FWC’s road transport contractual chain order: a guide to new fuel cost recovery obligations

The Fair Work Commission (Commission) has made a historic intrusion into contractual arrangements by making a road transport contractual chain order (RTCCO) which came into force from 21 April 2026. 

The RTCCO was made on an expedited basis as an emergency measure in response to the increase in fuel price following the conflict in the Middle East and the disruption of shipping through the Strait of Hormuz.

In short, the RTCCO requires parties in road transport contractual chains to adjust payment rates so that participants in those contractual chains are active participants in the recovery of the increased cost of fuel. 

Organisations should act immediately to assess their contracting arrangements and identify whether they are subject to the rate adjustment obligations.

The requirements of the RTCCO have the capacity to be administratively demanding, so it is timely to consider the scope and effect of the order, and how parties to road transport contractual chains can implement it. 

In some circumstances, the application of the RTCCO is simple. For example, a supermarket, its contracted haulage company, and the haulage company’s contracted driver are each plainly party to a road transport contractual chain to which the RTCCO applies. However, where there are further links in the contractual chain—and where upstream parties are more distant from contracted haulage or transport—the application of the RTCCO requires further consideration. 

What is an RTCCO?

An RTCCO is a relatively new concept introduced in the Fair Work Act 2009 (Cth) by the ‘Closing the Loopholes’ amendments in August 2024. This is the first order made using these provisions. 

An RTCCO sets standards for regulated road transport contractors, employee-like workers and other persons in a ‘road transport contractual chain’. A road transport contractual chain is a broad concept that captures not only those who deliver goods and operate as part of the supply chain, but also suppliers and customers. It is defined as:

• a chain or series of contracts or arrangements;
   
• under which work is performed for a primary party, being a party to the first contract or arrangement in the road transport contractual chain;
   
• by a regulated road transport contractor or road transport employee-like worker under a services contract, or by an employee; and
   
• at least one of the primary parties is a constitutional corporation. 

The RTCCO made by the Commission covers all work in the road transport industry (other than the cash in transit industry) and applies to the following persons in road transport contractual chains:

• primary parties, as defined above; 
   
• secondary parties, being parties to a subsequent contract or arrangement in the contractual chain;
   
• road transport businesses;
   
• digital labour platform operators in the road transport industry;
   
• road transport employee-like workers performing work in the road transport industry; and
   
• regulated road transport contractors performing work in the road transport industry.

In practical terms, the RTCCO captures persons or businesses that contract for the provision of road transport services (other than cash in transit), the contractor or worker who ultimately performs the transport work, and any intermediary parties in between.  

Obligations under the RTCCO

The RTCCO imposes three core obligations with respect to rate adjustments under contract to address the increased cost of fuel: 

1. primary parties must, within each fortnight or twice per calendar month, adjust the rate paid to any other primary party for the performance of work in the road transport industry by the amount necessary to ensure recovery of the increased cost of fuel from the date of commencement of the RTCCO;
    
2. primary parties must take reasonable steps to ensure that secondary parties engaging regulated road transport contractors or employee-like workers in the same contractual chain adjust the rate they pay to such contractors or workers to ensure recovery of the increased cost of fuel; and
    
3. secondary parties must, within each fortnight or twice per calendar month, adjust the rate they pay to any other secondary party, regulated road transport contractor or employee-like worker for the performance of work in the road transport industry to ensure recovery of the increased cost of fuel.

The defined “increased cost of fuel” is the difference between the cost per litre for the type of fuel used at any given time and the cost as it was on or before 6 March 2026.

The second obligation does not apply to a primary party that is a small business employer and is not a road transport business.

How rates may be adjusted

The RTCCO provides flexibility as to the mechanism by which rate adjustments may be made. For example, adjustments may be effected by one or a combination of:

• an adjustment to the rate or a component of the rate payable; 
   
• the introduction of a fuel increment or levy; or
   
• a direct reimbursement or offset of money expended upon the increased cost of fuel.

A critical feature of the RTCCO, and one that will be of immediate practical relevance to many businesses, is that certain existing contractual arrangements may satisfy the RTCCO's requirements without further action.

Specifically, the RTCCO provides the rate adjustment obligations will be satisfied where there is an existing rise and fall mechanism in the contract:

• a ‘rise and fall’ formula, cost model or cost benchmark in an applicable state or territory industrial instrument, collective agreement or contract, which addresses recovery of the increased cost of fuel; or
   
• an ongoing or special arrangement between persons in a road transport 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.

Additionally, the Commission clarified that a ‘rise and fall’ formula, cost model or benchmarking methodology may be applied in a standardised way on the basis of a reasonable averaging of the increased cost of fuel to a group of regulated road transport contractors or employee-like workers engaged by a single road transport business.

Disputes and enforcement

Disputes concerning the implementation or operation of the RTCCO can be referred to the Commission after the parties have genuinely tried to resolve the dispute between themselves. The Commission may use any method of dispute resolution it is permitted by the Act that it considers appropriate, and may arbitrate the dispute with the consent of the parties.

