"While discrimination can be justified, the threshold should be very high," Mr Rutherford said.
"The commission considers that insufficient evidence has been provided to demonstrate a rationale connection that compulsory income management services work and are needed, or that the proposal's proportionate given its blanket application."
He recommended the committee make a number of amendments to the legislation to better meet the justification threshold, including making the income management provision optional, with compulsory management only used as a last resort.
Mr Rutherford joined a number of other submitters in criticising the time that had been given for people to make submissions on the bill, saying the constrained timeframe of just 11 working days undermined the principles of democracy.
Submissions from the Law Society, The Council of Trade Unions, the Children's Commissioner and a number of others have slammed the shortened submissions period, saying at least six weeks should have been given for such significant legislation.
Labour MP Jacinda Ardern yesterday called for Social Welfare Minister Paula Bennett to reopen submissions, saying the "overwhelming message" was for the process to slow down.