NSW Labor will allow party members to participate in the direct election of its next state leader, following the lead of the federal branch.

But a controversial push to also allow the direct election of senators and state upper house candidates by rank and file members was voted down on the floor of the state Labor conference on Saturday, after a fiery debate.

John Faulkner had championed the failed bid to break the "farcical system" that had "allowed the shonks to prosper", pointing out the present system of allowing factions to choose upper house delegates had delivered Eddie Obeid, found corrupt by the Independent Commission Against Corruption, to the NSW Parliament.

Resistance to the amendment was driven by concern it would weaken the power of unions. But SenatorFaulkner argued thousands more union members would have a vote under a direct election system, rather than a small number of powerful union secretaries.

Legislative Council member Luke Foley backed the move away from factional selection, saying it was "pro-unionist" to give union members who are Labor members a direct vote.

But NSW Labor's right-wing general secretary, Jamie Clements, opposed it, saying Mr Obeid "did not have the backing or support of any trade union – he was an ethnic branch stacker with wealth".

Australian Services Union secretary Sally McManus said Labor should not cast aside the union movement, and said the Faulkner reform would "take away the very little say we have over who represents us in parliament".

The conference on Saturday voted for the direct election of the NSW party leader, departing with a tradition held since 1939. Rank and file members will have an equal say with the parliamentary caucus, after the state poll in March 2015.

Deputy Opposition Leader Linda Burney said the direct election of the state leader would be an important step in repairing NSW Labor's reputation.

"We have to not only regain the trust and respect of our members but regain trust and respect across the community," Ms Burney said.

The challenge of how to scrub clean the stain of corruption was the dominant theme at the meeting at Sydney's Town Hall.

The conference heard from Mr Clements that revelations at the ICAC had forced NSW Labor to face some horrific home truths. "The true believers had our hearts broken," Mr Clements said.

Left assistant secretary John Graham said "power in Labor is in too few hands" and compared the NSW Labor right's idea of democracy to a reality television singing show where "the theme song plays, there's 53 minutes of ads, then Jamie Clements walks in and picks the winner".

Federal MP Anthony Albanese had also backed the direct election of both party leader and upper house members, saying trusting members to get it right would lead the electorate to trust Labor.

NSW Opposition Leader John Robertson delivered a rallying call to NSW Labor before next year's election.

Highlighting a fight for jobs and training next March, he unveiled a policy imposing a ratio of 15 per cent of workers on major government construction projects to be filled by apprentices, trainees and the long-term unemployed.

Mr Robertson repeated his call for Mike Baird to pass legislation to allow full public funding of elections, to make 2015 the "cleanest ever".