The Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026 (RTCCO) was made by an Expert Panel of the Fair Work Commission (FWC) in April 2026 as an emergency response to the fuel supply shock caused by the conflict in the Middle East and the disruption of shipping through the Strait of Hormuz. Less than seven weeks after it took effect, its central obligations switched themselves off when the diesel price fell below a threshold prescribed by the RTCCO. The obligations under the RTCCO have not been reactivated as of the date of this article, even though the diesel price has since returned above that threshold. The RTCCO is presently neither operative nor revoked, and the Expert Panel has invited interested parties to make submissions on what should happen to it ahead of a hearing on 28 September 2026.

In our previous article, we briefly explained the effect of the RTCCO and made recommendations regarding compliance. This article further explains the basis on which the RTCCO was made, what it requires when it is operative, how it came to be in its current state of suspension, and what participants in road transport contractual chains should be doing now.

Background: conflict in the Middle East and the Strait of Hormuz

The escalation of the US-Israeli war against the Islamic Republic of Iran through the first months of 2026 produced the most serious disruption to global energy and fuel supply in decades. The Strait of Hormuz, through which a substantial proportion of the world’s seaborne crude oil and refined petroleum product passes, has seen a significant and sustained reduction in shipping. From an average 150 per day to single digit numbers, vessel transits in the Strait of Hormuz have been interrupted by ongoing hostilities, fog of war, and the withdrawal of insurance capacity from the Persian Gulf route.

Australia imports the overwhelming majority of its refined liquid fuel, and the consequences were felt quickly when diesel prices rose sharply from early March 2026. Diesel is the single largest variable input cost for most road transport operators, and road transport is typically performed under contracts that fix a rate for the duration of the engagement. As a result, the increase in diesel price fell most heavily on the parties at the bottom of the contractual chain: owner-drivers, regulated road transport contractors, and road transport employee-like workers who could not pass the increase on. That mismatch between where the cost lands and who has the bargaining power to recover it is the problem the RTCCO was designed to address.

Clause 1 of the RTCCO records the circumstance in which it was made, being the fuel supply chain disruption resulting from, or which continues to be affected by, the significant reduction in shipping through the Strait of Hormuz and conflict in the Middle East. As explained below, that framing has since become central to the Expert Panel’s reasoning about whether the RTCCO should remain on foot.

The legal basis for the Order

Part 3B-2 of the Fair Work Act 2009 (Cth) (FW Act) empowers the FWC to make road transport contractual chain orders. These are a novel form of instrument. Unlike a modern award or an enterprise agreement, an RTCCO regulates the commercial relationships between the parties in a road transport contractual chain, rather than only the relationship between an employer and its employees. Section 536PD provides that the Commission may make such an order. The RTCCO applies to primary parties and secondary parties as described in section 15RA of the FW Act, and to road transport businesses, digital labour platform operators, road transport employee-like workers and regulated road transport contractors.

Compliance is not optional. Section 536NP of the FW Act provides that a person must not contravene a term of a road transport contractual chain order. Section 536NP is a civil remedy provision, and section 539 sets out who may apply to the courts in relation to contraventions and the maximum penalties that apply. The RTCCO also contains its own dispute settlement procedure in clause 6, under which unresolved disputes may be referred to the FWC and arbitrated with the consent of the parties.

What the RTCCO requires when it is operative

The RTCCO took effect on 21 April 2026 (clause 5.1). It covers all work in the road transport industry as defined in section 15S of the FW Act, other than the cash in transit industry, and covers primary parties, secondary parties, road transport businesses, digital labour platform operators in the industry, and road transport employee-like workers and regulated road transport contractors performing work in the industry.

Two definitions do the heavy lifting. The ‘increased cost of fuel’ is the difference between the cost per litre of the type of fuel used to perform the relevant work at any given time and the cost as it was on or before 6 March 2026. The ‘rate’ is the contracted, standard, ongoing or usual rate or amount paid by one covered person to another for the performance of work in the road transport industry on or before 6 March 2026, in whatever form that payment takes.

Rate adjustment obligations

Clause 4.1 requires primary parties, within each fortnight or twice per calendar month, to 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 of the RTCCO.

Clause 4.4 imposes the equivalent obligation on secondary parties in respect of the rates they pay to other secondary parties, regulated road transport contractors and road transport employee-like workers, on the same fortnightly or twice-monthly cycle.

Clause 4.5 leaves the mechanism to the parties. The adjustment may be made by adjusting the rate or a component of the rate, by introducing a fuel increment or levy, by a direct reimbursement or offset of money expended on the increased cost of fuel, or by any combination of those methods.

Primary parties’ duty to take reasonable steps

Clause 4.2 goes further than the payment obligations, and it is the provision that has attracted the most attention. It requires primary parties in a road transport contractual chain to take reasonable steps to ensure that secondary parties engaging regulated road transport contractors or road transport employee-like workers in the same contractual chain adjust the rates they pay to those contractors and workers by the amount necessary to ensure recovery of the increased cost of fuel. The obligation is therefore directed at conduct further down the chain, in respect of parties with whom the primary party may have no direct contractual relationship.

