The Illawarra Business Chamber has raised concerns about a new law requiring employees to provide a birth certificate or passport to their employer to verify their citizenship.
The Migration Amendment Bill 2012, which passed the House of Representatives on Tuesday, puts the onus on the employer to vouch for the legality of their workers and means employers will now have to seek proof of citizenship.
Illawarra Business Chamber chief executive Mike Leask said the IBC supported government actions to reduce illegal immigration and protect jobs for legitimate Australian workers.
"But we think that requiring employers to be burdened by checking all employees, current and future for citizenship and 'right to work', is an excessive level of red tape which simply becomes another cost to employing people," he said.
"This form of red tape on business is not productive."
Australian Chamber of Commerce and Industry education, employment and training director Jenny Lambert described the bill as a national inconvenience.
Ms Lambert said that while cracking down on illegal workers was a fair thing to do, she likened the approach to "using a sledgehammer to crack a nut".
She encouraged the Senate to examine the bill.
"This bill imposes penalties on employers who act in good faith and are not aware that an employee or job seeker is not legally allowed to work," she said. "The bill effectively means that all employers will have to validate the citizenship or sight the original or certified copy of a birth certificate or passport of every worker that they employ including existing employees."