The company building Victoria's desalination plant, Thiess Degremont, has sent all its construction workers home until further notice in a row over allegations of spying.

Members of the Electrical Trade Union (ETU) walked off the job at Wonthaggi over reports in the Australian newspaper that the company had employed contractors to infiltrate union ranks and spy on workers.

ETU boss Dean Mighell says unions are demanding an explanation from the company and have advised members not to return to work.

"Our members will not be working on a site where they're subjected to union-busting activities or subjected to surveillance and those sorts of things without their knowledge," he said.

"It's been a model project. There's no call for this. It's just absolutely absurd if it's true."

Bill Oliver, from the Construction Forestry Mining and Energy Union (CFMEU), is calling for a full investigation by the State Government.

"Talking to senior management down there, Don Johnson, he said he knows nothing about it," he said.

"We're demanding answers."

The Water Minister, Tim Holding, says it is completely unacceptable and says the Victorian Government had no knowledge of any alleged spying.

"I have spoken obviously with the senior public servants in the Victorian Government who are managing this project to see whether they knew anything about it and they have assured me emphatically that they knew nothing about the engagement of this firm," he said.

Mr Holding has backed the unions' demands for a full explanation.

"We need to obviously get more information from Theiss as they complete their investigations," he said.

"It seem as though senior people in Theiss were not aware of these developments either."