Background
The Fair Work Amendment (Fairer Fuel) Bill 2026 (Bill) amends the Fair Work Act 2009 (Fair Work Act) to allow the Minister to determine that an application for the making, variation or revocation of a Road Transport Contractual Chain Order (RTCCO). This allows for emergency application, where the Minister is satisfied that events or circumstances exist that have a significant national negative impact on the road transport industry and it is in the public interest.
The first RTCCO, the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026, came into effect on 21 April 2026 and sets rules for fuel cost recovery for parties in a road transport contractual chain. The RTCCO has been made because there is fuel supply disruption in Australia caused by the ongoing conflict in the Middle East.
In summary this RTCCO:
- Covers all work in the road transport industry.
- Sets rules for fuel cost recovery for parties in a road transport contractual chain.
- Fuel is any liquid or gaseous energy source used to power vehicles for the performance of work in the transport industry, including petroleum and diesel.
- It applies to Primary Parties, Secondary Parties and road transport businesses (along with digital labour platform operators, road transport employee-like workers and regulated road transport contractors performing work in the road transport industry).
- Key examples of primary parties are those at the top of the chain who procure transport services as part of their activities, such as supermarkets and construction contractors or mining services providers. One of the primary parties must be a ’corporation’.
- Secondary parties include suppliers and subcontractors. It must be noted that a primary party can also act as a secondary party when it participates in a subsequent contract that constitutes the next stage in the chain. For example, a construction contractor may engage a supplier or subcontractor under the primary contract and the supplier or subcontractor then engages a road transport business under the secondary contract (the supplier or subcontractor is both primary and secondary party).
- Each fortnight (or twice each calendar month), primary parties must review and adjust the rate they pay to other primary parties for the performance of work in the road transport industry to account for the increased cost of fuel.
- Secondary parties owe the same obligation to other secondary parties – each fortnight (or twice each calendar month), secondary parties must review and adjust the rate they pay to any other secondary party, regulated road transport contractor or road transport employee-like worker for the performance of work in the road transport industry by the amount necessary to ensure that the other secondary party, regulated road transport contractor or road transport employee-like worker recovers the increased cost of fuel from the date of commencement of the RTCCO.
- Increased cost of fuel means – the difference between the cost per litre for the type of fuel used to perform the relevant work at any given time and the cost it was as at 6 March 2026. The adjustments under the RTCCO can be made by an adjustment to the rate or a component of the rate, the introduction of a fuel increment or levy, or a direct reimbursement or offset of money expended upon the increased cost of fuel, or any combination of these. Section 4.6 of the order gives examples of means of rate adjustment – in essence using an existing rise and fall clause or a special arrangement between the contractual parties.
- The RTCCO is in effect from 21 April 2026 and will cease to apply if the weekly average national terminal gate price for diesel as measured in the weekly diesel price report of the Australian Institute of Petroleum, falls below $2.00 per litre.
So what does all this mean and what are the limitations?
- It is not a catch-all increase across all sectors. It applies only with respect to fuel for those in the road transport industry. Those doing civil works or mining works on site do not get a benefit (where a road transport business delivers equipment to site it may apply) but not the work on site – no fuel increase for plant and equipment usage.
- It only covers scenarios where the road transport business is one of the parties in the chain. Where a supplier or subcontractor uses its own fleet and own employees for deliveries, it does not apply to those fuel costs.
- A company that is a small business employer (fewer than 15 employees) and is not primarily a road transport business, is excluded from the application. The RTCCO also does not apply to the cash in transit industry.
- There is some contention in the industry as to how far the chain goes. It is likely that it applies only for direct transport supplied in the chain. This would mean that general transport of a mixed bundle of materials from port to a storage depot where the goods are then separated, stored and periodically delivered to different customers and sites, is unlikely to be captured as part of a specific chain.
- It applies only to fuel. It is not a basis to claim general rise and fall. It is not applicable for additional labour costs, insurance costs, general market turbulence etc. It is not a basis for a subcontractor to simply add 15% due to increased market costs. It is fuel costs only as delineated by the RTCCO i.e. between the cost per litre for the type of fuel used to perform the relevant work at any given time and the cost it was as at 6 March 2026. In a similar manner it is applied to a rate. If that rate has numerous components such as margin, overheads, labour and so on, those parts of the rate should not adjust, the adjustment is only for increased cost of fuel.
