KGT Freight cuts ties with DHL

KGT Freight Management cuts ties with DHL over unviable contract, but cannot escape paying redundancy to affected drivers

By Brad Gardner | January 17, 2011

West Australian operator KGT Freight Management has cut ties with DHL over an unviable contract, but it has won a reprieve on redundancy pay to affected drivers.

KGT decided to end its contract of delivering freight to DHL’s Perth depot in September last year and informed six of its drivers that their employment would also end.

Fair Work Australia decided to reduce KGT’s redundancy payments by 50 percent to five of the drivers because the operator found work for them with Ellenbrook Transport and GKR Transport, which both took over the DHL contract.

Under the Fair Work Act, companies’ redundancy obligations can be varied if they obtain acceptable alternative work for employees or cannot afford to pay.

"In this case there is sufficient evidence to find that the applicant did obtain acceptable alternative employment through its urgings of DHL which were communicated by DHL in turn to the two new contractors," Commissioner Bruce Williams says.

However, Williams dismissed an application from KGT to absolve it of all financial obligations.

"The evidence from Ellenbrook Transport and GKR Transport is that the entitlements of the employees have not been transferred and their prior service with KGT will not be recognised by their new employer. Consequently it is not correct to say there has been no detriment to the employees," Williams says.

"In the circumstances I believe it is appropriate that the amount of redundancy pay required to be paid…to each of the employees be reduced by 50 percent."

One of the six drivers did not receive redundancy pay because she did not meet the minimum period of employment.

The Transport Workers Union (TWU) opposed KGT’s application and claimed it had to prove it "obtained" the employment for the drivers with Ellenbrook and GKR.

Williams says there were several meetings between KGT operations manager Richard Ashton and DHL transport manager Robert Gaden about the end of the contract.

"At one such meeting Mr Ashton said to Mr Robert Gaden that if DHL or a new contractor wanted to take on the employees then he would facilitate that," Williams says.

"The employees were not themselves responsible for gaining their acceptable alternative employment and there is no evidence that the acceptable alternative employment was obtained because of the actions of any other party."

The Australian Industrial Relations Commission, which was superseded by Fair Work Australia, found that ‘obtain’ referred to any action that caused alternative employment to become available.

Williams ruled that the term varied depending on the case of each employer, saying how far a company needs to go to find acceptable alternative employment would depend on the circumstances.

"In some cases an employer will need to go to a considerable amount of effort over a long period of time. In other cases the acceptable alternative employment may be gained quite easily with minimal effort by the employer," he says.

Williams says setting "unreasonably high thresholds" might hinder future employees because employers might be discouraged from taking action to find acceptable alternative employment.

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