Attorney General Baroness Scotland is clinging to her job after she was fined £5,000 for hiring an illegal immigrant as her housekeeper.
Gordon Brown insisted he would not sack the peer, despite her being forced to apologise for "technically" breaking a law she had helped pass.
But opponents branded her position untenable, and accused the Prime Minister of "dithering" over getting rid of her.
The UK Border Agency launched a probe after it emerged that a Tongan citizen employed by Lady Scotland to look after her west London home had overstayed her student visa.
In a statement, chief executive Lin Homer accepted that the peer had not "knowingly" employed an illegal worker, and "took steps" to check documents for 27-year-old Loloahi Tapui. "However, the law requires that employers must keep copies of documents proving the right to work in the UK and in this instance the employer failed to meet this requirement," she added.
Lady Scotland, the Government's top legal officer, said: "I fully accept the findings of the UK Border Agency, that I made a technical breach of the rules and I apologise for having made this inadvertent error. Having examined the documents which I was shown, I accept entirely that I should have taken copies of them and retained those copies and I accept it is my duty to pay the fine and I have done so."
Mr Brown, en route to the US for a crunch G20 summit, attempted to draw a line under the damaging episode. "In line with the Ministerial Code I have consulted the Cabinet Secretary and, given the UK Border Agency is satisfied she did not knowingly employ an illegal worker and took steps to check the documents, I have concluded that no further action is necessary given the investigation and action that has already been taken by the appropriate authorities and her unreserved apology," he said.
But shadow home Secretary Chris Grayling said the premier was dodging the problem. "After this, we can't see how Baroness Scotland can credibly stay in her job," he said.
"The fact that once again Gordon Brown is dithering over a serious issue affecting his government is yet another sign of the vacuum of leadership in Downing Street."
Lib Dem home affairs spokesman Chris Huhne also called for Lady Scotland to go: "Law makers should not be law breakers, and this applies even more to Baroness Scotland due to her special position as chief law officer. Her position now looks untenable."
