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The program began with six groups: El Centro del Inmigrante in Staten Island; the Chinese Staff and Workers’ Association; the Retail, Wholesale and Department Store Union; Make the Road New York; the United Food and Commercial Workers International Local 1500; and the Workplace Project in Long Island.

But within weeks of the announcement, business groups questioned the program. Five trade groups representing restaurants, retail outlets, convenience stores and other businesses across New York sent a letter to Ms. Smith saying the program “steps well over the boundaries of even the most constructive collaborations with community groups and advocates.”

The letter from business groups also cited fears of “an unprecedented and unwarranted intrusion on New York’s employer community.”

Scott Wexler, executive director of the Empire State Restaurant and Tavern Association, who signed the letter, said the business leaders later met with Ms. Smith privately to discuss their concerns.

“We came away with the impression that the department was probably less nefarious than we thought but a bit more than they were letting on,” he said. “I don’t think any of us left that meeting thinking that this still wasn’t a conflict of interest” for unions to participate.

Pat Purcell, assistant to the president for the Food and Commercial Workers Local 1500, which participates in the program, said wage watch isn’t being used as a tool to negotiate with employers. He said the union, like any member of the public, already had the power to refer wage violations to the government.

“This is not what it’s for,” Mr. Purcell said, describing Ms. Smith as “an extremely fair-minded person who’s trying to find out ways to bring labor and business together in an educational approach. It’s not a gotcha approach.”