Labour is expected to support the Department of Work and Pensions (DWP) in speeding a retroactive law through parliament that will overturn the outcome of a court of appeal judgment and ensure the government no longer has to pay £130m in benefit rebates to about a quarter of a million jobseekers.

The law has been hastily drafted by the government in response to last month's ruling from three appeal court judges in favour of science graduate Cait Reilly and unemployed lorry driver Jamieson Wilson.

The court found that Reilly, who had been made to work unpaid in Poundland for weeks; Wilson, who was forced to work unpaid for six months, and up to 231,000 other benefit claimants had been unlawfully punished over the last few years because the government had failed to give them more than a few lines of regulatory information about the schemes they had to take part in.

In a move that has upset campaigners and activists, the parliamentary Labour party said it was likely to abstain from any vote expected on Tuesday and was pushing for concessions – including an independent review of the benefit sanctions regime – in return for allowing the jobseekers (back to work schemes) bill to be rushed through parliament at "lightning speed".

The DWP is keen to see the retroactive bill passed into law in case the supreme court rejects its application for appeal and £130m that was taken away in sanctions has to be paid back to jobseekers.

In explanatory notes to the bill, which lawyers and campaigners described as "repugnant", the government said the legislation to overturn the court's findings was needed to "protect the national economy".

Lawyers acting for Reilly are already preparing to challenge the law as soon as it is given royal assent under article six of the European convention on human rights, which guarantees the right of access to the courts.

In a blogpost on Monday evening, the shadow work and pensions secretary, Liam Byrne, described the department's inability to draft lawful back-to-work scheme regulations for about half a dozen employment schemes as "incompetence on a truly monumental scale".

Byrne said in return for Labour's support on the bill's emergency timetabling, "ministers must launch an independent review of the sanctions regime with an urgent report to parliament".

Labour sources said they also wanted to make sure that the legislation was tightened up so jobseekers' regular rights of appeal, separate to the court of appeal judgment, were not also trampled on by the new law.

Ahead of the supreme court appeal, the government has instructed James Eadie QC, the government's top lawyer – known as the "Treasury devil" – to take charge.

The DWP said regulations had been drafted in a minimal fashion to give job centres and organisations involved in getting the unemployed into work flexibility and latitude for innovation.

Former Green party leader Caroline Lucas said she was working with other MPs to try to get a vote at the bill's second reading, "in order to show our deep opposition to the flawed principles of the bill".

She added: "We are hugely disappointed at the signs coming from the Labour camp which indicate that they will not be joining us.

"A meek call for a review of the regulations in a year's time is frankly no opposition at all.

"If Labour MPs don't join us in voting against this bill, they will be supporting the government in undermining a court of appeal judgment and backing the primary purpose of the bill: to prevent people from rightly claiming back welfare payments that were docked as part of the shambolic workfare scheme that Cait Reilly courageously exposed in the Poundland case."

The union Unite, which also represents unemployed people, is also calling for MPs to strongly oppose the bill and "stand up for the rights of jobseekers".

The union's general secretary, Len McCluskey, said: "This is a cynical move by the Tory-led government to avoid giving rightful compensation to jobseekers who have fallen foul of the incompetence of the Department of Work and Pensions. When will they learn that rushed law is bad law?

"The courts have told Iain Duncan Smith that his approach is unlawful. And the public accounts committee has decried the woeful success rate of his schemes. Given this, the government ought to be going back to the drawing board."

A spokesperson from campaign group Boycott Workfare, which protests against making unpaid work schemes a condition of receiving benefits, said: "It is just as disgusting to hear Liam Byrne say that the social security people are due must be withheld or the entire welfare budget be cut. Everyone knows abstaining is as good as voting for the bill."