Grant Shapps has been asked to "come clean" about whether he made up reasons to fire people who worked for his printing business.
On Wednesday morning Shapps, the chairman of the Conservative Party, said the 2015 Tory manifesto would include proposals to make it easier for companies to fire people.
Drawing from his personal experience he added:: "I started a printing company 23 years ago, it still runs to this day, and we always sat there and wondered how it is that when you know that somebody is not working out right for the company, they are just not fitting in to that role, you have to effectively end up coming up with disingenuous reasons why you need to change that role.
"Either you have to say that role itself is now redundant and re-engineer the way the department operates or you have to say that person was so bad at their job that you must fire them, and it's disciplinary and will go on their record.
"That means there are only two ways of dealing with wanting to bring a contract to an end. You either have to pretend the role has gone, or you have to fire the person.
Shapps said: "That is crazy, it doesn't stack up to what really happens out there in the real world.
Ian Murray MP, Labour's shadow business minister, seized on the comments as evidence that Shapps had possibly broken the law.
"Grant Shapps appears to be admitting that he has broken the law by making up 'disingenuous reasons' to sack his own employees," he said.
"The Government should be making it easier to hire people, not easier to fire people - but now the Tory Chairman is raising serious questions about his own record as an employer. He needs to come clean and clarify exactly what he meant by these comments.
"If the only solution the Tories have for sorting out their economic mess is illegally firing workers it's no wonder people think they're out of touch."