The staff representative association of the Defence Forces, PDFORRA, has said that 13 soldiers serving in Co Donegal are facing the threat of dismissal from the Army.
The men's superior officers claim the soldiers are unfit for training exercises.
The issue emerged at the second day of PDFORRA's annual conference in Letterkenny, Co Donegal.
The association alleged that, when one of its representatives intervened in recent months to try and resolve the issue, he was victimised.
PDFORRA's general secretary, Mr Gerry Rooney, said the future of the 13 men should be decided within the existing industrial relations framework, and not left to the discretion of the men's superior officers.
Mr Rooney said there were now fears that the attempt to dispose of the men's services may have far-reaching implications across the Army, Naval Service and Air Corps.
"PDFORRA will not enter discussions on the application of part two of the Sustaining Progress national pay agreement until the Department of Defence honours its commitments under the peace clause contained in the Sustaining Progress agreement," he said.
Mr Rooney was speaking at the second day of PDFORRA's annual conference.
The issue arose about three months ago when 13 soldiers serving in Donegal were issued with letters from their superiors informing them that at the end of their current two-year contract an extension may not be recommended.
It is understood the letters informed the men that their inability to take part in training exercises would be taken into account when contracts were up for renewal.
They were told such participation was a minimum demand associated with their role as soldiers.
Mr Rooney said the decision to issue the letters created a "level of conflict \ is provocative and unnecessary".
The men, most of whom have just over 20 years' service in the Army, are currently employed under two-year contracts, which are extended at the discretion of their superiors.
The men have sustained injuries since joining the Army and are unable to participate in often physically demanding exercises. Instead they have been assigned to guard duties and radio control detail, among other tasks, at their barracks.
PDFORRA claims that although the men are unable to participate in exercises, they are still working at "housekeeping" tasks and should be retained for that purpose.
The association says unless a third party, either the Labour Court or Employment Appeals Tribunal, is appointed to resolve the issue, it will not be entering talks on the implementation of the second part of the wage agreement.
The deal guarantees a wage increase of between 5 per cent and 6.5 per cent for Defence Forces personnel.
Mr Rooney said PDFORRA would ask its members to forego that increase until the dispute has been resolved.
Mr Simon Devereux, deputy general secretary of PDFORRA, said the association representative who tried to intervene and help resolve the issue was charged with minor offences. The charges were later dropped.