Clause 4.3 provides a narrow carve-out: clause 4.2 does not apply to a primary party which is a small business employer within the meaning of section 23 of the FW Act and which is not a road transport business within the meaning of section 15R. Both limbs must be satisfied. A small business employer that is a road transport business remains subject to the duty, as does any primary party that is not a small business employer, however remote it may be from the workers performing the transport work.

Deemed satisfaction of the obligations

Clause 4.6 recognises that many contractual chains already contain fuel cost mechanisms, and provides that the rate adjustment obligations in clauses 4.1, 4.2 and 4.4 are satisfied by any of the following:

• adjustment of the rate in accordance with an applicable State or Territory industrial instrument involving a ‘rise and fall’ formula or cost model that accounts for or addresses recovery of the increased cost of fuel;
• adjustment of the rate in accordance with the application of a ‘rise and fall’ formula, cost model or cost benchmark in an applicable collective agreement or contract; 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.

For an arrangement of the third kind, clause 4.7 permits the formula, cost model or methodology to be applied in a standardised way on the basis of a reasonable averaging of the increased cost of fuel across a group of regulated road transport contractors or road transport employee-like workers engaged by a single road transport business. Clause 4.8 confirms that rate adjustments implemented before commencement may be taken into account in satisfaction of the obligations.

What are ‘reasonable steps’?

The RTCCO does not define ‘reasonable steps’. The Fair Work Ombudsman (FWO) updated its online guidance on 19 May 2026 to address the point.

The FWO’s position is that reasonable steps are not intended to place an excessive administrative burden on primary parties, and that what is reasonable in a given case depends on matters including:

• the size and nature of the primary party;
• the resources available to the primary party;
• the nature of the contractual relationships in the chain;
• the level of control and visibility the primary party has over the arrangements further down the chain; and
• any other relevant circumstances.

The FWO identifies steps that a primary party could take to demonstrate compliance, including ensuring that secondary parties understand their obligations and the consequences of not complying, discussing with secondary parties how they engage contractors and manage fuel costs, requesting assurances or documents showing that rate adjustments have been made (excluding commercially sensitive information), and setting expectations for compliance and agreeing on the processes by which adjustments will be made. The FWO makes clear that this is not a complete list and that particular circumstances may require additional measures.

The guidance does not displace the language of clause 4.2. It remains, however, the most authoritative practical statement available.

Cessation and review: clauses 5.3 and 5.4

Two provisions govern the life of the RTCCO.

Clause 5.3 provides that the obligations in clause 4 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 (AIP), falls below $2.00 per litre.

Clause 5.4 provides that the RTCCO will be the subject of a review by the FWC after the first month of its operation and then every three months thereafter.

The first review and the proposed variation

The first review took place on 25 May 2026. Following that review, the Expert Panel published a proposed variation to the RTCCO for consultation. The proposed changes were directed at practical problems that had emerged in the first month of operation, and included the following:

• Clauses 4.1 and 4.4 would require parties to ‘adjust or set’ the rate, rather than only to ‘adjust’ it. This recognised that contracts entered into after 6 March 2026 may already have been priced to account for the higher cost of fuel, and that the obligation is properly directed at the level of the rate rather than at a mechanical adjustment to it.
• Clause 4.2 would be expanded so that a primary party’s reasonable steps duty is directed at secondary parties adjusting rates to ensure recovery of the increased cost of fuel or satisfying the obligations in clause 4.1 or 4.4 in one of the ways set out in clause 4.6.
• Clause 4.3 would recast the carve-out from the reasonable steps duty. Instead of applying to a primary party which is a small business employer and which is not a road transport business, the carve-out would apply to a primary party which is a small business employer and which does not engage road transport contractors or road transport employee-like workers under services contracts, or employ employees to perform work in the road transport industry.
• Clause 4.6(a) would require the adjustment to be made in accordance with, and at the times or intervals determined by, the applicable State or Territory industrial instrument.
• Clause 4.6(b) would only operate to satisfy the rate adjustment obligations so long as the adjustment under the collective agreement or contract is implemented each fortnight or twice per calendar month.
• Clause 5.3 would be varied so that the obligations cease to operate only where the weekly average national terminal gate price for diesel falls below $2.00 per litre for four consecutive weeks, with cessation taking effect following the fourth consecutive week. This was intended to prevent the obligations being switched off by a short-lived movement in price.

The diesel price falls and the obligations cease

The variation was never made. Before the consultation process was completed, the weekly average national terminal gate price for diesel reported by the AIP fell below $2.00 per litre in the week ending 5 June 2026. By operation of clause 5.3 in its unamended form, the obligations in clause 4 ceased to apply automatically.

