New requirements for terminating regulated road transport contractors

On 25 February 2025, the Fair Work (Road Transport Industry Termination Code) Instrument 2024 (Cth) came into effect, establishing a mandatory process regarding the termination of regulated road transport contractors (i.e. owner-drivers) (Termination Code). The new laws seek to balance the competing interests of road transport businesses and contractors in decisions relating to termination. 

For businesses that engage regulated road transport services, the Termination Code brings certainty, ensuring terminations are only considered unfair if the Code’s requirements are not met. For road transport contractors, non-compliance with the Termination Code now means the Fair Work Commission (FWC) can deem terminations unfair, providing important protections.

In this update we look at the process established by the Termination Code and how it fits into the broader changes regarding the regulation of road transport contractors brought about under the Closing Loopholes reforms at the end of 2024.

Who does the Termination Code apply to?

The Termination Code applies to the termination:

• by a road transport business – primarily, this will be the receiver of services under a services contract made in the road transport industry. Importantly, this extends to any person or corporation that receives road transport services, not just businesses that are road transport operators – and so will cover people and businesses that engage road transport services under a regulated contract (see below)
• of a services contract – being a contract for services relating to the performance of work by an individual, whether the services contract is entered into directly or through a company trust or partnership
• of a regulated road transport contactor – this will capture an individual, director, family member of a director, trustee or partner who is not an employee or employee-like worker in the contractor’s business and who performs all or a significant majority of work under the road transport contract or subcontract
• in the road transport industry – this includes road transport and distribution, long distance operations in private road transport, waste management, cash in transit and passenger vehicle transportation, as those industries are defined in their respective (see the full list of industry awards here).

For the Termination Code process to apply, the road transport contractor must also be ‘protected from unfair termination’, which requires that the contractor has performed work under a services contract (or series of contracts) for at least 6 months after 26 August 2024.

Importantly, these new laws apply regardless of the business structure through which a road transport contractor is engaged, so long as they are a contractor or owner-driver performing road transport work.

Contractors are often engaged through various business structures, which previously meant they were typically excluded from certain workplace protections (for example, incorporated independent contractor owner drivers). The new laws make it clear that this will no longer be the case as the amendments aim to “capture individuals performing work under a services contract regardless of the type of entity they have adopted”.

What does the Termination Code require?

The Termination Code establishes a ‘code process’ which must be followed before terminating a regulated road transport contractor who performs work under a services contract for the benefit of a road transport business. This process is outlined below.

Warnings

Warnings are generally required before termination can occur. The road transport contractor must be able to understand, from the warning, that the contract is at risk of being terminated.

Show cause

Before termination, the road transport contractor must be given an opportunity to ‘show cause’ why the contract should not be terminated.

Decision

The road transport business must then make a decision. In doing so, it must take into account certain mandatory considerations, including:

• the contractor’s response from the show cause stage
• whether the circumstances leading to the desire to terminate:
  • were within the control of the contractor
  • resulted from the contractor meeting its obligations under the Heavy Vehicle National Law (HVNL) – for example, if a contractor’s fulfilment of their fatigue obligations results in them missing a contractual delivery deadline, this should arguably weigh against termination.
• the financial investment made by, and performance history of, the contractor
• how long the contractor has performed work for the business.

Post-termination protections

Even where a road transport business decides to terminate a regulated road transport contractor, the Termination Code provides certain protections which focus on properly closing out the business relationship. A termination notice must include:

• the reason for termination
• the effective date of the termination
• how and when final payments owing to the contractor will be made.

Exceptions

There are certain exceptions from the code process. For example:

• a road transport business is not required to issue warnings before moving to the show cause stage if it reasonably believes the contractor’s conduct justifies immediate termination
• if a contractor commits ‘serious misconduct’ (e.g. conduct that causes imminent risk to health and safety or the reputation or profitability of a road transport business), the code process won’t apply at all.

Disputes regarding unfair termination

As part of the Closing Loopholes reforms, the FWC has been given jurisdiction to determine disputes concerning the unfair termination of road transport contractors. Regulated contractors earning less than the current ‘contractor high income threshold’ of $175,000 per annum may apply to the FWC if they believe they have been unfairly terminated. This must be done promptly, as applications must be made within 21 days from the date of termination. 

A road transport contractor will be considered to have been unfairly terminated where:

• the termination was unfair
• the termination was not consistent with the Termination Code.

In determining whether a termination was unfair, the FWC must consider whether:

• there was a ‘valid reason’ for the termination
• whether the Termination Code was followed.

The Termination Code provides that any of the following may constitute a valid reason for termination:

• safety breaches – including of health and safety laws, the HVNL or other road transport legislation
• fraudulent or dishonest conduct
• non-compliance with licensing/accreditation requirements
• where termination is permitted by the services contract.

This last category is of particular interest, as it arguably allows parties to broaden the scope of matters that will constitute valid reasons for termination, giving parties the contractual freedom to choose the circumstances that could end their relationship.

The FWC has broad powers to grant remedies to contractors who it finds to have been unfairly terminated, including the power to reinstate the contract, restore lost pay and award compensation.

Key takeaways

For businesses that engage regulated road transport services, the Termination Code is a playbook – where termination will only be unfair if there is non-compliance with the Termination Code and ‘valid reasons’ for termination can be the subject of contract, compliance with the code’s requirements and thoughtful contracting when entering road transport arrangements can significantly reduce the chances of finding yourself on the wrong side of an unfair termination dispute. All businesses that engage regulated road transport services need to review their transport services contracts to ensure that the causes for termination are clearly spelled out and prepare guidance on how to follow the Termination Code procedure when termination is being considered.

For road transport contractors and owner-drivers, these new requirements introduce important protections, ensuring they are not subject to unfair and arbitrary decision-making in relation to their work.

If you are a road transport business or contractor facing an unfair termination dispute or would like assistance with your contracting under and/or compliance with these new laws, please get in touch with Nathan Cecil from our Transport, Shipping and Logistics team or Megan Cant from our Workplace Relations and Safety team.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Nathan Cecil

Jonathon Parkin

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