Contravention of a term of the RTCCO is a civil remedy provision under the Act and can attract a maximum fine of $99,000. Courts can impose penalties against businesses, individuals or other persons who fail to comply with the RTCCO. 

Cessation and review

The obligations under the RTCCO will cease to apply 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 Commission will review the RTCCO after the first month of its operation and then every three months thereafter.

Implications 

The RTCCO represents a significant intervention in the commercial arrangements underpinning Australia's road transport sector. It is a significant and first of its kind step. It is one which is grounded in well-intended policy, but which has a demanding and arguably unclear application across numerous industries.

Organisations should consider whether they are operating within a road transport contractual chain and whether they meet the definition of a primary party or secondary party.

In some circumstances, the identification of a road transport chain will be easy. An example given by the Commission is as follows:

Supermarket – Haulage Contractor – Transport Subcontractor – Driver

In this case, the Supermarket is a primary party and the Transport Subcontractor is a secondary party. The Haulage Contractor is the connecting link in the contractual chain and is both a primary party and a secondary party. 

Further consideration is required where there are further links in the contractual chain upstream from the party that directly engages for transport by road. Consider, for example, the following contractual chain in the construction industry:

Project Proponent – Head Contractor – Earthworks Subcontractor – Haulage Contractor – Transport Subcontractor – Driver

In the above example, the Head Contractor and Project Proponent are one and two steps removed from the direct engagement of the Haulage Contractor. A question is whether, and to what extent, the RTCCO applies to them. 

At first blush, one might reasonably argue that the RTCCO is only intended to impact the contract chain directly involving transport. However, the legislation is drafted broadly. As above, a “road transport contractual chain” is defined to mean a chain of contracts under which work is “performed for” the first party in that chain by a road transport contractor (e.g. driver). Further, the legislation contains a deeming provision by which work performed by a driver is taken to be performed for the person who engaged the driver; and is also taken to be performed for each party to a contract or arrangement in the chain or series of contracts or arrangements. On a broad view of the “performed for” stipulation, each contract in the contractual chain is caught by the RTCCO, even those numerous steps upstream from the transport contract.

Against that background, we would recommend that organisations relying on the road transport industry consider the following:

• Contracts directly involving road transport. Where an organisation is directly part of a road transport contract (e.g. supermarket or contractor engaging a delivery contractor), the organisation is required by the RTCCO to make the contractual adjustment as per the RTCCO, and to take reasonable steps to ensure that the parties downstream similarly adjust their rates.
   
• Contract chains indirectly involving road transport. For other contractual chains where an organisation’s involvement in a road transport chain is indirect (i.e. further up the chain), it may be appropriate for the entity to take an investigatory, and wait and see, approach. 

Organisations at the top of such contractual chains could issue a pro-forma notice to their downstream counterparties that asks for information as to any road transport contracts in that chain, and whether an adjustment is necessary. The organisation can then act on the information received as appropriate.

• Other contractual rights. Organisations up and down the contractual chain should also consider whether there are contractual entitlements that are triggered by the RTCCO, including entitlements arising under change in law provisions and the like.
   
• Assess the adequacy of existing mechanisms. Organisations should review whether their existing contracts already contain ‘rise and fall’ provisions, fuel levy clauses or other benchmarking methodologies that may satisfy the RTCCO's requirements, and if not, consider what mechanisms should be implemented. Care should be taken to ensure that any existing mechanism genuinely provides for recovery of the increased cost of fuel on or before 6 March 2026, not merely an adjustment tied to a different baseline or formula that may not adequately capture the current spike in prices. If an existing contract does not include a rise and fall mechanism, the preparation and agreement of a separate ‘rise and fall’ arrangement might be a relatively easy way to ensure compliance with the RTCCO.
   
• Consider ‘reasonable steps’ obligation and downstream exposure. Primary parties should consider how in practice they will discharge their obligation to take reasonable steps to ensure that secondary parties adjust the rate they pay to the relevant counterparty, including considering what inquiries and assurances may be necessary. We note the Commission identified that the “nature of the obligation is analogous to the safety obligations borne by primary parties under the ‘chain of responsibility’ provisions of the Heavy Vehicle National Law”.
   
• Monitor the Commission’s review. Organisations should monitor any developments or amendments to the terms of the RTCCO flowing from the review of the RTCCO scheduled for late May 2026 and every three months thereafter.
   
• Seek legal advice. The novelty of the RTCCO, together with the speed at which it has taken effect, means that affected organisations will need to move quickly to understand their obligations. Further, the RTCCO is a precursor to potential further regulatory change; while the current order is an emergency measure directed at fuel cost recovery, the statutory framework permits far broader orders covering matters such as payment times, termination (including one-way termination for convenience) and general rate reviews. We note that there are several other applications for RTCCOs and minimum standards orders currently before the Commission.