The company was ordered by the Environment Agency to stop taking in waste, after both E.coli and salmonella were found at its composting facility last week.
Agency officers discovered a substance known as as leachate – which is produced by the composting process - near the wall of a building used for food waste deliveries, and near a compost mound, and considered that represented a serious risk of pollution to ground water.
Samples taken from the area were found to contain high levels of ammoniacal nitrogen, which is toxic to fish at low levels, as well as E.coli and salmonella.
The suspension notice came into effect last week and will remain in place until the site operators prove that all the areas used for the treatment of waste are sealed and that liquid from the composting process cannot escape from the site and pollute the local environment.
Kelly Jarman, Environment Agency Wales, said, 'Our investigations into the Wormtech site are still ongoing and our officers are continuing to monitor the situation closely.
'Initial tests on the site indicate that there is a serious risk of pollution to groundwater by leachate coming from the operation at Wormtech.
"The presence of E.Coli and salmonella have also been confirmed at the site.
'We have issued the suspension notice to stop the operators from bringing any waste into the site until they can prove that the buildings have been sealed and do not pose a risk to the environment or public health.
'We will continue to take action against people who breach the terms of their licence.'
Jackie Powell of Wormtech said the firm was doing everything it could to work with the Environment Agency, and has asked for more time to sort out its issues.
Wormtech handles 10,000 tonnes of food and green waste a year for the Torfaen and Blaenau Gwent councils, as well as food waste for Monmouthshire.
All three councils say they are finding or already have alternative arrangements in place. A Blaenau Gwent council spokeswoman said the council was agreeing contingency plans, while both Monmouthshire and Torfaen said contingency plans were in place and there would be no interruption to waste collections.
Wormtech has been operating in a former munitions building in Caerwent since 2004 with its whole composting operation carried out inside the converted military buildings which it explains on its website can be 'sealed from the environment'.
When the garden and food waste is collected, it is taken to this 'unique in-vessel' composting facility where it is shredded and composted in a sealed bunker designed to kill off harmful bacteria that may be present.
Ironically, Wormtech's website urges residents to avoid contaminating the green waste collection bags with glass or plastics, saying, "We have a data base of customers that put contaminants in our bags".
Most of the compost produced is used in land reclamation projects, but according to Monmouthshire County Council's website a soil conditioner can be purchased from McDonalds Nurseries, Llanfoist.
Dr Lika Nehaul, Public Health Wales said however that the agency was satisfied that there was no public health risk at this stage.
The suspension by the Environment Agency is not the first time Wormtech has found its anti pollution measures failing.
In May 2011 the firm was fined £41,000 after polluting a water supply and forcing a Ministry of Defence training base into quarantine for three months.