Rocky road: a delicious treat, or the reality of the new employment and industrial landscape for Road Transport companies?

Employment

minutes reading time

DATE PUBLISHED: October 15, 2024

key takeaways

  • Recent amendments to the Fair Work Act 2009 introduce significant new protections for ‘employee-like’ workers in the road transport sector.
  • These protections include:      
  • the ability for the Fair Work Commission (FWC) to establish a minimum safety net for workers in the road transport industry;
  • an unfair termination scheme for eligible road transport workers, similar to the unfair dismissal scheme for employees;
  • a system enabling road transport businesses and unions to bargain for owner drivers’ entitlements, like enterprise bargaining but for contractors; and
  • the ability for eligible contractors to apply to the FWC to set aside unfair contract terms
  • This marks a significant shift for businesses in the road transport industry.  We recommend you start preparing now by reviewing your terms of engagement with road transport contractors, implementing policies regarding terminating owner-drivers, and considering whether you’ll be actively engaged with FWC processes that will set minimum terms for road transport workers.

How we got here 

The road transport industry is a fundamental part of our national business infrastructure.  Historically, the industry has relied heavily on independent contractors, rather than employees, with many drivers operating through ABNs, ‘Pty Ltd’ companies, or trusts.
Such were the arrangements of two road transport contractors in the 2022 High Court of Australia case of ZG Operations & Anor v Jamsek & Ors [2022] HCA 2.  Those drivers claimed they were employees and thus entitled to employee benefits.  The High Court disagreed, determining that they were independent contractors.  The Court’s reasoning took into account the fact that the drivers operated their delivery businesses through partnerships, not as individual employees.
In 2023, the Albanese Government responded by passing the ‘Closing Loopholes No. 2’ legislation, which amended the Fair Work Act to substantially impact the rights and entitlements of non-employed road transport owner-drivers.  Many of those changes have now commenced. In this article, we will summarise some of the key developments, including four recent applications filed by the Transport Workers Union.

Key Changes 

Minimum Safety Net
The Fair Work Act has now established an Expert Panel that has the power to set a minimum safety net for the road transport industry.  The FWC has been given new powers which to create minimum standards orders, road transport guidelines, and road transport contractual chain guidelines.  These are intended to set standards for regulated road transport contractors and employee-like workers, plus others in a road transport contractual chain, on matters such as payment terms, record-keeping, insurance, consultation, representation, and cost recovery.
Before issuing minimum standards orders, the FWC must conduct a consultation process.  It is about to commence that in relation to three recent applications filed by the Transport Workers Union (TWU), which are discussed further below.  We anticipate that more applications for minimum safety orders will follow, whether by unions or of the FWC’s own initiative.  
Unfair Termination Claims

From 26 February 2025, eligible regulated road transport contractors will have access to a new unfair dismissal style regime through via the FWC.  Road transport contractors may qualify for this scheme if they are engaged as an individual, through a company where they are a director or a family member of a director, through a trust if they are trustee, or through a partnership if they are a partner. 

To make a claim, eligible road transport contractors must have been engaged under a services contract for at least six months and earn below the high income threshold for contractors (currently $175.000 per year, subject to yearly adjustments).  Claims must be lodged within 21 days of contract termination.  There is also a similar jurisdiction in relation the ‘unfair deactivation’ of employee-like workers from digital platforms.

When assessing claims, the FWC will refer to the Road Transport Industry Termination Code, which has not yet been published at the time of writing.  If the termination was unfair, the FWC can order that a new contract be entered into with the driver, or that compensation be paid.

Road Transport Collective Agreements

A new system has been introduced to allow bargaining between regulated road transport contractors and the businesses that engage them.  This mirrors enterprise bargaining but is designed for contractors rather than employees.

Unions representing road transport contractors can negotiate better minimum terms and conditions on behalf of those contractors.  The Fair Work Act sets out notice and requirements that must be followed, to try to ensure that any potentially covered workers are informed of the commencement of the bargaining process. And while the FWC will play a role in overseeing the process and resolving disputes, it cannot impose agreements through arbitration.  If an agreement is reached, it must be registered with the FWC, which will ensure that it provides more beneficial terms than any applicable minimum standards order.

