Against the backdrop of surging fuel prices and ongoing conflict in the Middle East, the Fair Work Commission (FWC) has made an emergency road transport contractual chain order that took effect on 21 April 2026 (Order). The Order carries significant implications for businesses across road transport supply chains, from manufacturers and retailers through to construction companies and logistics operators and brings with it real civil penalty exposure for those who fail to comply.
We take a closer look at the Order and what it means for employers in the road transport industry.
Background
The Middle East conflict has driven fuel prices upwards, disrupting supply chains and placing real financial pressure on those who perform the physical work of moving goods across Australia. The Fair Work Act 2009 (Cth) (FW Act) already contained mechanisms which were introduced in 2022 for the FWC to make contractual chain orders in the road transport sector. What changed with this Order was the urgency.
On 2 April 2026, the Federal Government acted swiftly, passing amendments to the FW Act and enabling the Minister to issue an emergency declaration on 10 April 2026. The FWC ran an expedited process before issuing the final Order on 20 April 2026, to take effect the very next day.
Purpose of the Order
The Order’s purpose is straightforward. It ensures that the people performing road transport work are not left carrying the burden of increased fuel costs alone. It does this by compelling parties at the top and middle of road transport contractual chains to make fortnightly adjustments to the rates they pay. The adjustments need to be sufficient to ensure that increased fuel costs are recovered by those further down the chain.
The mechanics of compliance turn on two key definitions. “Increased cost of fuel” captures the difference between the current cost per litre for the relevant fuel type and what it cost on or before 6 March 2026. “Rate” is anchored to 6 March 2026 also, and means the contracted, standard, ongoing or usual rate or amount paid for road transport work, whether expressed as an hourly rate, a running rate, a total amount, or otherwise. Those two definitions, and that single reference date, are the foundation of every compliance calculation under the Order.
Coverage
The Order covers all work in the road transport industry and applies to all persons in road transport contractual chains involving the performance of that work. This means the Order is not limited to transport businesses. Manufacturers, large retailers, construction companies and any other business that sits at the top of a road transport contractual chain as a primary party will be caught. The cash in transit industry is expressly excluded. At least one party in the chain must be a constitutional corporation for the Order to apply.
Obligations
Primary parties in the contractual chain carry the heaviest obligations:
- Within each fortnight or twice per calendar month, primary parties must adjust the rate they pay to any other primary party by the amount necessary to ensure that the other primary party recovers the increased cost of fuel from the date of commencement.
- Primary parties (who are not small business employers with less than 15 employees) must also take reasonable steps to ensure that secondary parties engaging regulated road transport contractors or road transport employee-like workers in the same chain adjust the rates they pay to those contractors or workers so that they recover the increased cost of fuel.
Secondary parties in the contractual chain face a direct pass-through obligation:
- Within each fortnight or twice per calendar month, secondary parties must adjust the rate they pay to any other secondary party, regulated road transport contractor or road transport employee-like worker by the amount necessary to ensure that those persons recover the increased cost of fuel from commencement.
Compliance
The Order does not prescribe a single method of compliance. It is intentionally flexible. Businesses can meet their obligations by adjusting the rate directly, introducing a fuel increment or levy, making a direct reimbursement, or using any combination of these.
It is also worth noting that existing arrangements may already satisfy the requirement. Where a contract, collective agreement or other agreed arrangement already contains a “rise and fall” formula, cost model or benchmarking methodology that accounts for fuel cost recovery, that mechanism can be relied upon.
Similarly, any fuel-related adjustments made before the Order came into force on 21 April 2026 can be taken into account. This is helpful as any businesses that have already moved to address rising fuel costs are not starting from scratch.
Non-compliance with the Order contravenes s.536NP of the FW Act which is a civil remedy provision.
Duration
Like the fuel price surge that prompted it, the Order is designed to be temporary. It took effect on 21 April 2026 and will cease automatically if the weekly average national terminal gate price for diesel falls below $2.00 per litre, as reported by the Australian Institute of Petroleum.
The FWC will review the Order in late May 2026 and then every three months.
Practical steps to take now
Five key practical steps for employers and parties in the road transport contractual chain:
- Map your position: Identify whether you are a primary party, a secondary party, or both across your road transport contractual chain arrangements. Your role determines your obligations, so this is the logical starting point.
- Lock in your baseline: Record the rates you were paying and the relevant fuel price as at 6 March 2026. Every compliance calculation under the Order flows from that reference date.
- Audit your existing contractual arrangements: Check whether a “rise and fall” formula, fuel levy, cost model or benchmarking mechanism is already in place. If it is, assess whether it satisfies the Order. If it does not, put one in place now.
- Implement a fortnightly adjustment process: Establish an operational mechanism to make the required rate adjustments within each fortnight from 21 April 2026, and keep clear records of every adjustment made, including any fuel-related increases put in place before the Order commenced, which may count towards compliance.
- Monitor and review: Track the Australian Institute of Petroleum’s weekly diesel price report against the $2.00 per litre trigger, keep an eye on the FWC’s review timetable, and ensure internal processes are in place to resolve any disputes with other parties in the chain before they escalate.
