Chief Ombudsman Peter Boshier has called for significant restrictions on online schools including legislation to stop them becoming dumping grounds for children with disabilities.
The bill would allow the creation of online schools, including privately-owned schools, and permit full-time enrolment in such schools.
In a submission on the Education Update Amendment Bill to the Education and Science Select Committee, Judge Boshier also criticised government plans to give the Education Minister absolute discretion over creating, closing and merging schools.
Judge Boshier said it was rare for the Ombudsman's Office to make submissions on bills, but it was worried by several aspects of the proposed legislation.
Online schools could become the default for disabled children that physical schools did not want to enrol, he said.
"I'm really worried about what the unintended impact of this could be on those who schools might wish to exclude because its convenient," he said.
"I'd want there to be, if you don't mind, if we're going to go this way, an actual statutory safeguard to guarantee the right of disabled people to attend physical schools if they wish to."
Judge Boshier said children in online schools risked social isolation and full-time attendance should be restricted to those who could not access a physical school because of illness or remoteness.
He said the bill should also be changed to ensure the schools were covered by both the Ombudsman's Act and the Official Information Act.
Judge Boshier said Education Minister's multiple powers of absolute discretion over the closure, merger and accreditation of schools under the legislation needed to change.
"These appear designed to ensure that key ministerial decisions with respect to schools are not judicially reviewed," he said.
"If we don't have jurisdiction either, people are left with no-one to go to.
Judge Boshier said it was hard to justify absolute discretion in a country that wanted to be seen as having all the checks and balances of a transparent democracy.
Other submitters to the committee called for greater protection of children's rights.
Elaine Gousmett said schools ignored Education Ministry guidelines and the ministry was ineffectual at dealing with complaints.
"There needs to be a clear process of complaint and there needs to be an independent tribunal outside the Ministry of Education to which complaints can be made and voices can be heard that currently are not because the resources are not there."
Parent Alice Collard said her son's former school had failed to deal with bullying and nobody held schools to account.
"We parents are completely rail-roaded by schools because no-one holds them to account. My recommendation is an independent complaints authority like you have if you're a patient, you can go to the Health and Disability Commissioner. Parents and their children have nowhere to go."
Another parent, Rebekah Corlett, opposed online schools. She said they would not help inclusive education of children with disabilities and would devalue the importance of teachers.
But representatives from Te Kura (formerly the Correspondence School) supported the bill's proposal for creating online schools.
The chairperson of the school's board, Karen Sewell, said it would give parents and children more choice.
She said currently it was up to schools to decide whether to provide students with teaching via Te Kura for subjects that they could not offer - parents were not able to make that choice for their children.