Malcolm Turnbull is under pressure to revisit workplace law changes after a senior member of the Fair Work Commission quit.
Commission vice president Graeme Watson said in his resignation letter the business community felt the industrial umpire had become "partisan, dysfunctional and divided".
"I do not consider that the system provides a framework for co-operative and productive workplace relations and I do not consider that it promotes economic prosperity or social inclusion," he wrote.
"Nor do I consider it can be described as balanced."
Former prime minister Tony Abbott says the commission is pro-union and anti-jobs because of the way in which Labor designed it and appointed members to it.
Conservative colleague and former workplace minister Eric Abetz said he hoped Mr Watson's resignation brought about "culture change" in the commission.
Labor employment spokesman Brendan O'Connor said Mr Turnbull should repudiate the criticism of the commission, or the public would be left thinking the prime minister agreed with the comments by Mr Abbott and Senator Abetz.
Business groups say the resignation shows the need for the government to act on advice from the Productivity Commission to change the rules around unfair dismissal, the application of general protections, agreement-making and taking industrial action.
Industrial law expert Professor Andrew Stewart, from the University of Adelaide, said there was no evidence the commission was dysfunctional.
Its members were able to make decisions impartially and professionally, he said.
