Cases such as Israel Folau’s would be captured by the government’s proposed religious discrimination bill, according to the attorney general, who says the legislation will include a “powerful avenue” for people of faith who face “indirect” unfair treatment.

However, Christian Porter is holding firm against calls from conservative MPs to establish a religious freedom act, saying such legislation could see “sensitive public policy” determined by the courts as it adjudicated competing rights.

Speaking to Guardian Australia after briefing more than 20 government MPs in Canberra on Friday, Porter said the legislation would include a clause relating to indirect discrimination, mirrored on section 7b of the sex discrimination act. He believed this would prevent employers from putting in place a binding condition on all employees – such as occurred with Rugby Australia – that restricted someone from expressing their religious views.

“This would provide an overarching rule that places limitations on what an employer could do by way of general rules that affected all of their workforce, if those general rules, in an unfair and unreasonable way, had a negative – or what the legislation calls a disadvantaging – effect on a person of faith,” he said.

“A bill like this would provide a very powerful avenue for someone who believed that a general rule in their employment especially disadvantaged them because of their religion, to argue that that rule was contrary to the act and unfair.”

The move to assure MPs of the merits of the proposed religious discrimination act comes after Rugby Australia terminated the contract of star player Folau for a widely condemned social media post in which he said “drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists and idolaters” would go to hell unless they repented. The case is headed to the federal court.

Porter said once the religious discrimination legislation came into effect, it would prevent employment contracts being made that were in breach of the new commonwealth law.

“When two private parties contract with each other – an employer and an employee – they can’t contract to do something that another piece of law, in this case commonwealth law, says is unlawful,” he said.

“The bill … provides an avenue for people who think a rule in their employment has unfairly disadvantaged them or led to their termination unfairly because of their religion, provides an avenue for complaint and potentially redress in those circumstances, and so it goes a long way to protect people from being discriminated against in the context of their employment.”

When asked if he believed Folau should have been free to express his view on social media, Porter said the case was about “competing principles” and he was unable to give an answer “as a lawyer”.

But he “personally” had concerns about the ability of a corporation to restrict the views of an individual in their private life.

“I think a real issue arises here about how much and to what extent modern businesses – whether they are sporting codes or law firms – attempt to limit people’s behaviour in their private life and in their private discussions and in their private discourse outside of work hours based on an argument that there is what is sometimes called brand damage to the overall organisation,” he said.

He believed there was “disquiet” among Australians about the Folau case.

“We have probably reached a point where the ability of employers to control people in their non work time is getting tested,” he said.

Conservative MPs have seized on the Folau case as an example of why the federal government needs to do more to protect people of faith, and NSW senator Concetta Fierravanti-Wells has launched a petition for a religious freedom act.

Fierravanti-Wells has argued that the proposed religious discrimination act would “fall well short” of the expectations among those who voted for the Coalition who were concerned about their religious freedoms being curtailed.

“[A religious discrimination act] would be defensive in nature and limited to protecting against acts and practices by others which are discriminatory on the grounds of religion,” she told the Senate on Tuesday.

“Quiet Australians now expect the Coalition to legislate to protect their religious freedom. It is important that Australians of all faiths be free to practise their religion without discrimination. Even those who have no beliefs should be free to express those views.”

But Porter said the government was doing “precisely what we said we would do” at the election.

He believed a “classical formulation of rights” that protected people from the behaviour of other people through the architecture of anti-discrimination bills was superior to a religious freedom bill.

“As soon as you say, ‘Here is a bill that says everyone has a right to freedom of speech, everyone has got a right to freedom of association, to freedom of religion’ they all start competing with each other, and eventually you get the circumstance that you have got in America where the highest court in the land decides what is more important: the right to free choice or the right to life, and then the decisions around how the boundaries on really, really sensitive public policy decisions are made get made by courts.”

The prime minister, Scott Morrison, told the first partyroom meeting of the new parliament that he did not want the issue of religious freedom to become divisive or politicised. He urged MPs to give Porter feedback through a series of workshops. He has also flagged a bipartisan approach, saying he wants to work with Labor on the “deeply personal” issue.

Equality Australia has said it agrees in theory that discrimination on the basis of religion should be outlawed, but has warned that the new law must be a “shield not a sword” against LGBTI people.

Porter is holding seminars with MPs over the next six to eight weeks and has already revised the legislation multiple times.

After the internal consultations are complete, Porter said he would begin external consultations. The legislation will be introduced in the second half of this year.