The Community and Public Sector Union has removed from a proposed enterprise agreement a provision requiring union support before a syringe program can be implemented at the Alexander Maconochie Centre.
But despite describing the development as a "significant compromise" made in good faith, CPSU ACT secretary Vince McDevitt said the union would still propose the government secure majority support from staff at the prison before the program could go ahead.
Custodial officers at the prison have been waiting on a pay-rise with back-pay for more than a year since their last enterprise agreement expired on June 30 2013, with the threat of industrial action now looming.
A spokeswoman for Corrections Minister Shane Rattenbury said the government welcomed the offer from the CPSU and would consider the proposal in coming days.
In September, Chief Minister Katy Gallagher called on the CPSU to progress enterprise bargaining negotiations for prison officers before resolving a long-standing dispute on needle exchange program inside Canberra's jail.
"We're trying to work out if there's any way to reach agreement on it and, at the moment, it seems to be blocking up prison officers getting their back pay and getting their EBA sorted," she said.
But Mr McDevitt said it was time for the government to "start talking to their employees about their concerns without holding a gun to their heads over pay".
"Custodial officers are now facing another Christmas without a pay rise and the CPSU is calling on the ACT Government to stop blackmailing their staff, settle a new agreement and start engaging in a fair dinkum conversation with their employees," he said.
Mr McDevitt said he hoped the compromise would avert any industrial action with CPSU members having already voted to take protected action should an agreement not be reached.
"Starting today and until the ACT Government settles a new agreement with custodial officers, prison staff and their supporters will be engaging in an ongoing community campaign seeking community support," he said.
The proposed needle exchange program at the jail has been a contentious topic for several years with the CPSU previously describing the initiative as a "ridiculous proposition".
"[Prisoners] are not going to get rehabilitated off drugs while the government is facilitating their habit," Mr McDevitt said.
"This is a ridiculous proposition and the reality of the policy [is clear] when you just stand back and look at it,"
Mr Rattenbury has said the needle exchange was part of a multi-faceted "three-pronged" approach to addressing drug use in ACT prisons.
"There are people in jail who will continue drug-taking behaviour and criminal behaviour as well. Our job is to minimise that," he said.
"It's not an either or. We don't want people taking drugs, that's why we do both the supply and demand reduction.
"But we need to acknowledge that, unfortunately, some people do drugs and there's a public health issue there that we need to deal with as well."