The jobs of 139 health and safety inspectors will be disestablished and staff made to reapply for the positions.
Public Services Association president Brenda Pilott said all the health and safety inspectors at the Ministry of Business, Innovation and Employment were told this week their roles would be disestablished and they would have to reapply for their positions through a rigorous process including psychometric testing.
Ms Pilott said it would result in a shortage of inspectors at the ministry as inspectors were refusing to go through the new selection process and might take redundancy or change jobs.
Labour Minister Simon Bridges declined to comment, saying it was an operational matter.
MBIE deputy chief executive, health and safety group, Lesley Haines said that from July this year there would be 158 new health and safety inspectors roles, created following a restructure.
Ms Haines said that of the 158 roles, 149 would be offering higher salaries and would involve high competency than current roles.
"All existing inspectors are being supported to take the opportunity to apply for the new roles."
She said the new health and safety inspectors would target high-risk workplaces and would take a firmer approach where required.
"Strengthening workplace health and safety in New Zealand is in everyone's interest. The changes will provide a strong foundation on which the new Crown agency for health and safety services will be built," Ms Haines said.
Ms Pilott said there was a lot of "change fatigue" among current health and safety inspectors forced to reapply for positions.
Labour's spokeswoman on labour issues Darien Fenton said the decision made no sense.
"Last week the Government trumpeted the formation of a new stand-alone Crown agency for health and safety - this week, it sacks all of our existing health and safety inspectors and expects them to reapply for jobs that are essentially the same."
Greens industrial relations spokeswoman Denise Roche said the move would leave 139 people in limbo and create a shortfall in qualified staff to oversee New Zealand's health and safety regime.
Last week Mr Bridges announced a stand-alone Crown agency would be set up as part of the recommendations made by the Royal Commission on the Pike River Coal Mine tragedy.
It would be dedicated to health and safety, with the aim of reducing workplace fatality rates by 25 per cent.
- APNZBy Kate Shuttleworth @K8Shuttleworth Email Kate