The Attorney-General has accepted the bungled scheme was unlawful and has not ruled out the Commonwealth paying damages.
The debate underscores the difficulty of finding industrial reforms that both employers and unions can agree to.
Industrial relations laws could go to Parliament as early as this year even if an ambitious reform plan fails win consensus between unions and employers.
The Prime Minister has opened the door to significant industrial relations changes,but it will be up to employers to make their case.
The government will shelve its Ensuring Integrity Bill as a sign of good faith ahead of a new effort to reform Australia's industrial relations system.
The government is considering urgently legislating to nullify a landmark court ruling allowing some casual workers access to paid leave and redundancy payouts.
Casuals who have a firm commitment from their bosses of more regular,ongoing work in advance are entitled to annual leave,a court has found.
The government will this week push ahead with a parliamentary inquiry into the class action industry,including the profits made by litigation funders that bankroll claims on behalf of Australians.
Civil liberties groups want the government to change the design of the contact tracing app to ensure personal data is not stored on a central database.
Labor needs One Nation's support in the Senate to overturn the government's temporary cut to the minimum notice period for proposed amendments to an enterprise agreement.
Tougher privacy laws will be put to Parliament next week in a bid to jail anyone who breaches the safeguards in Australia's new coronavirus tracing app.