[2018] FWC 7168
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009

s.318 - Application for an order relating to instruments covering new employer and transferring employees

Kmart Australia Limited
(AG2018/5683)

Retail industry

COMMISSIONER GREGORY

MELBOURNE, 22 NOVEMBER 2018

Application for an Order relating to instruments covering new employer and transferring employees.

Introduction

[1] This decision deals with an application made under s.318 of the Fair Work Act 2009 (Cth) (“the Act”) by Kmart Australia Limited (“Kmart”). It arises as a consequence of a decision by Wesfarmers Limited to close its Target Australia Pty Ltd (“Target”) store at Forster in New South Wales, and to offer employment at its Kmart store to those employees interested in being redeployed. Target and Kmart are both wholly-owned subsidiaries of Wesfarmers Limited. It is understood the Target store will close at the end of 2018.

[2] The application accordingly seeks an Order that the Target Australia Retail Agreement 2012 1 (“the Target Agreement”) will not cover Kmart (“the new employer”), and any employees who were employed by Target (“the former employer”) and previously worked at the Target Store at the Stockland Forster Shopping Centre in Forster, New South Wales (“the Forster store”), but are subsequently redeployed to work at Kmart.

[3] The application also seeks that the Kmart Australia Ltd Agreement 2012 2 (“the Kmart Agreement”) will instead cover the new employer and those former Target employees who are redeployed to work at the Kmart store at Forster. It is intended that this will occur from the time each employee becomes employed by the new employer.

[4] The application consists of the Form F40 - Application for Orders in Relation to Transfer of Business, together with a Draft Order and a copy of the Target Agreement. It is also supported by Statutory Declarations made by Mr Sandro Mazzotta, the National Employee Relations Advisor at Kmart, and Ms Leanne Gaw, Kmart’s State Operations Manager in New South Wales.

The Relevant Legislation

[5] Section 311(1) defines when a transfer of business occurs under the Act.

[6] Section 312 continues to set out the “Instruments that may transfer.” It states:

312 Instruments that may transfer

Meaning of transferable instrument

(1) Each of the following is a transferable instrument:

(a) an enterprise Agreement that has been approved by the FWC;

(b) a workplace determination;

Meaning of named employer award

(2) Each of the following is a named employer award:

(a) a modern award (including a modern enterprise award) that is expressed to cover one or more named employers;

(b) a modern enterprise award that is expressed to cover one or more specified classes of employers (other than a modern enterprise award that is expressed to relate to one or more enterprises as described in paragraph 168A(2)(b)).” 3

[7] Section 317 then provides that the Commission may make certain orders if there is, or is likely to be, a transfer of the business from a previous employer to a new employer.

[8] Section 318 continues to set out what orders may be made, who may apply for an order, and the matters the Commission must take into account in making any order. It states:

318 Orders relating to instruments covering new employer and transferring employees

Orders that the FWC may make

(1) The FWC may make the following orders:

(a) an order that a transferable instrument that would, or would be likely to, cover the new employer and a transferring employee because of paragraph 313(1)(a) does not, or will not, cover the new employer and the transferring employee;

(b) an order that an enterprise agreement or a named employer award that covers the new employer covers, or will cover, the transferring employee.

Who may apply for an order

(2) The FWC may make the order only on application by any of the following:

(a) the new employer or a person who is likely to be the new employer;

(b) a transferring employee, or an employee who is likely to be a transferring employee;

(c) if the application relates to an enterprise agreement—an employee organisation that is, or is likely to be, covered by the agreement;

Matters that the FWC must take into account

(3) In deciding whether to make the order, the FWC must take into account the following:

(a) the views of:

(i) the new employer or a person who is likely to be the new employer; and

(ii) the employees who would be affected by the order;

(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;

(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement;

(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;

(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;

(g) the public interest.

Restriction on when order may come into operation

(4) The order must not come into operation in relation to a particular transferring employee before the later of the following:

(a) the time when the transferring employee becomes employed by the new employer;

(b) the day on which the order is made.”4

[9] This decision accordingly deals with whether it is appropriate in all the circumstances to make the Order sought by Kmart.

