"Gangs are commonly identified by their insignia, which is often worn as a badge of pride. What it really demonstrates is a high probability that the wearer has committed crimes to earn the right to wear gang colours or insignia," Mr McClay said.
He said government departments and Crown entities provided a valued service to members of the public and staff and visitors deserved to feel safe in the work place or service.
However, the bill has sparked a public debate between Mr McClay and Mana MP Hone Harawira.
Mr Harawira has labelled the bill racist and said if it was made law he would consider wearing a gang patch to Parliament.
The bill will now go to the law and order select committee.