Attorney-General Christian Porter says requiring COVID-hit businesses to comply with a turnover test in order to strike agreements that would leave their workers worse off would be "unworkable".
A political fight is brewing over the Morrison government's industrial relations omnibus bill introduced into the parliament on Wednesday.
Australian Council of Trade Unions secretary Sally McManus described the bill as the worst since Work Choices, while Labor leader Anthony Albanese says the party will reject the legislation unless major changes are made.
Key to their opposition is plans to allow the Fair Work Commission to approve enterprise agreements that would make some workers worse off for up to two years.
Currently, the "better-off-overall test" - or BOOT - requires the Fair Work Commission to assess whether employees will be better off under the new agreement than the award.
But under the changes, the commission could allow agreements that did not meet this threshold for businesses hard hit by the coronavirus pandemic, if both parties agree and the commission believes it is in the public interest.
The law already allows the commission to consider agreements that don't meet the test during a short-term crisis.
But Mr Albanese said the way the bill was drafted would allow many more businesses to have the "better-off-overall test" disregarded.
"Guess what? Breaking news on Radio National, Fran. Every business has been affected by the pandemic," Mr Albanese told ABC Radio on Thursday morning.
However Mr Porter said the test would be disregarded in only a "tiny handful handful of cases".
He said introducing thresholds like a turnover test would be "clunky and unworkable".
"In these circumstances where all parties have to agree, where the businesses have to be impacted by COVID obviously in a negative way, and from the Fair Work Commission would have to determine in those circumstances it was not in the public interest to have a modification to an award provision, there would be a tiny handful of cases," Mr Porter said.
Mr Porter signalled parts of the bill would be up for negotiation, amid reports the government was already walking back from the most controversial elements of the legislation.
"It's a process, as I indicated previously, continuing the dialogue, the discussion, the consultation around the draft through the committee," he said.
"But the five problems that we're seeking to fix, they can't be left unsolved. If we can't fix those problems in a practical way, we allow barriers to job growth to persist in an economy that desperately needs them removed."