The Workers Compensation Act was updated in May 2020, to add the protection for essential workers, but the government says it is no longer appropriate.

It estimates keeping the protection could invite 25,000 extra claims over the next 12 months, forcing insurance premiums to rise by up to $950.

The bill to remove Section 19B on Wednesday night passed the lower house by a single vote, after Labor opposed it, and will now go to the upper house.

"Failure to pass this legislation will put small businesses across NSW at risk," Minister for Digital and Customer Service Victor Dominello said, as he asked upper house MPs to support the bill.

"The legislation before the Legislative Council simply returns the Workers Compensation scheme to the way it was before the pandemic, treating COVID-19 in exactly the same way as every other workplace injury or acquired illness."

While the government is painting the bill as support for "mum and dad businesses", Labor and the unions say it is an attack on workers.

"This is a cruel blow to the frontline workers who got us through the Delta outbreak - including those who work in retail and disability," opposition industrial relations spokesperson Sophie Cotsis said on Thursday.

"Proving you have contracted the virus at work can be a legally challenging, stressful task - particularly for those in frontline teachers, transport and service professions that are at higher risk of exposure every day."

There was no evidence of a link between the number of claims and Section 19B and it was not the reason premiums were high in NSW, Ms Cotsis said.

"The numbers of claims has simply followed the curve of the infections."

Frontline workers this week protested outside state parliament in a bid to convince MPs to vote against the bill.

Australian Associated Press