The government has consulted on legislation which would mean more individual disputes in areas such as unfair dismissal could be settled outside tribunals, by binding arbitration.
The proposals are intended to reduce the cost of processing industrial tribunal cases.
The number of cases completed each year has almost doubled in the past decade. In 1993-94 the government spent almost £24 million on hearing them.
'Anything that reduces peoples' opportunity to resort to industrial tribunal erodes their employment rights,' said MPO general secretary Graham Corless.
'For my members, industrial tribunals are a last resort. When independent arbitrators adjudicate on cases we often still end up at industrial tribunal.'
The government would allow the conciliation service ACAS to arbitrate in unfair dismissal disputes. Alternatively, both sides could elect an arbitrator to settle all disputes brought by or against individuals which are now heard by tribunals.
Employer secretaries on the 10 provincial councils in England and Wales welcomed the changes. They see the government's proposals as an opportunity to extend their role in settling disputes, if their member authorities agree. Their view is supported by the Local Government Management Board and the Society of Chief Personnel Officers.
Both union and employer representatives sit on provincial councils, which deal only with local government.
They are currently used to settle small disputes over grading and salaries, but also help negotiate leaving settlements for chief executives and chief officers.
Ron Simpson, East Midlands provincial council employers' secretary, said arbitration would work well on an informal basis, with small meetings rather than hearings in front of large union/employer panels.
'Increasingly, we talk to colleagues on an informal, confidential basis. A good provincial council is like an iceberg, a lot of good work goes on unseen, on the phone and in visits,' said Mr Simpson.