The Fair Work Commission has made an extraordinary order to support recovery of increased fuel costs associated with the Middle East conflict. The order commences from 21 April 2026 and requires fuel cost increases to be passed through relevant road transport contractual chains by way of periodic rate adjustments or another agreed process which provides for recovery of increased fuel costs.
The order has impacts for all businesses that enter into contracts providing for the delivery of goods and operates across the supply chain including transport providers, owner drivers but also businesses who are merely customers of transport providers. Participants across the road transport supply chain including customers need to be aware of this order, assess its implications and develop a plan to comply.
This order has been made against the backdrop of the ongoing Middle East conflict, which continues to have profound humanitarian consequences, alongside significant impacts on global energy markets and supply chains.
Background
- The 2022 changes to the Fair Work Act created a series of pathways for the Fair Work Commission to make ‘minimum standards orders’ and ‘contractual chain orders’ in a range of industry sectors including across road transport contractual chains in the road transport industry.
- The Federal government rushed through amendments to the Fair Work Act (assented to on 2 April 2026) and the relevant Minister made an emergency declaration on 10 April 2026, which provided the Commission powers to make urgent road transport contractual chain orders (RTCCO) in the context of the Middle East conflict and the surging fuel prices as a result.
- After a series of expedited hearings and submissions from a large number of opposing parties which took issue with both the expedited process and the substantive orders proposed, the Commission issued a notice of intent to make a RTCCO and a draft RTCCO on 14 April 2026 and has now published a final order to take effect from 21 April 2026.
- The order is intended to address the increased cost of fuel, defined as the difference between the current cost per litre of the fuel used for the relevant work and the cost as it was on or about 6 March 2026.
Coverage of the order
The proposed order covers all work in a road transport contractual chain excluding work in the cash in transit industry. This includes primary parties, secondary parties, road transport businesses, digital labour platform operators in the road transport industry, road transport employee-like workers and regulated road transport contractors.
The diagram below depicts different parties in the road transport contractual chain:
At least one of the parties in the chain must be a ‘constitutional corporation’ for the RTCCO to apply to the chain.
The RTCCO requires primary parties to review and adjust the rates they pay for road transportation services fortnightly (or twice monthly) to ensure that the other party recovers the increased cost of fuel (as measured against 6 March 2026 prices).
Those obligations will override the terms and rates under existing contracts or agreed arrangements, which is an extraordinary intervention in contracts negotiated by commercial counter-parties.
There are some limited exceptions which allow for the required rate adjustment to be satisfied by certain contractual mechanisms or ‘special arrangements’ which seek to address recovery for the increased cost of fuel – these are discussed further below.
Non-compliance with the RTCCO is a civil penalty offence.
Obligations across the chain
The RTCCO imposes the following obligation on parties in the chain.
|
Contractual chain participant
|
Impact
|
|
Primary parties
|
Required, within each fortnight or twice per calendar month, to adjust the rate they pay to any other primary party by the amount necessary to ensure recovery of the increased cost of fuel from the commencement of the order. Primary parties are also required to take reasonable steps to ensure that secondary parties engaging regulated road transport contractors or road transport employee-like workers in the same contractual chain adjust the rates they pay so that those workers or contractors recover the increased cost of fuel. Small business employers (less than 15 employees) who are the primary party and which are not themselves a road transport business are excluded from this part of the order. Primary parties are the only participants on whom the RTCCO places both a direct payment adjustment obligation and a separate obligation to take reasonable steps in relation to downstream secondary parties. Businesses that sit at the top or middle of a contractual chain and pay other primary parties would therefore need to assess whether their existing pricing arrangements already allow for recovery of increased fuel costs or whether a fresh adjustment mechanism is required. |
|
Secondary parties
|
Secondary parties have a direct obligation to pass through fuel cost recovery to other secondary parties, regulated road transport contractors and road transport employee-like workers whom they engage in the chain. This means secondary parties should focus particularly on the rates they pay downstream and on whether those rates are being adjusted frequently enough to meet the proposed fortnightly or twice-monthly cadence. Required, within each fortnight or twice per calendar month, to adjust the rate they pay to any other secondary party, regulated road transport contractor or road transport employee-like worker so that the increased cost of fuel is recovered from the commencement of the order. |
|
Road transport businesses and digital labour platform operators
|
Regulated road transport contractors and road transport employee-like workers are the categories of downstream participants to whom secondary parties may need to pass through fuel cost recovery by adjusting rates paid for road transport work. |
How is the adjustment made?
- The required adjustment can be made by increasing the rate itself, adjusting a component of the rate, making a direct reimbursement or offset, or using any combination of those methods.
- An ongoing or special arrangement can also be implemented between persons in the contractual chain which adjusts the rate in accordance with an agreed ‘rise and fall’ formula, cost model or other benchmarking methodology to account for or address recovery of the increased cost of fuel (including by using a standardised method).
- Existing “rise and fall” mechanisms or cost models may satisfy the obligation where they arise under a State or Territory industrial instrument, a collective agreement, a contract, or another agreed benchmarking arrangement that accounts for fuel cost recovery.
- Fuel-related adjustments already implemented before commencement may also be taken into account when assessing compliance with the obligation.
Is the order permanent?
- The obligations under the RTCCO will cease if the weekly average national terminal gate price for diesel, as measured in the Australian Institute of Petroleum’s weekly diesel price report, falls below $2.00 per litre.
- The RTCCO will be subject to review by the Commission after its first month of operation and every 3 months thereafter.
Disputes and review
- The order contains a dispute resolution process requiring parties to first attempt to resolve disputes between themselves.
- If that fails, a party may refer the dispute to the Commission, which may use any dispute resolution method available under the Fair Work Act and may arbitrate with the parties’ consent.
- Any party may be represented by an industrial association at any stage of that dispute process, including before the Commission.
Steps you should take to assess impact and avoid non-compliance risk
- Map your position in each road transport contractual chain so that you can identify whether you are acting as a primary party, a secondary party, or both in different arrangements, because the RTCCO’s operative obligations are role-specific.
- Identify the baseline rate and fuel cost position as at or about 6 March 2026, because the definitions of both “rate” and “increased cost of fuel” are anchored to that date.
- Review current contracts, collective agreements and industrial instruments to determine whether an existing rise and fall formula, cost model or benchmarking methodology already addresses fuel cost recovery and could therefore satisfy the proposed obligation.
- Put in place a compliant adjustment mechanism where none currently exists, whether by a rate increase, a fuel levy, direct reimbursement or another permitted method.
- Set up an operational process to make adjustments within each fortnight or twice per calendar month from commencement.
- For primary parties, document the reasonable steps taken with downstream secondary parties to support fuel cost recovery for regulated contractors and employee-like workers in the same chain
- Keep records of any fuel-related adjustments already made before commencement, because the RTCCO allows those earlier adjustments to be taken into account in satisfaction of the obligation.
- Establish an escalation pathway for disputes, noting that parties must first try to resolve disputes themselves before a dispute may be referred to the Fair Work Commission, which may then use any permitted dispute resolution method and may arbitrate with the parties’ consent.
- Monitor the diesel price trigger and the Commission’s review timetable, because the clause RTCCO will cease if the weekly average national terminal gate price for diesel falls below $2.00 per litre, and the Commission proposes to review the order after the first month and then every three months.
We would be pleased to support you to understand and comply with this significant development.