Grounds on which the application is made

[10] Kmart relies on the following grounds in support of its application. Kmart and Target are both wholly owned subsidiaries of Wesfarmers Limited and it recently announced that the Target store at Forster will be closed with likely effect from the end of 2018.

[11] However, the Kmart store in Forster intends to offer employment to those employees now employed by Target, who have expressed an interest in being redeployed, on the basis that any employee accepting such an offer would become a transferring employee for the purposes of s.313 of the Act.

[12] Kmart also states that the making of the Order will assist in:

  management of the transferring employees by ensuring all employees engaged by Kmart are on common terms and conditions;

  enabling the transferring employees to be fully integrated into the employee management systems currently operating in all other Kmart stores;

  avoiding the administrative costs involved in establishing two separate payroll systems and other employee management arrangements for the transferring employees; and

  removing any disincentive to Kmart offering employment to the current employees of Target.

Consideration

[13] As indicated s.318(3) sets out the matters that the Commission must take into account in determining an application made under s.318. I now turn to deal with each of those matters.

(a) the views of:

(i) the new employer or a person who is likely to be the new employer;

[14] The application is made by the new employer, Kmart, and it obviously supports the application, and seeks that an Order in the form of the draft order attached to the application be made. It has also provided two separate Statutory Declarations from Ms Leanne Gaw and Mr Sandro Mazzotta in support of the application. They both indicate that the proposed Order would ensure that common employment conditions are maintained in all of Kmart’s stores, as well as ensuring that the transferring employees are fully integrated into Kmart’s management systems. They also indicate that the Order would avoid Kmart having to maintain separate payroll systems and related arrangements, as the employees would no longer be covered by different enterprise agreements.

[15] The declaration provided by Mr Mazzotta also attaches a document which contains a detailed comparison of the differences between the Kmart Agreement and the Target Agreement.

(ii) the employees who would be affected by the order;

[16] The Statutory Declaration provided by Mr Mazzotta indicates that the affected employees were informed in March of this year that the Target store would be closing at the end of 2018, and that Target would explore other redeployment opportunities within the Wesfarmers group for those employees interested in redeployment. Mr Mazzotta now understands that five of the existing Target employees have indicated an interest in being redeployed to work at the Kmart store in Forster.

[17] Target was also in contact with the Shop, Distributive and Allied Employees’ Association (“the SDA”) about the decision to close the Target store. Mr Mazzotta continues to indicate in his declaration that Kmart also consulted with the SDA in September about the potential redeployment of Target employees to the Kmart store. The Store Operations Manager from the Kmart store then met with the Target employees who had expressed an interest in redeployment and it was subsequently confirmed that the five employees were interested in being redeployed.

[18] A further meeting was then arranged with those employees on 27 September and they were provided with details about a series of principles that had been agreed to between Target and Kmart as part of the redeployment. Kmart and Target also consulted with the SDA about these principles, which were the same as those agreed when similar redeployments had occurred on other occasions where Target stores were either being closed or rebranded. This consultation session was conducted by Mr Mazzotta along with representatives from Target and the SDA. It was also indicated that Kmart would be seeking the present orders as part of the redeployment arrangements. All of the five Target employees who attended that meeting subsequently confirmed their support for the Kmart Agreement in the event that they accepted employment with Kmart at some point in the future.

[19] Mr Mazzotta’s declaration also attached a document which summarises the principal differences between the enterprise agreement that applied at Target and the enterprise agreement that applies to the employees at Kmart. This document was provided to the Target employees, who wish to be redeployed to Kmart, on 20 September. The declaration also set out a series of commitments entered into by Kmart in regard to the employees in the event they subsequently accept offers of employment with Kmart.
[20] It is understood that each of the five casual employees who expressed an interest in redeployment attended the consultation meeting on 27 September, and each expressed their support for the Kmart Agreement to be applied to them. This was indicated by a show of hands at the conclusion of the session.

