Malcolm Turnbull has dismissed as baseless union claims his government's planned internship program is illegal.
But the nation's peak union body - armed with legal advice - is calling on the prime minister to scrap the program for jobless youth.
The ACTU says the government will need new laws to legalise what it says will lead to $4-hour jobs.
The Fair Work Act would have to be changed or subsidies increased to satisfy minimum wage requirements.
Employment Minister Michaelia Cash has obtained legal advice from her department showing the scheme fully complies with the law.
It's understood it shows interns fall under social security laws and are not considered employees under workplace legislation.
Jobless youth under 25 will get welfare not a wage, with a $200 top-up to their fortnightly unemployment benefit.
"The claims are baseless," Mr Turnbull told reporters in Melbourne on Thursday.
The prime minister says it's a matter of shame that both unions and Labor would seek to block a scheme designed to give vulnerable young people a kick-start to work.
"It is the pathway to employment."
But ACTU president Ged Kearney says the internships should be treated as an employment contract because there was a prospect of a job.
She's labelled the program one of the "heaviest betrayals" of Australian workers since WorkChoices.
"It's not really an internship. They're workers - they'll be doing a job, they're being paid."
Ms Kearney believes the scheme will create a replacement workforce and create a perverse incentive for companies to fire workers and obtain free labour.
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