Businesses are suffering as managers spend more and more time dealing with requests from parents of young children to work flexible hours, the CBI says.
Some companies say dealing with requests can be time-consuming
Its survey of 420 firms found more were reporting a negative impact on their business because of such requests.
TUC leader Brendan Barber says flexible working is one of the most important rights introduced by the government.
But the CBI urged the government to be "very careful" before extending the law to cover parents of older children too.
The number of firms reporting a negative impact from family friendly employment laws has risen from 11% to 26% in the past year, the CBI survey says.
Employers spend a "great deal" of time dealing with these requests, it said.
However, companies have made "great strides" during the last 18 months to make a reality of the government's family-friendly policies, the business body said.
Pockets of concern
Most firms now offer part-time working.
Results from a CBI/Pertemps Employment Trends Survey this year showed that 75% of employee requests for flexible working were fully accepted, with a compromise reached on a further 15%.
But extra costs and lost management time were beginning to impact some businesses, companies reported, and "pockets of concern" over trade union relations were beginning to surface.
"Companies still need to get the job done," said CBI deputy director general John Cridland.
"The temptation to overwhelm them with unjustified employment law, just to placate the trade union movement, must be resisted."
In response to the CBI's comments, Mr Barber said: "The right for new parents to request flexible working, to which employers can too easily say no, is one of the most popular rights introduced by this government as a result of union campaigning.
"For the CBI to see this as simply a way of placating unions rather than of retaining and motivating staff, says a great deal about their attitudes to the modern world."