The Victorian government has conceded that school chaplains can be of “any faith or no faith” as part of a settlement to a landmark legal challenge that could open the way to secular or atheist chaplains.

In order to settle a case arguing the program is discriminatory, Victoria agreed on Monday to change the position description. It’s a move the Rationalist Society and the academic Luke Beck believe will force providers to hire atheists and allow religious groups to endorse atheists.

But the Victorian education disputed that its practices had changed.

“It simply reflects what already occurs,” a spokesman said, because secular chaplains could already be endorsed by religious bodies.

The commonwealth-funded program currently requires chaplains to be recognised or endorsed by a religious institution, despite the fact pastoral care is only supposed to provide “general spiritual and personal advice”, without crossing the line to proselytisation.

The program has faced numerous complaints about its religious nature, which has been wound back through the Australian Capital Territory’s pledge to remove chaplains from public schools and federal Labor’s policy to allow schools to pick a secular chaplain instead of a religious one.

In the Victorian Civil and Administrative Tribunal challenge, Juliette Armstrong – who works as a school chaplain in both public and Christian schools, despite not being a Christian – argued the government and Access Ministries discriminated against her because of her lack of religion.

The Victorian government has agreed to change the position description to state that chaplains may be “of any faith or of no faith”. It will also retract statements that it is acceptable for chaplaincy providers to make hiring decisions based on job applicants’ religious affiliations, replacing it with the statement: “It is possible for a chaplain who does not have a religious affiliation to be endorsed by a religious organisation.”

Beck, an associate professor at Monash University, believes the changes are legally enforceable because chaplaincy providers are contractually obliged to comply with the position description, meaning there could be further litigation if chaplaincy providers refuse to hire atheists.

Dr Meredith Doig, the president of the Rationalist Society, told Guardian Australia it planned to approach religious organisations such as Anglican and Uniting church ministers to provide letters of endorsement to allow qualified, secular pastoral care workers to be hired and still comply with federal rules.

Access Ministries has settled the case, in return for issuing a statement that it believed “only a person with a personal commitment to Christian faith and values is able to carry out that work as an Access chaplain”.

A spokesman confirmed that term of the settlement, adding its employment practices “have been – and continue to be – in adherence with Victoria’s Equal Opportunity Act”.

The other terms of the settlement were confidential and Beck and the Rationalist Society – who supported the challenge – declined to answer questions about whether Armstrong was paid compensation.

Armstrong told Guardian Australia she was “glad that the Victorian government accepts that anyone who is qualified should be eligible to be a school chaplain, regardless of their religion,” adding that “religious discrimination is wrong”.

Doig said she was “delighted” by the outcome, calling it a “step in the right direction” but calling on other states and territories to follow Victoria’s lead.

“There is no reason their important work cannot be done by suitably qualified, trained and supported youth welfare workers,” she said.

“The Rationalist Society will be carefully monitoring the actions of Access Ministries and other faith-based agencies to ensure they comply with the Victorian government’s now non-discriminatory policy.”

The Victorian government has already pledged a “mental health worker” in every government secondary school, a policy which supplements but does not displace chaplains. In February, the federal shadow education minister, Tanya Plibersek, promised Labor will give schools the choice of a chaplain or secular social worker.

Doig welcomed Labor’s policy but said it was “not enough” because millions of dollars had already been given to faith-based agencies that recruit and train chaplains.

“[Youth welfare workers] should be employed by education departments or directly by schools,” she said.

In the 2018 budget the Coalition gave $247m over four years to extend the controversial program.

The departmental spokesman said the changes “do not contradict” the chaplaincy agreement signed by the commonwealth, states and territories.