The Central Labor Council called on the D.C. City Council yesterday to censure council member Willie J. Hardy (D-Ward 7), accusing her of "collusion" with business groups in attempting to rewrite the city's workers' compensation law in favor of employers.

Labor officials also urged residents of Ward 7 to recall Hardy from office. The requests were made as a result of a Washington Post story last week which disclosed that a lobbyist for the Metropolitan Washington Board of Trade had written much of a proposal by Hardy that would cut workers' compensation benefits sharply.

Hardy could not be reached for comment yesterday. Earlier, she said she "really resented" suggestions that the board of trade had unduly influenced her. "This ain't their bill," she said.

"Last week's news reports have established that the proposed legislation was written by the board of trade," said Robert E. Petersen, president of the Greater Washington Central Labor Council (AFL-CIO), a confederation of labor groups representing about 200,000 workers in the Washington area.

"The collusion between Mrs. Hardy, an elected representative of the people, and the board of trade to . . . [deprive] workers of the long-established protections is a betrayal of her constituents and the city," Petersen said, reading from a statement at the District Building.

"We call upon the City Council to censure Councilwoman Hardy for ther betrayal of the legislative process and we urge the residents of Ward 7 to recall her from office," Petersen said.

In February, Hardy, who is chairman of the council's Committee on Housing and Economic Development, introduced legislation that would cut workers' compensation benefits by nearly a third, according to insurance industry estimates.

The bill was a response to statements by members of the business community that workers' compensation premium costs to employers have ballooned by 500 percent since 1972, when Congress liberalized benefits and adjusted the system for inflation.

The maximum weekly payment to an injured worker in the District is the second highest in the country at $396.78. Only Alaska's is greater at $654.30. Hardy's bill would freeze the maximum and eliminate other benefits.

Employers argue that the present system carries no incentive for injured workers to return to work and allows them to malinger at pay levels as great as or greater than their take-home pay.

"The proposed bill would deprive injured workers of protections and benefits they now earn." Petersen said. If enacted, he said, "it will be the first time in the history of workmen's compensation that a legislature has taken back protections currently in place for workers."

Workers' compensation is a private insurance system paid for by employers and required by law in most states. It represents a social contract between employe and employer. Under workers' compensation, injured workers give up the right to sue their employers for negligence after accidents in return for a promise by the employer to pay medical and wage-loss benefits in a no-fault system.

Labor officals object to Hardy proposals that would:

Eliminate a worker's right to choose his doctor when injured. The bill would require injured workers to be treated by a physician selected by an employer.

Tighten the conditions under which an out-of-town worker injured in the District could be compensated.

Shift the burden of proof that an injury occurred. Currently, the worker is presumed to be entitled to benefits in the absence of "substantial evidence to the contrary."

Require a worker claiming an occupational hearing loss to leave his job for six months before filing a claim. Labor officials say this provision is intended tto discourage claims but employers argue it is essential to determine whether alleged hearing losses are only temporary.

Eliminate benefits to workers who are able to return to their jobs at previous wage levels. The current law acknowledges that even though a worker returns to work, he or she still may be partially disabled and therefore less competitive in the job market. CAPTION: Picture, WILLIE J. HARDY . . . "this ain't their bill"