Australia’s road transport sector is facing a convergence of pressures that threatens its economic sustainability. At the center of these challenges are the widespread use of sham contracting arrangements by some players in the industry, and the growing urgency of fuel cost recovery for road transport operators.
Legislative response to rising fuel costs
Fuel price volatility caused by the conflict in the Middle East has put a significant strain on the road transport industry. Fuel represents one of the largest operating expenses in road transport, yet many operators lack the contractual power to adequately or promptly recover these costs. This leaves the increased cost of fuel to be absorbed by many road transport businesses, contractors and employee-like workers.
On 30 March 2026, the federal government passed the Fair Work Amendment (Fairer Fuel) Bill 2026 (Fairer Fuel Act). The Fairer Fuel Act amends the Fair Work Act 2009 (Cth) to allow the Fair Work Commission (Commission) to expedite the making, varying and revoking of road transport contractual chain orders in response to an ‘emergency application’ (as determined by the Minister for Employment and Workplace Relations).
A road transport contractual chain refers to a sequence of agreements or arrangements involving workers and businesses operating within the road transport industry. For example, the chain includes a business that requires the delivery of freight by road, the driver making the delivery and the sub-contracting arrangement that exists between the business and the delivery driver.
The Commission already has the power to make road transport contractual chain orders and guidelines about the pay and conditions of road transport workers. However, under these amendments, the minimum consultation period on time-sensitive road transport contractual chain orders is a period that the Commission considers to be reasonable, rather than the usual 12-month consultation period (or six months in urgent circumstances).
On 2 April 2026, the Transport Workers’ Union of Australia and the Australian Road
Transport Industrial Organisation (collectively, the Applicants) made a joint application (MS2026/1) for an expedited road transport contractual chain order to address the disruption to the fuel supply chains amid the significant reduction in shipping through the Strait of Hormuz.
The order sought by the Applicants would mean that parties in road transport contractual arrangements would be required to conduct weekly reviews of fuel costs and amend the payment terms to ensure that employee-like drivers are paid rates that allow them to recover those costs. The order is designed so that the price of fuel is not purely absorbed by operators. Other employer parties have responded by proposing, amongst other things, that the reviews should occur less frequently.
On 10 April 2026, the Minister for Employment and Workplace Relations, Amanda Rishworth, determined that the Applicants’ application is an ‘emergency application’. On 13 April 2026, a Commission Expert Panel conducted a hearing in relation to the Applicants’ application.
On 14 April 2026, the Commission Expert Panel released a statement confirming that it would publish a notice of intent to make a road transport contractual chain order. The Panel had not yet determined the specific terms of the order. The Commission stated that it considered this to be “an appropriate step taking into account the need for an appropriate safety net of minimum standards for regulated road transport workers and employees in the road transport industry”. The Commission has invited submissions from affected parties in relation to the draft order to be lodged by no later than 17 April 2026.
The Commission Expert Panel will conduct a further hearing on 17 April 2026 where affected parties are invited to give evidence and make submissions concerning whether the order should be made and its proposed terms.
Sham contracting
In addition to fuel-related pressures, the industry is also grappling with the growing issue of sham contracting.
In November 2025, the National Road Freight Transport Association urged the federal government to address the widespread use of illegal employment practices in the road transport industry known as ‘sham contracting’.
Sham contracting involves employers misclassifying drivers as independent contractors despite functioning as employees. Some transport companies now seek to engage ‘employee drivers with ABNs’. This misclassification allows these companies to bypass legislative obligations (at least in the short term), such as payroll tax, workers’ compensation, the National Employment Standards (NES) and, in some cases, superannuation. According to industry estimates, this creates an artificial cost advantage of 20 to 30 per cent over compliant operators.
The prevalence of this practice means that transport businesses are increasingly unable to compete against operators who reduce costs through unlawful/sham contracting methods. In effect, compliance becomes a commercial disadvantage. Further, drivers caught in sham arrangements are often trapped working longer hours, which contributes to fatigue, vehicle maintenance issues, and a heightened risk of road incidents.
Many of these non-compliant companies use sophisticated avoidance structures to avoid regulatory thresholds, including labour hire intermediaries to create the illusion of independence, or drivers participating in ABN sharing arrangements. These structures are deliberately designed to evade detection, highlighting the limitations of enforcement capabilities.
Notwithstanding this, a strategy of misclassifying workers can be risky. In a joint statement released on 13 March 2026, the Australian Tax Office and the Fair Work Ombudsman (FWO) stated that they are increasing their focus on sham contracting. Fair Work Ombudsman Anna Booth warned that the FWO already has investigations on foot into alleged sham contracting practices by road transport employers. Non-compliant employers can also be discovered when the misclassified workers challenge the status of the relationship when the engagement ends or sours, or when an anonymous report is made to the FWO, potentially by competitors or other workers.
Potential consequences: In addition to requiring non-compliant employers to pay any unpaid employee entitlements to misclassified workers, courts can impose penalties against businesses or individuals for sham contracting. The maximum penalties for each contravention are:
- $19,800 for individuals;
- $99,000 for businesses with fewer than 15 employees; and
- for businesses with 15 or more employees, the greater of $495,000 or three times the underpayment amount
Conclusion
Australia’s road transport industry is navigating a critical period marked by rising fuel costs and well-known non-compliant labour practices. Stronger focus on FWO enforcement against sham contracting can be expected in order to restore fair competition, eradicate sham contracting and protect worker entitlements.
Contact us
If you are a road transport employer seeking advice on your obligations or the impact of the potential road transport contractual chain order, please contact a member of our Transport & Logistics or Workplace Relations groups.
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