
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