Labour and Greens have pulled their support for a law change which cracks down on migrant exploitation because of their concern about significant new powers including warrantless searches of migrants' homes.
The Opposition parties initially supported the Immigration Amendment Bill (No 2) but now believe that it will will fail to help migrant workers because the punitive sanctions and lack of protection for abused employees will mean they are too afraid to report abuse.
The Labour Party's spokesman for labour issues Andrew Little said the motivations of the bill were good but some of the "coercive powers" were "open to abuse".
The changes followed reports about international students and temporary visa holders being underpaid, trapped on their employers' premises, and in the most extreme cases, forced into prostitution.
Immigration officials would be given a number of new tools to stamp out this kind of abuse.
Immigration New Zealand staff were already able to enter premises but only under strict conditions and for a single purpose - to serve a deportation notice.
If the bill passes, they will be able to bypass police in executing warrants and will have power to search an employers' home without a warrant to look for documents or compel anyone inside to answer questions.
The bill explicitly states that the powers will not be limited to business premises, but will apply to homes or dwellings.
Officials will also be able to conduct a personal search of any non-citizen who does not have adequate documentation and will be able to take fingerprints, photographs and iris scans in a broader range of cases.
The Law Society said it was rare to extend these powers beyond the police force and the extended powers should only be used in exceptional cases where the need was clearly justified.
Immigration Minister Michael Woodhouse has previously said the measures were needed to effectively enforce the Immigration Act.
Ministry of Justice analysis had found they were consistent with the Bill of Rights.
The legislation would introduce heavy sanctions including deportion for migrant bosses or business owners who abused employees.
Labour and Greens said New Zealand needed to created an environment which enabled workers to report abuse, and the failure to provide visa protection for temporary workers undermined the intent of the bill.
"Workers are not going to report exploitation if they risk being deported", the parties said in their report on the legislation.
"Our belief is that putting immigration officials into the role of enforcers confuses things and creates barriers to reporting."