- Despite the reference to 6 March 2026, it is not retrospective. The 6 March 2026 date is a baseline for price measurement purposes, but additional costs only apply from 21 April. In fact, it is the opposite of retrospective as the RTCCO allows any rate adjustments implemented before the date of commencement of this Order may be taken into account in satisfaction of the obligations in the RTCCO.
- The RTCCO does not actually apply a formula for the calculation for the difference but does give guidance by referencing the weekly average national terminal gate price for diesel, as measured in the weekly diesel price report of the Australian Institute of Petroleum (AIP). Therefore, the likely best measure is to compare current AIP rates averaged over the fortnight to the AIP rate as at 6 March 2026 and add the difference per litre based on fuel usage. It is questionable whether a predominantly rural road transport business would be entitled to claim more if it can demonstrate that it actually paid higher rates for fuel in rural areas.
- The RTCCO applies irrespective of contractual terms to the contrary. So, a no rise and fall clause will not prevent the application of the RTCCO but that does not mean the clause as a whole is void or invalid. As noted above, the RTCCO covers fuel only so it does not open the door to other cost increases where a contract does not allow them.
- The bi-monthly obligations apply irrespective of whether others in the chain claim or not. The RTCCO uses the word, ”must” in this regard, making the obligation mandatory. That said, it is not unreasonable that the party required to make the assessment of the adjustment to pay, do so on the basis of reasonable information. For example, the adjustment to rates for increased fuel costs can only be based on the fuel burn rate per kilometre (this can be taken from average industry data depending on the type of vehicle) and the distance travelled. If this is not known (from information provided by the relevant road transport business) how can an adjustment be made for increased cost of fuel. In practice it is likely that there will be a significant amount of estimation, extrapolation and averaging (particularly where the relevant information is incomplete or withheld). It is unlikely to be perfect.
- The RTCCO does not apply upstream from the primary parties. If a primary party is a Supermarket, then there is nothing stopping a Supermarket from passing on costs at the checkout by adjustments to pricing of products on the shelves. The situation is not so simple for construction contractor passing this up the chain to a principal. In this regard there may still be some contention. Is the principal a primary party. At present the examples of primary parties provided by Fair Work Ombudsman are manufacturers and suppliers, large retailers and construction companies. While this is not definitive, the likely argument is that a principal in construction is buying the whole finished product or building and is not a party to the particular chain with individual subcontractors or suppliers.
On that basis, if the head contract does not have a price adjustment mechanism or rise and fall clause then the likely avenue will be a change in legislation clause. Each clause will be different so the wording will need to be reviewed (and consideration of any time bars on claims also taken into account). We are already hearing of Superintendents rejecting claims under clause 11.2 of AS4902-1997 (D&C Contract) on the basis that the RTCCO is not a change to the Works (being the end product delivered). Clauses should be reviewed to determine if they allow claims with respect to impact on WUC (work under contract – which will include temporary works and transport) or alternatively the payment of a new fee or charge as allowed under the unamended clause 11.2(a)(iv).
It would appear to be a significant shortfall of the RTCCO if the ultimate beneficiary of the works had no liability for costs in relation to the works that are mandatory obligations under the RTCCO for all others in the chain.
This is a snapshot of what we so far know and actual application of the RTCCO has not yet been tested. No doubt different participants in the industry will take divergent views.
In this regard the Fair Work Commission as the key administrative body behind the RTCCO and the Fair Work Act has indicated it will review the RTCCO after the first month of operation and every three months thereafter to determine its impact and if there are unintended consequences of its urgent imposition. This is the first time an order has been made and there are likely to be significant learnings from it.
In summary, the RTCCO applies only to fuel, it applies only where one party in the chain is a road transport business, it needs to be applied to a rate but that rate will then need to be applied to actual fuel utilised to determine what the increases are (or at least the best available estimate) and it is unlikely to directly allow claims against a principal in construction upstream, for that there will need to be a contractual mechanism, most likely claims for legislative change.
This article may provide CPD/CLE/CIP points through your relevant industry organisation.
The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.
