Sharp increases in fuel costs have moved from being a commercial risk to a regulatory risk in the road transport chain. Through the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026, the Fair Work Commission has imposed obligations across contractual chains to ensure fuel price increases are passed upstream.

The Order took effect on 21 April 2026 as a time‑sensitive Order following a Ministerial determination relating to fuel supply disruption associated with the conflict in the Middle East, and the significant reduction in shipping through the Strait of Hormuz.

The consequent disruption to oil supplies have significantly increased the cost of diesel and petrol used by the road transport industry. Fuel costs have risen from approximately 20%-30% of operating costs to as much as 40%-50% per cent for owner-drivers.

The Commission observed that contractual chains in the road transport industry are often hierarchical in nature, with clients and major businesses at the top of the chain being in a position to dictate prices for road transport services to those lower down the chain, and with owner-drivers and small business operators being ‘price takers’ with weak bargaining power. In addition, many small operators do not have escalation or other contractual clauses which allow for rate adjustments to deal with rising fuel costs.

The Order was made to allow the increased cost of fuel to be recovered by owner-drivers and small business operators and passed up the chain, with the cost burden ultimately being borne by the end users of road transport services.

The Order was characterised as an emergency, remedial measure intended to operate only until fuel prices return to a measure of normality.

Coverage and core obligations

The Order applies to work performed across the road transport industry, excluding cash‑in‑transit. Coverage extends to primary parties, secondary parties, road transport businesses, digital labour platform operators, regulated road transport contractors, and road transport employee‑like workers.

Primary parties must adjust rates paid to other primary parties at least fortnightly or twice per calendar month to allow recovery of increased fuel costs. Primary parties must also take reasonable steps to ensure that secondary parties pass on adjusted rates to regulated contractors and employee‑like workers within the same contractual chain. An exemption applies where the primary party is a small business employer and not a road transport business.

Secondary parties must adjust rates paid to other secondary parties, regulated contractors, or road transport employee‑like workers within the same payment cycle to achieve fuel cost recovery.

Compliance does not require mathematical precision, but must have a sound and reasonable mathematical basis. Obligations may be met through existing rise and fall clauses, cost models, benchmarks, or other mechanisms that provide a sound and reasonable approximation of fuel cost recovery. Rate adjustments implemented before commencement may be taken into account.

The obligations will cease if the weekly average national terminal gate price for diesel falls below $2.00 per litre. The Commission will also conduct an early review, followed by regular reviews thereafter, to address evolving conditions and any unintended consequences. This is particularly given the novel Order, and this being the first time the new powers in Part 3B-2 of the Fair Work Act 2009 have been exercised.

Compliance

Road transport users and principals should not assume that fuel cost recovery obligations sit solely with contractors and owner-drivers. The Order extends responsibility across the contractual chain and exposes all those in road transport contractual chains to civil penalties where a term of the Order is contravened.

Civil penalties apply for any contravention of the Order, pursuant to section 536NP of the Fair Work Act 2009 (Cth).

Parties in the road transport chain should review their existing contractual arrangements, including rise‑and‑fall clauses or other pricing mechanisms, to ensure they comply with the obligations imposed by the Order.

This article was written by Kristin Hibbard, Special Counsel, and reviewed by Joe Hurley, Partner.