The government had rushed to draw up its own proposal on Friday after three-way talks with unions and business failed and the draft is unclear on matters like the procedure for firing, CiU spokesman Josep Antoni Duran Lleida told SER radio.
(We say) no to this labor reform it's a slapdash job, Lleida, of the Catalan nationalist party (CiU), said.
Economists see the reform of Spain's inflexible labor laws as vital to restore Spain's competitiveness, return the economy to strong growth and prevent a Greek-style debt crisis.
The Catalan nationalist party is an important ally for the Socialist government if it hopes to pass the reform through a parliamentary vote on June 22. The party's 10 votes would be enough to give the government the majority it needs.
Without them the government, trailing in opinion polls, will have to seek support from several other parties. The reform is due to be approved at a cabinet meeting on Wednesday.
The CiU abstained from a parliamentary vote on austerity measures last month, allowing the government to push through the plan by a single vote.
After European countries were forced to come to the rescue of Greece last month, financial markets have fretted that other ailing euro zone economies like Spain and Portugal could suffer similar debt crises.
Prime Minister Jose Luis Rodriguez Zapatero on Saturday said the draft package would help generate jobs and boost confidence in the Spanish economy, although the business organization CEOE slammed the proposal saying it would increase employer costs.
Unions have criticized the draft reforms, saying they cater to business rather than workers. They have threatened a general strike if the measures are passed in a parliamentary vote.
Minority unions in the northern industrial regions of the Basque Country and Navarra said on Saturday they would call a general strike on June 29 there in protest at the reform.
Spain's 20 percent unemployment, the highest in the euro zone, has crimped economic activity, making Spain struggle to emerge from its worst recession in half a century.
The austerity plan would affect economic growth, Economy Minister Elena Salgado said in an interview published in El Pais newspaper on Sunday. It was unlikely there would be net growth in employment in 2010, she said, with job growth more likely to start next year.