MPs have rejected a House of Lords amendment that sought to cancel out significant changes to 39-year-old health and safety legislation.
The government wants to change Section 47 of the Health and Safety at Work Act 1974 to remove the principle of strict liability and force claimants to prove negligence if they want to claim compensation.
Business leaders argue reform would allow employers to fulfil the basic requirements of health and safety law without worrying of potential, unforeseen claims against them.
The House of Lords last month voted in favour of an amendment to the Enterprise and Regulatory Reform Bill that would remove the strict liability clause, but it was rejected in the Commons on Tuesday by 316 votes to 241.
Business minister Jo Swinson (pictured) said the measure was an 'important element' of the government's wider reforms to tackle both the perception of a compensation culture, and the effect it has on sensible health and safety management and business growth.
She said: 'The purpose of this reform is to establish the important principle that a responsible employer should not be liable to a civil claim for compensation where they have taken all reasonable steps and have not been negligent.
'The substantive law is unaffected. Criminal offences and their enforcement will not be affected, and employees will continue to have the right to bring claims for compensation where they can prove their employer has been negligent.'
Labour MP David Anderson said the debate was not about the right to claim damages but the effect that existing legislation has on employers.
'That financial disincentive will drive employers to do the right thing in circumstances in which they might not otherwise have done so.
'This is not about people at work receiving money; it is about people at work not getting hurt and not getting killed.'
Labour Lords have vowed to 'hold firm' when the bill goes back to the House of Lords next week for what is dubbed in parliament as 'ping-pong'. Peers may vote to retain their opposition to the government's clause or opt to drop it.