The Knesset rejected a bill Wednesday that would have barred the government from signing contracts with companies that violate labor laws.

The bill, sponsored by MKs Haim Oron (Meretz) and Shelly Yachimovich (Labor), failed because the coalition opposed it.

Minister Meshulam Nahari, who responded to the bill for the government, said the reason for this opposition was that the bill would increase government expenditures.

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"The bill would significantly reduce the supply of companies with which the government could sign contracts, and would therefore likely increase the costs of such contracts," he told the Knesset plenum.

"The proposal to ban contracts by public agencies with anyone found guilty of violating labor laws in a civil suit also fails the test of reasonability. Lawsuits over labor law violations are very common in Israel."

Under pressure from nongovernmental organizations, the Knesset passed a law in 2002 that prohibited the government from purchasing goods or services from any firm convicted of violating the Minimum Wage Law or the Foreign Workers Law. Two years later, however, the government amended the law, applying the ban only to firms that have been convicted of violating one of these laws twice in the last three years.

During those first two years, the government is not known to have disqualified a single bidder due to labor law violations. Nor is it ever likely to do so, as most labor law violations result in administrative fines rather than indictments. Last year, only 10 employers were convicted of violating the Minimum Wage Law, and none of these companies have been convicted again since meaning they would almost certainly not meet the two convictions in three years test.

The Oron-Yachimovich bill would have applied to violators of any labor law, regardless of whether they were convicted or merely fined.

Attorney Eran Golan of Kav La'Oved, a workers' rights NGO, was furious at the vote.

"The fact that in five years not a single supplier has been disqualified from contracting with the state shows that the government is once again pulling the wool over its citizens' eyes," he said.