The D.C. Council last night tentatively approved the first changes in the District's workers' compensation laws in 11 years, despite a last-minute attempt by business leaders to rescind support for the legislation.

The measure, passed by a voice vote and requiring a second approval by the council, would give workers injured on the job greater freedom in choosing physicians, guarantee continued health insurance for at least a year, increase some benefits and set a standard formula for determining the benefits paid to an employee who can't work.

But leaders of the Greater Washington Board of Trade, a business group, say the law would raise costs to employers an average of 11.3 percent and may drive some businesses out of the District.

Minutes after the bill's passage, council members were hit with new evidence of the city's dire financial circumstances: a revelation that the bank that underwrites special "tax revenue anticipation notes," used to ease the city's perennial cash-flow problems, had set costly new requirements to continue writing the notes.

"Banks at this time do not want to loan us any money any more because cash-flow problems at the end of the {1991} fiscal year will be worse than this year," council member John A. Wilson (D-Ward 2) said in asking for passage of emergency legislation to meet demands of the current lender, Japan's Sunwa Bank.

To avoid default on the $263 million the city must pay Sunwa on Friday for notes issued last Oct. 1, Wilson said, the city has postponed making its regular contribution to Metro and the D.C. employees pension plan.

If new notes are not issued Oct. 1, Wilson said, the city won't be able to meet its Oct. 2 payroll. But to underwrite those notes Sunwa required a guarantee the city would pay a 15 percent interest penalty if it defaults.

Wilson, the chairman of the council's Revenue and Finance Committee, said, "We are having considerable amount of trouble getting people to buy our notes."

The only alternative to meeting Sunwa's requirements would be to borrow from the U.S. Treasury, which Wilson said would cost more. He added, "That would be the day the Office of Management and Budget takes over running the city."

The emergency legislation was passed by voice vote, with council members Betty Ann Kane (D-At Large) and William Lightfoot (I-At Large) voting against it.

In contrast, the workers' compensation bill, which has been a politically explosive issue for several years, was passed without opposition.

The legislation had been stalled in Charlene Drew Jarvis's housing and economic development committee and was passed out to the whole council in the waning days of her campaign for mayor. Fact sheets about the bill were distributed on her campaign stationery.

After last night's vote, Jarvis said she was "very proud of the ability to achieve a compromise" on the legislation, which she said will "benefit workers without harming the business community."

But Larry Mirel, a member of the Board of Trade's workers' compensation committee, said no agreement on the bill was ever reached. "We think the bill is unnecessary because the current workers' compensation in the District of Columbia is the most generous in the entire region." The best thing he could say about the bill was that it wasn't as costly as business leaders feared it might be.

Joslyn N. Williams, local head of the AFL-CIO, praised the council's vote. "Justice is sometimes slow," Williams said, "but tonight the workers of this city achieved justice by the actions of the City Council."

Earlier yesterday, council members criticized Mayor Marion Barry's proposal to provide $31.5 million in pay increases for 24,000 union and nonunion city workers in the face of a looming deficit and other fiscal problems.

Wilson called Barry's plan a political ploy to curry support from influential unions. The mayor is a candidate for an at-large seat on the council.

"This is absolutely disgusting," Wilson said during a hearing on the proposal before the Committee of the Whole. "It is a sick decision that doesn't make any sense."

Barry said the proposal would maintain parity between the salaries of union and nonunion workers.