Labor will oppose Coalition proposals which would require intellectually disabled workers to waive their right to make discrimination claims in return for a payment.
The Senate is considering Abbott government proposals for a scheme to provide payments to workers whose wages were calculated using a tool which the Federal Court found discriminated against people with intellectual disability.
Under the scheme, in return for a payment equivalent to 50 per cent of their owed wages, workers, some of whom were paid less than $1 an hour, would give up their right to sue the government for back pay.
But Labor will seek to amend the legislation to allow workers to accept a payment without giving up their right to pursue other claims.
Labor will also seek to strengthen safeguards around provisions which would allow the secretary of the Department of Social Services to appoint a person to accept a payment on behalf of a worker.
The government announced the payment scheme proposal in January after law firm Maurice Blackburn lodged a class action to recover lost wages for the 10,000 workers.
If the government does not accept its amendments, Labor will vote against the bill.
"Labor wants to ensure people with disability can find work and receive fair pay for the work they do," Labor's spokeswoman on disability reform, Jenny Macklin said.
"Labor urges the government to get on with putting in place a long-term solution that will see people with disability receive fair pay, and ensure people with disability have every right to work."
Assistant Minister for Social Services Mitch Fifield said late on Wednesday that Labor had not circulated its amendments, but he hoped it was not seeking to scuttle the bill, and deprive people with disability of the choice to receive payments from the proposed scheme.
"This would leave them with no option but to participate in a potentially lengthy legal battle with an uncertain outcome," Senator Fifield said.
Senator Fifield has previously warned there was a risk of job losses if the payment scheme was blocked, because disability enterprises had raised concerns about the potential financial threat arising from accruing contingent liability.
The Greens appear likely to also vote against the scheme, but it could still pass with the support of the Palmer United Party and other crossbench senators. The Palmer United Party's position was unclear late on Wednesday.
Groups including People with Disability Australia, the Australian Federation of Disability Organisations, the National Council on Intellectual Disability, and Disability Advocacy Network Australia this week sent a letter to senators urging them to reject the bill, and calling on the government to negotiate a compensation settlement with the workers.
The Australian Human Rights Commission has granted the Commonwealth an exemption from the Disability Discrimination Act to allow disability enterprises to continue paying workers wages assessed using the discriminatory tool until April next year.
Senator Fifield last week announced $173 million in funding to help disability employers move to new wage arrangements.