The consequence is a significant one. The very amendment designed to prevent the obligations from being extinguished by a single week’s price movement was overtaken by a single week’s price movement, and the four consecutive week buffer never became part of the RTCCO.

The 19 June 2026 statement and the revival question

On 19 June 2026, the Expert Panel confirmed that the trigger in clause 5.3 had been activated and that the obligations in clause 4 had ceased to apply. It also confirmed that the RTCCO itself remained in force. It had not been, and has not been, revoked.

The Expert Panel’s decision created considerable uncertainty in the industry. Clause 5.3 states only that the obligations ‘will cease to apply if’ the price falls below the threshold. It says nothing about what happens next.

On one reading, the trigger operates once and is then spent, so that the obligations cannot return unless the RTCCO is varied or a new order is made. On the other hand, the threshold can be viewed as a condition that is tested against each weekly AIP report, so that the obligations would revive automatically in any week in which the reported price is $2.00 per litre or more.

The 7 July 2026 decision: dormant, but not repealed

On 7 July 2026, the Expert Panel declined either to revive the obligations or to revoke the RTCCO. Its reason for declining to revoke was that the underlying emergency circumstances caused by the conflict in the Middle East and the Strait of Hormuz crisis had not yet passed, which is to say that the circumstance identified in clause 1 of the RTCCO continued to exist. The matter was listed for a further case management hearing on 26 August 2026.

The effect of that decision, and the language in which it was expressed, is that the RTCCO is effectively dormant. It remains an instrument in force, made under Part 3B-2 of the FW Act and capable of being varied, but it currently imposes no operative obligations on any party. It has not been repealed, and the emergency to which it responds is treated as continuing.

The diesel price returns above the threshold

In the week ending 21 August 2026, the weekly average national terminal gate price for diesel returned above the RTCCO’s $2.00 per litre threshold.

This has brought the revival question into sharp focus, because the RTCCO does not currently contain any provision that contemplates what happens to the obligations where the diesel price falls below the threshold and then rises above it again.

The 26 August 2026 case management hearing

A range of views was expressed at the case management hearing on 26 August 2026. The Transport Workers’ Union and the Australian Trucking Association submitted that the obligations should be reinstated. Other participants submitted that the RTCCO should be revoked entirely.

The Expert Panel did not make any definitive decision at the case management hearing. Instead, it has invited interested parties to make submissions on what should happen to the RTCCO, in accordance with the following timetable:

• a statement identifying the steps the Expert Panel should take, together with a short statement of grounds, was due by 4:00pm on Monday, 31 August 2026 (a date which has now passed);
• written submissions and evidentiary materials are due by 4:00pm on Monday, 14 September 2026;
• written submissions and evidentiary materials in reply are due by 4:00pm on Wednesday, 23 September 2026; and
• the matter is listed for hearing on Monday, 28 September 2026.

Where things stand

As matters presently stand, the obligations under the RTCCO remain dormant, the RTCCO itself has not been revoked, and there remains a real possibility that the obligations will be reactivated at some point in the future, whether by variation of the RTCCO or otherwise.

The circumstances that gave rise to the RTCCO have not resolved, especially considering the recent escalation in the Strait of Hormuz. US forces have struck Iranian coastal targets and tankers, and Iran has expanded strikes on US bases across the region. The ongoing conflict makes it difficult to see how the Expert Panel would accept in September that the emergency identified in clause 1 has passed. Parties in road transport contractual chains should therefore plan on the basis that fuel cost recovery obligations may return and with little notice.

Next steps

We recommend that participants in road transport contractual chains take the following steps:

• Monitor the diesel price. Continue to monitor the weekly average national terminal gate price for diesel reported by the Australian Institute of Petroleum. It is the metric on which clause 5.3 operates, and it is the trigger that will determine the practical effect of whatever the Expert Panel decides, unless the threshold itself is varied.
• Consider making submissions. Consider whether to make submissions to the Expert Panel within the specified timeframes. The outcome may determine whether, and on what terms, fuel cost recovery obligations apply across the industry.
• Contract on the basis that the obligations may be reactivated. Ensure that ongoing and new contractual commitments proceed on the footing that the obligations under the RTCCO may be reactivated. Where possible, include clauses that permit adjustments or variations to rates in response to changes to regulations or to the making, variation or revival of an instrument of this kind, so that a return of the obligations does not require renegotiation of the contract as a whole.
• Maintain records. Maintain records of fuel costs, correspondence, discussions and documents exchanged within the contractual chain as evidence of compliance. This is particularly important for primary parties subject to the ‘reasonable steps’ duty in clause 4.2.

How can we help?

HWLE Lawyers has a dedicated Transport Group with experience in road transport and chain of responsibility who can assist you. Please do not hesitate to contact us if you would like more information about the services we offer.

This article was written by Danella Wilmshurst, Partner, and Jerry Zhan, Associate.