The Legislative Council on Wednesday voted 23-17 to set up an upper house inquiry with public hearings into the contentious WorkCover bill, with the committee to report back by February 6.
The Victorian coalition and Greens have refused to support the government's proposed reforms to tighten eligibility and testing requirements under the scheme.
The opposition instead pushed for a short inquiry, insisting the Economy and Infrastructure Committee would be able to report back before the reforms are due to take effect in late March.
"It's a victory for common sense and balanced reform," Opposition Leader John Pesutto told reporters.
"This bill is half-baked and the work of this committee will allow is for a better bill to emerge."
WorkSafe Minister Danny Pearson labelled the opposition and the Greens' actions "cynical", saying they had delayed reforms to protect hard-working Victorians from significant increases in premiums.
"We expect this legislation to pass at the earliest opportunity in the new year," Mr Pearson said.
Under the government's legislation, workers suffering stress and burnout would no longer be able to access weekly WorkCover benefits.
Opposition Leader John Pesutto has backed a short inquiry into Victorian WorkCover reforms. (Joel Carrett/AAP PHOTOS)
They would instead be eligible for 13 weeks of provisional payments to cover medical treatment, along with access to enhanced psychosocial support services.
Workers receiving payments beyond two-and-a-half years would also have to undergo another impairment and capacity test to determine if they are still eligible.
Those changes have angered Victoria's union movement, which called for the government to go back to the drawing board.
WorkCover's claims liability has tripled in Victoria since 2010, mainly because of the increased cost of weekly income support.
Many workers are staying on the scheme longer, with mental injury accounting for 16 per cent of new claims.
Taxpayers have topped up the WorkCover scheme with an extra $1.2 billion to offset rising costs over the previous three financial years.
The average premium for businesses was lifted from 1.27 per cent to 1.8 per cent in July after the government declared the scheme was broken and in need of an overhaul.
Premier Jacinta Allan has repeatedly warned the government will have no choice but to raise premiums for businesses if the reforms don't pass.
The government estimates the average premium for Victorian businesses next year would have to be hiked to 2.4 per cent of remuneration, the highest of any Australian state.
Victorian Chamber of Commerce and Industry chief executive Paul Guerra has flagged another premium rise would cost some traders thousands of extra dollars a year.
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