[21] It is also noted that the Commission received an email on 2 November 2018 from Mr Mitchell Worsley who indicated that he represented the SDA in regard to the application. The email continued to indicate that, “The SDA does not intend on making any objections to the application by Kmart Australia Limited.” 5

(b) whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;

[22] The application and the Statutory Declarations each provide information about those aspects of the arrangements applying under the Kmart Agreement that provide more advantageous entitlements than those in the Target Agreement.

[23] Kmart has also made a series of additional commitments to the transferring employees in that until such time as any new enterprise agreement applies at Kmart it will:

  pay the higher Target Transport Allowance to any transferring employees that use their own personal vehicle on Kmart business until such time as any new enterprise agreement applies at Kmart.

  pay the transferring employees a 20% higher rate for overtime than the rate which applies in the Target Agreement for overtime work performed Monday to Sunday until such time as any new enterprise agreement applies at Kmart.

  include in the letters of offer provided to the transferring employees that they have the benefit of a savings provision under the Target Agreement (that is not included in the Kmart Agreement) in respect to their hours of work, and this entitlement will continue to be preserved while they work in a Kmart store. 6

(c) if the order relates to an enterprise agreement—the nominal expiry date of the agreement;

[24] Both the Target and Kmart Agreements have passed their nominal expiry dates which are respectively 31 July 2016 and 30 April 2016.

(d) whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;

[25] Kmart submits that if the proposed Order is granted it will avoid any potential negative impact on its productivity as it will avoid the unnecessary administrative costs that would otherwise have been incurred if it had been required to establish and manage separate payroll systems and different employee management arrangements for the transferring employees.

[26] The Statutory Declaration provided by Ms Gaw also makes clear that if the Order is not granted the management team at Kmart would be required to understand and apply two different enterprise agreements covering the same group of employees, and would need to manage the employees who accept redeployment under a different set of arrangements from those applying to the overwhelming majority of Kmart’s employees.

[27] Ms Gaw also states in her Declaration that if the Order is not made, “This can readily be expected to increase the administrative burden on the management teams and will considerably impact on the productivity and efficiency of managing the team members at an ongoing cost to Kmart.” 7

(e) whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;

[28] I am satisfied that the main issues have already been canvassed in response to the other matters the Commission is required to take account of.

[29] However, there is no suggestion that Kmart would incur significant economic disadvantage if the transferable agreement continued to apply to it.

(f) the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer;

[30] Kmart submits that there is a lack of business synergy between the Target Agreement and the Kmart Agreement. It is understood in this context that if the Order is not made Kmart would be required to administer different sets of conditions for the five transferring employees, resulting in a situation where employees working side by side would be on different terms and conditions of employment.

[31] The granting of the Order would also assist in the management of the five transferring employees redeployed to Kmart on the basis that they would be on the same terms and conditions as other Kmart employees.

(g) the public interest;

[32] I am not aware of any public interest considerations that need to be taken account of in the context of this application.

Conclusion

[33] I have considered the details contained in the application, and the materials provided in support, including the Statutory Declarations of Ms Gaw and Mr Mazzotta. I have also had regard to each of the matters in s.318(3) that the Commission is required to take account of. I am satisfied, in conclusion, that it is appropriate to make the Order in the terms sought by the Applicant. The Order is issued in conjunction with this decision.

al of the Fair Work Commission with member's signature

COMMISSIONER

Printed by authority of the Commonwealth Government Printer

<AE898762  PR702560 >

 1   AE898762.

 2   AE896430.

 3   Fair Work Act 2009 (Cth) s 312.

4 Ibid, s 318.

 5   Email correspondence from Shop, Distributive and Allied Employees Association to Fair Work Commission, dated 2 November 2018.

 6   Statutory declaration of Sandro Mazzotta, dated 1 November 2018, [29].

 7   Statutory declaration of Leanne Gaw, dated 25 October 2018, [29].