Usually this error happens when the workflow evaluation criteria is not “when a record is: created, and every time it’s edited”.

ISCHANGED  function is available only in:

1. Assignment rules
2. Validation rules
3. Field updates
4. Workflow rules if the evaluation criteria is set to Evaluate the rule when a record is: created, and every time it’s edited .
5. Formula criteria for executing actions in Process Builder.
6. This function returns FALSE when evaluating any field on a newly created record.
7. If a text field was previously blank, this function returns TRUE when it contains any value.
8. For number, percent, or currency fields, this function returns TRUE when:
a. The field was blank and now contains any value
b. The field was zero and now is blank
c. The field was zero and now contains any other value