Mexico City - Mexico's efforts to pass the biggest reform of its labor laws in four decades hit a snag on Tuesday when the Senate sent the bill back to the lower house of Congress to try and open up trade unions to more scrutiny, potentially stalling the legislation.

Last month the lower house approved a version of the bill that would make it easier for companies to hire and fire workers and simplify labor disputes, but there was controversy over the removal of clauses designed to improve union transparency.

Mindful of its large base of trade union support, the Institutional Revolutionary Party (PRI) of incoming president Enrique Pena Nieto had stripped out the measures seeking to enshrine free, secret election of union leaders and oblige unions to divulge details of fees they collect from members.

Those elements were pushed by the conservative National Action Party (PAN) of outgoing President Calderon, who submitted the bill for fast-track approval in early September.

In the lower house the PRI and its allies are dominant, and they succeeded in watering down the bill to protect the unions.

But the PRI lacks a majority in the Senate, where the PAN and a bloc of leftist parties combined to reinsert sections to promote transparency and the free election of union leaders in the version of the bill approved late on Tuesday night.

Even without those measures, the reform would still be the biggest revamp of Mexico's labor laws since 1970.

Various efforts have been made to overhaul Mexican labor law in the past, and the bill could be stalled in the lower house unless the PRI is prepared to give ground on a reform that is expected to deliver a boost to the economy if it passes.

Earlier on Tuesday, the Senate gave preliminary approval to the bill before debating the divisive union elements of the reform, which have thrown its future into some doubt.

Every year, tens of millions of dollars pass through the hands of bosses from the biggest trade unions without them having to account for how the money is spent.

Economists and politicians have forecast Calderon's bill could create upwards of 150,000 jobs a year, but that may not be enough to meet the demands of the labor market.

In his first five years in power, Calderon created fewer than 2 million jobs, well short of his promise of 1 million annually.