Thousands of Australian businesses may not be aware they face new legal obligations under a first-of-its-kind fuel cost order from the Fair Work Commission that has been designed to protect smaller operators from global price shocks.
In effect from April 21, the Road Transport Contractual Chain Order requires businesses at the top of supply chains – including supermarkets and retail groups – to adjust the rates they pay transport operators every fortnight, rather than over longer periods, to account for surging diesel prices. Federal Parliament fast-tracked the order after conflict in the Middle East drove up diesel prices by more than 70 per cent and threatened the viability of many SMEs. It will continue until average diesel prices dip below $2 a litre.
The legally-binding directive extends beyond the transport industry. Any business that contracts couriers, engages freight operators or sits anywhere in a supply chain that moves goods by road may be affected. Non-compliance carries penalties that will be enforced the same way as underpaying workers.
Smaller Operators Needed Fuel Cost Relief
The Fair Work Commission granted the order at the request of the Transport Workers Union and Australian Road Transport Industrial Organisation after members reported higher fuel bills were placing truckies and employers under significant strain.
Over the last few weeks, drivers and transport businesses have outlined the dire circumstances they are facing with diesel costs, many already having to park up their trucks or rely on personal loans just to keep going
says TWU National Secretary Michael Kaine.
“Many drivers in the industry are mum-and-dad operations currently being forced to subsidise fuel costs for the multi-billion-dollar companies they are carting goods for. These clients of transport must pay their fair share, and the Fair Work Commission has recognised that this should happen on a fortnightly basis going forward.”
Australian Trucking Association Chair Mark Parry describes the order as a powerful and necessary response to an unprecedented situation. “Small and medium sized trucking businesses cannot keep Australia’s freight moving at rates that do not recover their fuel costs,” Mr Parry says.
ARTIO National Secretary Peter Anderson argues that by protecting smaller operators, big businesses will benefit too. “The nation’s road transport supply chains are critical in keeping our economy running. If the trucks stop the economy stops,” he says.
The Order Creates Fortnightly Obligations Across Supply Chains
The order sorts businesses into two groups based on where they sit in a supply chain. Primary parties are the businesses at the top of the chain, who enter into a contract because they need goods moved by road.
This may include manufacturers, large retailers and construction companies. Under the order, these businesses must adjust the rates they pay to transport operators every fortnight, or twice per calendar month, to cover increased fuel costs. This prevents smaller operators being stuck with unviable rates that don’t cover their costs if their contracts are not regularly renegotiated.
Secondary parties sit further down the chain, namely, transport companies, fleet owners and smaller logistics operators. Their obligation is to pass on increased payments to the party below them, all the way down to the drivers and contractors who actually bear the fuel costs.
The adjustments can take several forms: higher base rates, a fuel levy, direct reimbursement or a combination of these. The core requirement is that operators and drivers are left no worse off than they were before diesel prices spiked.
Primary parties must also take “reasonable steps” to ensure the funds they provide to secondary parties are passed on further down the supply chain. But, in recognition of the compliance burden, Fair Work imposed an exemption on this policing requirement for small business employers with fewer than 15 employees who are not road transport businesses.
Many SMEs May Not Realise They Are Impacted
The order’s reach extends well beyond businesses that own trucks or employ drivers.
A retailer that contracts a courier company to deliver online orders may be considered a primary party. A wholesaler that arranges freight from a warehouse to distribution centres or a manufacturer that engages a logistics firm to move raw materials may also fall into this category. If the business is the reason road transport work is being performed, the order likely applies.
Employment lawyer Trent Sebbens notes that the order “captures virtually every business that engages road transport services,” making it far broader than many employers expect. He also observes that some businesses may lack the supply chain visibility needed to identify their obligations at all. For SMEs that have never had to map their contractual chains, this is new territory.
If a business is unsure whether it is caught up, there is a powerful motivation to investigate: the order is legally enforceable. Penalties mirror those available for underpaying employees under the Fair Work Act 2009, making this a serious compliance risk for businesses of all sizes.
The Fair Work Ombudsman warns: “Businesses and workers covered by this RTCCO have to follow its rules. It’s unlawful to contravene the rules of an RTCCO. Courts can impose penalties against businesses, individuals or other persons if they don’t comply with one.”
Since rates are measured against publicly-available data, Sebbens points out that compliance or non-compliance can be assessed well after the fact, meaning it’s in an SME’s best interest to determine their obligations now.
What Affected Businesses Should Do Now
The order has an automatic off switch: it will cease to apply when the national weekly average terminal gate price of diesel falls below $2.00 per litre. But the uncertainty surrounding the Middle East conflict and ceasefire mean a timeline is impossible to predict.
With the order already in force, it means the first fortnightly adjustment period is underway.
“I urge every trucking business to read the order, talk to their financial adviser and seek the necessary rate adjustments,” says ATA Chair Mark Parry.
Sebbens recommends business owners who engage any form of road transport services start mapping their contractual chains. That means identifying every contract or arrangement under which goods are moved by road and working out whether their business sits as a primary or secondary party.
If they are impacted and need to pass on or receive fuel recovery payments, they can use a standard, benchmark-based calculation set by the Fair Work Commission or choose to enter into individual pricing calculations, although this would increase the compliance burden even further.
“Talk to other affected businesses or workers in your road transport contractual chain to ensure that everyone understands and follows the rules,” the Fair Work Ombudsman says, while also suggesting business owners contact industry and employer associations for specialised advice.
