Casual workers have won the right to request permanent employment if they work regular hours over a year, under a ruling by the industrial umpire.

Union leaders launched a Fair Work Commission claim for the mandatory conversion of all casual staff to permanent positions after six months' regular work with one employer.

But Fair Work has instead agreed to give workers covered under 85 modern awards the right to request full or part-time employment status after 12 months.

"If the casual employment turns out to be long-term in nature, and to be of sufficient regularity ... then we consider it to be fair and necessary for the employee to have access to a mechanism by which the casual employment may be converted to an appropriate form of permanent employment," the full bench found.

Employers can refuse the request on reasonable grounds, including that it would require a significant adjustment to a casual employee's hours of work or they could foresee their position would no longer exist in the next 12 months.

Plugging 'one small hole' in casualisation crisis

Australian Council of Trade Unions (ACTU) secretary Sally McManus said the ruling was a small step towards addressing an "epidemic of insecure work" and the casualisation of the country's workforce.

"Australian unions fought for this improvement but it only plugs one small hole in a nationwide crisis," she said.

"Too many employers have been abusing the term casual and use it as a business model to drive down wages."

The unions' claim was designed to give casual employees who are effectively permanent but miss out on entitlements such as sick leave, annual leave and other benefits greater job security.

Workers in the hospitality, retail, manufacturing and agriculture industries are among those covered by the judgment.

The commission rejected the unions' push to impose a minimum four-hour shift for casual and part-time staff and to ban employers from taking on extra part-time or casual workers unless existing employees had been offered more hours.

Employers condemned the unions' campaign, warning the change would jeopardise tens of thousands of jobs and punish some workers.

Australian Industry Group chief executive Innes Willox said the ruling would reduce flexibility for some employers, but welcomed the rejection of the unions' most "damaging" claims.

"The unions' claims, if they had been accepted, would have wreaked havoc on Australia's labour market," he said.

Mr Willox also accused unions of making "bogus" claims about the casualisation of the workforce.

"The level of casual employment in Australia has been around 20 per cent for 19 years, with no sign of the level increasing.

"Union arguments about the 'casualisation' of the Australian workforce are a myth."

Penalty rate decision challenged

Unions have also launched a Federal Court challenge to a separate Fair Work ruling slashing Sunday and public holiday penalty rates for hospitality, fast food, retail and pharmacy workers.

ACTU president Ged Kearney said the cuts that came into effect last weekend would cost some of the country's lowest paid workers thousands of dollars a year.

"We are going to fight this all the way until this decision is reversed," she said.

The court has agreed to fast-track the appeal, which is likely to be heard by a full bench of judges in September or October.