Canterbury council is in chaos after a majority of councillors voted to sack the general manager Jim Montague.
But Mr Montague, 67, is refusing to go claiming any attempt to remove him is illegal because he is now an ICAC whistleblower.
However, Fairfax Media has obtained a letter from the acting head of the Office of Local Government, Steve Orr, to Labor Mayor Brian Robson expressing "serious concerns" about the legality of his actions.
Police were called to Canterbury council chambers on Tuesday night after the public gallery erupted when Cr Robson terminated an extraordinary general meeting which proposed to sack Mr Montague.
The mayor claimed that such action could be in breach of the Independent Commission Against Corruption Act which protects whistleblowers against reprisals.
Cr Robson and the general manager then left. Three Labor and three Liberal councillors re-opened the meeting and voted to sack Mr Montague.
Local government minister Paul Toole also claimed his department had "serious reservations" about decisions made by the mayor.
After the highly-charged meeting Cr Robson said that the other councillors' decision to sack his friend Mr Montague was "a completely illegal act" which he intended to report to the appropriate authorities.
"I am surprised they have no idea about local government," he said.
Meanwhile, Mr Montague was back at his desk on Wednesday. He sent an email to staff about the "melodramatic events" of the previous night.
"To proceed with the meeting could be seen as an act of reprisal which is prohibited by the ICAC Act, given that I recently referred certain behaviour of two councillors to the ICAC," he said.
Mr Montague reported councillors Michael Hawatt and Pierre Azzi to ICAC in early January over claims they offered him inducements. The pair, who deny this, claim Mr Montague went to ICAC after they called for the meeting to sack him.
"In short, I remain in my position as your General Manager and want you all to know that it is 'business as usual' for Canterbury Council today," said Mr Montague in his email.
The fiasco at Canterbury Council is a headache for Sussex Street as Labor has six of the ten councillors. Cr Robson is now at war with Mark Adler, Mr Azzi and Fadwa Kebbe, his three colleagues who voted with the Liberals to get rid of Mr Montague.
Of the remaining two Labor councillors Esta Paschalidis-Chilas did not turn up for the crucial meeting and Karl Saleh announced he wanted a full investigation into Mr Montague before any decision to sack him was made.
Mr Saleh said he was "deeply shocked and outraged" by Fairfax Media's revelations that the cash-strapped council had forked out $50,000 over a four-year period for Mr Montague's lunch bills at Il Buco restaurant.
"I think that we should have a thorough independent and professional investigation into this matter to ensure that justice is in place and corruption is quashed," said Mr Saleh.
