The Victorian Labor government's landmark work-from-home laws were brought on for debate in the upper house on Thursday afternoon after Premier Ben Carroll unveiled last-minute pro-business changes.
But the coalition and the cross bench teamed up to refer the bill to a parliamentary inquiry, stalling its passage.
The motion, led by Shooters, Fishers and Farmers MP Jeff Bourman, passed 18 votes to 17.
One sitting week remains before the Victorian parliament is dissolved for the November state election.
Shadow Attorney-General James Newbury earlier said the opposition supported the government amendments and would not oppose the bill.
He repeatedly said the coalition had "no plans" to change the legislation, which would guarantee employees a right to work from home two days a week if reasonably able, should it come to office.
Under Labor's proposed amendments, the right would be explicitly restricted to employees who live in Victoria and the definition of "home" would be amended to a worker's main residence or a mutually agreed location.
The right would not stack on top of other rights or entitlements under federal law and could not be used to vary an employment agreement's days and times.
Employers would be required to pay for limited essential equipment for workers, such as a laptop or software to complete tasks, and not be responsible for home internet or basic utility bills.
Businesses would have up to 28 days - instead of 21 days - to respond to a work-from-home notice.
Employers could issue a notice to pause or revoke the arrangements if work from home was deemed unreasonable.Â
Businesses with fewer than 15 workers were slated to be given more time to prepare, with their start date delayed to January 1, 2028.
The start date for larger businesses had already been pushed back to July 1, 2027, when Mr Carroll hit pause to reset the government's frayed relationship with the business community after he replaced Jacinta Allan as premier in late July.
"The business community have been worked with and consulted," Mr Carroll told reporters.
The Greens' workers' rights spokesman Aiv Puglielli accused the premier of capitulating to the business lobby on its "headline act" legislation.
"They opened a state (Labor) conference with it," Mr Puglielli said.
"It was the talk of the town and now a few whispers in the ear from the business lobby and suddenly Labor and the premier are scared of their own bill."
The right to work from home was being legislated through Victoria's Equal Opportunity Act to withstand a potential High Court challenge.
Section 109 of the Australian Constitution dictates that if a state law conflicts with a Commonwealth law, the latter prevails.
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