After an extensive consultation process, the Road Safety Remuneration Tribunal has issued a 71 page draft Order entitled the Draft Contractor Driver Minimum Payments Road Safety Remuneration Order 2016. The draft Order, if it comes into force in its present form, is likely to have significant ramifications for any party that engages ‘contractor drivers’ directly or contracts with a third party that engages ‘contractor drivers’. The draft Order proposes minimum rates of payment on an hourly and kilometre basis that will apply to a significant, previously unregulated sector of the road transport industry.

The Tribunal proposes that the draft Order will commence on 1 January 2016 and remain in force until 31 December 2019. However, the Tribunal has emphasised that it will undertake further consultation with respect to the draft Order, and has not yet determined whether it will make a final and enforceable order based on the draft. To this end, interested parties are able to provide written submissions to the Tribunal until midday on Wednesday, 23 September 2015.

Background

The draft Order is designed to complement the existing Road Transport and Distribution and Long Distance Operations Road Safety Remuneration Order 2014 that came into force on 1 May 2014. Details of that Order, which deals with a range of issues including contractual arrangements, drug and alcohol testing and safe driving plans, are set out in our legal alert dated 9 January 2014.

The draft Order, however, exists independently and will impose separate and new obligations on employers, hirers and others in the supply chain such as consignors, consignees, intermediaries and operators of premises for loading and unloading.

The minimum rates of payment for ‘contractor drivers’ set out in the draft Order are based on those developed by KPMG as part of a research project and modelling exercise commissioned by the Tribunal. The KPMG report and model are available on the Tribunal’s website.

To whom does the draft Order apply?

Broadly speaking, the draft Order applies to services provided by a road transport driver employed or engaged in:

  • the transport of retail goods destined for sale or hire by a supermarket chain (a business operating 5 or more supermarkets); and
  • long distance operations in the private transport industry within the meaning of the Road Transport (Long Distance Operations) Award 2010. This broadly covers interstate journeys exceeding 200 km or return journeys exceeding 500 km.

The minimum payments regime set out in the draft Order applies only to ‘contractor drivers’ engaged to provide a road transport service that falls within these categories. A contractor driver is defined as a ‘road transport driver who is an independent contractor’. ‘Road transport drivers’ include both individuals and corporations, provided each of the corporation’s vehicles is mainly driven by an individual who is a director or majority shareholder of the corporation, or an immediate family member of such a person. ‘Contractor drivers’ are commonly known in the industry as ‘owner drivers’.

What obligations are imposed by the draft Order?

Various obligations are also imposed on the employer or hirer of any road transport driver and on others in the supply chain such as consignors, consignees, intermediaries and operators of premises used for loading and unloading. Some of these obligations are discussed below.

Minimum rates for contractor drivers

Under the draft Order, contractor drivers must be paid minimum hourly rates and running costs per kilometre. These amounts are both paid together (i.e. the contractor driver must be paid both per kilometre and for the time spent performing services). A premium is applied to running costs where a contractor driver operates mainly in the Northern Territory, Tasmania or regional Western Australia.

The minimum rates per hour and per kilometre are set out in a series of schedules to the draft Order and depend on several factors including the class of vehicle, the driver’s transport worker grade, the type of trailer and the nature of the transport services (distribution operations or long distance operations). To assist transport operators to determine the relevant minimum payments that apply under the draft Order, the Tribunal has also published a draft online payments calculator on its website.

Despite submissions by some interested parties that any Order should include a ‘safe and fair flexibility rates’ clause allowing parties to substitute alternative rates, no such clause is included in the draft Order.

The minimum rates prescribed in the Order will automatically increase by 3.2% per year commencing on 1 January 2017. The 3.2% increase is the average annualised wage increase in enterprise agreements approved by the Fair Work Commission in ‘Transport, Postal and Warehousing’ over the year to the March quarter 2015.

The prescribed hourly rate must be paid ‘for each hour or part thereof that a contractor driver necessarily spends in providing road transport services’ and includes time spent:

  • while the contractor driver is required by the hirer to be at the disposal or direction of the hirer;
  • cleaning, inspecting, servicing or repairing a vehicle or trailer supplied by the hirer;
  • recording information or completing documents required by law or otherwise in relation to the vehicle or trailer;
  • during fatigue or rest breaks required by law;
  • while queueing or waiting or in control of the vehicle used to provide the transport services;
  • loading or unloading including tarping, removing gates or operating on-board cranes;
  • inspecting or attending to a load on a vehicle or trailer;
  • refuelling the vehicle; and
  • waiting in a location because of a natural disaster such as a flood or bushfire or other emergency.

The hours of work for a contractor driver will run from when they leave the depot from which they are principally engaged until they arrive at the ultimate location where the goods are to be delivered.

Transport operators will appreciate that requiring contractors to be paid for ‘all time’ spent by them associated with the transport task is a departure from current industry practice.

A hirer must permit a contractor driver to take four weeks unpaid leave per year.

Supply chain participants

Supply chain participants include consignors, consignees, intermediaries and operators of premises for loading or unloading.

The draft Order imposes obligations on supply chain participants to ensure that any contract they have with another party in the supply chain:

  • is consistent with the Order;
  • provides for adequate rates to allow the other party to pay any contractor drivers in accordance with the minimum rates set out in the draft Order; and
  • permits the supply chain participant to carry out audits of records to ensure compliance with the Order.

Subject to some limited exceptions, the draft Order also requires supply chain participants to undertake annual audits of the records of a party in the supply chain with which it contracts for the supply of transport service to ensure compliance with the Order. If an audit reveals a breach of the Order, the auditing party:

  • must provide a written notice of non-compliance;
  • must notify ‘the relevant regulatory bodies’; and
  • may terminate the contract if any non-compliance is not rectified within a reasonable period of the party receiving the non-compliance notice.

Publicising the Order

The draft Order requires that a copy of the Order (once in force) must be displayed at all depots and on the website of the hirer. An employer or hirer of a road transport driver must take all reasonable steps to advise road transport drivers of the existence and application of the Order, and where a copy of the Order may be accessed.

Implications

The KPMG model that forms the basis for the minimum payments set out in the draft Order has been extensively criticised by industry groups. For example, the submission filed with the Tribunal by Australian Industry Group on its own behalf and on behalf of NatRoad and Road Freight NSW concludes:

We have serious concerns about the rates contained in the KPMG Road Transport Contractor Driver Cost Model (KPMG Cost Model), as well as the methodology and assumptions underpinning it.

According to this submission:

The setting of specific mandatory freight rates to be applied across such diverse elements of the road transport industry as are proposed to be covered by a RSRO, would represent a significant and unprecedented regulation of the Australian economy. Inappropriately struck rates would threaten the viability and profitability of road transport businesses and indeed jeopardise the livelihood of contractor drivers.

In making the draft Order, the Tribunal observes that:

The information before the RSRT on the likely impact on the viability of businesses in the road transport industry, the national economy and the movement of freight across the nation of a RSRO in the terms we have set out in the draft RSRO is minimal.

If your business engages road transport drivers that are caught by the draft Order, it is essential that you familiarise yourself with the draft Order and the minimum payments that will be prescribed if the Order comes into force on 1 January 2016. You also need to establish which of your contractors fall within the scope of the draft Order.

If you want to make submissions as to the nature of the obligations that will be imposed on your business and the extent to which those obligations are practical, you must lodge any submission with the Tribunal on or before midday on Wednesday 23 September 2015.