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Resident Doctors Association national secretary Deborah Powell said the students - who have admitted going on holiday rather than completing overseas hospital placements - have been denied natural justice.
Otago University announced on Monday it would punish more than 50 trainee interns for using their three-month overseas hospital placement to instead go on holiday.
The university said it was working on a 'package of consequences' for the students and was barring them from graduating with the rest of the classmates next month, while at least one health board put them on unpaid leave from Monday until the students got their medical registration.
The package of consequences includes paying back their medical trainee intern grant for each week of holiday they took instead of attending their placements, writing a self-reflective essay and agreeing to a package of community service or research.
However, the university has been criticised for its treatment of the students, with medical professionals saying the practice has been going on for decades, and the 53 being punished were being used as "scapegoats".
Dr Powell said the medical trainee intern grant was not actually paid to students for the trip - it was recognition of the work that they would have done in New Zealand hospitals during their final year.
"They've done the work, they shouldn't be deducted the money in our view," she said.
Dr Powell said the Resident Doctors Association had also raised problems with the university about the "community service or research" requirement.
"These people are going to start working on rosters that can see them working anywhere up to 72 hours a week. On average, they'll be working 55 to 60 hours a week. So in terms of the community placement, we're talking voluntary community work ... they're going to have to do that over and above quite a heavy workload," she said.
At least 12 of the students were doing internship work at Canterbury District Health Board sites this month, and were due to transition to formal, paid graduate employment on Monday.
The health board has put them on a period of leave without pay until they have received formal registration by meeting extra requirements set by the Medical Council.
Its chief people officer Michael Frampton said the health board was committed to working with the university and the Medical Council to minimise the impacts of the situation, where possible.
He said it was through the health board's "culture of learning from mistakes", that it was not terminating the students' employment's altogether.
Other health boards declined to comment about the course of action that they were taking other than to indicate a "pragmatic approach."
Dr Powell said putting students on unpaid leave was definitely the most suitable arrangement for the foreseeable future, however with no indication how long the students will be on leave she said the Resident Doctors Association had concerns about the impact on wards.
"The university has acknowledged that there are pipeline effects of these students having delayed graduations, so we're trying to balance that as well, because we don't want rosters that are understaffed," she said.
"Fifty-three doctors down is a lot of doctors ... and we will have to be using our other doctors to cover, and these people are already doing, as I say, 55-to-60 hour working weeks."
Auckland District Health Board chief executive Ailsa Claire said the health boards were supporting the university to minimise the impacts where possible.
"It may be a week or two before the final situation is known, but we do not expect it to have any impact on patient services or the doctors' long-term training," she said.
Earlier, the university confirmed it had launched an inquiry to find out how the misconduct occurred and how it can be prevented - and said it may retrospectively look into previous years.