COSLA president Rosemary McKenna said the strategy had been forced on local authorities and it was 'not in the nature of local government to defy the laws of the land'.
Labour has signalled a shift in tactics since the Local Government (Scotland) Act became law. While councils will start preparations for unitary authorities, Labour will concentrate its attacks on the new water boards.
This week shadow Scottish secretary George Robertson condemned the act as 'an unwanted and unnecessary piece of legislation forced on Scotland'. But Labour will immediately begin planning for reorganisation.
Mr Robertson launched Labour's 10-point approach to reorganisation. This includes encouraging councils to set up 'a framework for co-ordinating and overseeing the transfer of service to the new authorities'. The aim is to 'retain local political control of the reorganisation process and minimise interference from the Scottish Office', Labour says.
It also wants to see officer-planning groups to review service-delivery structure within the new authorities' boundaries and to look at cross-boundary provision.
Labour says it will also press for improvements to services and resist any privatisation.
But the non co-operation policy will continue for the three new authorities due to take over water and sewerage services from local authorities. Labour councillors will not be nominated to the boards.
Mr Robertson announced the formation of the Scottish water action group to monitor the new authorities and to campaign for reform. He will chair the group, which will include representatives from local authorities. Labour wants councils to set up joint water services committees to monitor the new quangos.
The Liberal Democrats and Scottish National Party are also boycotting nominations to the water boards, and COSLA will not nominate anyone without the secretary of state guaranteeing a majority of council members on each board.
But Labour members of Highland RC have defied the party line and supported the council's nomination of eight members to the area board.
Highland was invited to fill one place on the board, but the council has nominated a member from each district, from a variety of parties.
The Scottish Trade Union Congress is also refusing to make nominations to the water boards, as part of its continued opposition to reorganisation.
The STUC plans a campaign to force the government to extend the timetable for setting up unitary authorities. It points to 'the enormous practical problem of disaggregating big service centres, like DSOs and IT departments'.
Trades unions will also be demanding an explicit commitment - in all manifestos for the shadow authorityelections - that council jobs will be protected under the transfer of undertakings legislation during reorganisation.