Unfair Contract Terms

Last year, we told you about significant updates to the Australian Consumer Law to enhance protections, and in turn the risks for businesses, in relation to unfair contract terms (UCT) (article accessible here).  The Fair Work Act now includes its own UCT framework, which applies to services contracts where the contractor earns below the high-income threshold. 

The FWC is now empowered to deal with disputes regarding UCT in services contracts.  Whether a contract term is considered unfair will need to consider:

  • the relative bargaining power of the parties;
  • whether the term is necessary to protect legitimate business interests; and
  • whether the contract imposes a harsh, unjust or unreasonable requirement on a party.

We recommend reviewing your current contracts and templates to ensure compliance with the new UCT provisions.

TWU Applications

Minimum standards orders

The TWU has filed three applications with the FWC seeking minimum standards orders for:

  • employee-like workers who transport goods, excluding food and beverages, via road to customers (sometimes referred to as ‘last mile work’ or ‘last mile delivery’) under services contracts, and the digital labour platform operator by or through which they are engaged (Application MS2024/1);
  • road transport contractors who transport goods, excluding food and beverages, via road to customers (the ‘last mile work’ or ‘last mile delivery’) under services contracts (Application MS2024/2);
  • employee-like workers who transport food, beverages, and similar items via road, and the digital labour platform operator by or through which they are engaged (Application MS2024/3).

The FWC is currently considering referring these applications to its Road Transport Advisory Group (RTAG), which must consult any subcommittee that has been established to advise. Submissions were open until 27 September 2024, with final recommendations expected from the RTAG by 6 December 2024


ROAD TRANSPORT CONTRACTUAL CHAIN ORDER

The TWU has now also filed a fourth application, seeking a road transport contractual chain order.  The application seeks to impose minimum standards across contractual chains containing at least one corporation, for the road transport of goods including materials, meats, dairies, resources, vehicles, and waste.  The minimum standards would include, in summary:

  • minimum 30-day payment terms;
  • prohibition of automatic reduction or set-off terms; and
  • compulsory rate review provisions.

The FWC is expected to shortly issue a statement including directions for interested parties who wish to be part of its consideration process regarding this application for the first road transport contractual chain order.

How MCW can help you

If your business operates in the road transport industry, you might be affected by these TWU applications, or future applications by the union or the FWC itself.  We can help you prepare and submit any necessary documentation to protect your interests.

We are excited to present our inaugural and exclusive Transport Industry Seminar in early 2025.  Please visit our Events page regularly for more details.

We are also well placed to assist with any unfair termination or deactivation cases once these regimes take effect from February 2025.  We are also experienced in enterprise bargaining and contract reviews, so we can help you remain compliant with the new regulations across the road transport industry.

At McInnes Wilson Lawyers, we specialise in helping businesses navigate regulatory changes.  For tailored advice and solutions, contact Ryan Murphy. Let us help you stay ahead of the changes and ensure your business is fully compliant with the new legislation.

Don't Miss a Beat

Subscribe to MCW Insights

Still Have Questions?

Make an Enquiry

Parliamentary inquiry calls for AI oversight in HR decision-making
Can employers completely remove the risk of workers’ compensation claims?
Old employment contracts, prescriptive policies, and botched dismissal processes: a Vision of risk
Rostering employees for public holiday work? Ensure that your rostering arrangements are compliant with the Fair Work Act, as clarified by the Federal Court
From Puppy Fences to Compensation: A Case for Employer Vigilance in Remote Work Arrangements
“Employee-like, it’s hard?” Navigating the new landscape of engaging employee-like workers through digital labour platforms
Rocky road: a delicious treat, or the reality of the new employment and industrial landscape for Road Transport companies?
Work Health and Safety Update: What the new Code of Practice on Sexual and Gender Based Harassment means for Australian workplaces