MLAs ban peers from sitting on 11 new councils
The Assembly agreed to ban members of the House of Lords from serving as members of the new councils, on 1 April 2014.
Members were continuing their debate on the Local Government Bill, which sets out the powers of the eleven councils.
MLAs voted by 59 votes to 31 to back the amendment proposed by Jim Allister of the TUV.
NI21's Basil McCrea said he hoped an amendment granting three weeks unpaid leave to public sector employees standing for public office would encourage participation and improve the public perception of politics.
He pointed to a "Democracy Plus" report in Scotland that he said showed broadening participation in politics would increase voter turnout.
Mr McCrea recognised the "deleterious affect on business" but said it was a sacrifice worth making.
His NI21 colleague, John McCallister, said the environment minister should "ask tough questions how we got into this position".
He said "with the election seven weeks away, we haven't complete clarity around what we're doing".
Mr McCallister proposed an amendment that would impose a deadline of September 30 2014 to enact reform.
Green MLA Steven Agnew said encouraging public sector workers into politics would help "normalise" local politics.
He said there was also an issue of an enduring political class.
"you work for a party and then stand for election - that shouldn't be the only route to being elected".
The first part of this debate can be viewed here.