Coles Supermarkets Australia Pty Ltd

[2020] FWC 3409

[2020] FWC 3409

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

Coles Supermarkets Australia Pty Ltd
(AG2020/1706)

Retail industry
DEPUTY PRESIDENT COLMAN	MELBOURNE, 30 JUNE 2020

Application for orders relating to transferrable instruments

[1] Coles Supermarkets Australia Pty Ltd (Coles) has made an application seeking orders pursuant to s 318(1)(a) of the Fair Work Act 2009 (Act) in relation to the Eureka Operations Fuel and Convenience Team Member Agreement – 2011 (Express Agreement), an enterprise agreement that applies to Eureka Operations Pty Ltd (Eureka), which trades as Coles Express. The Express Agreement is a ‘transferrable instrument’ as defined in s 312. Coles also seeks an order under s 318(1)(b) in relation to the application of the Coles Supermarkets Enterprise Agreement 2017 (Coles Agreement).

[2] The orders sought would have the effect that the Express Agreement would not apply to five employees of Eureka who were offered and have accepted employment with Coles: Rhonda Clifford, Jordan Harley, Kellee Sloan, Samantha Lovell, and Roxanne Mercer (transferring employees). The proposed orders would also have the effect that the Coles Agreement would cover the transferring employees in their employment with Coles.

[3] The Australian Workers’ Union, an organisation covered by both the Express Agreement and the Coles Agreement, advised my chambers that it did not oppose the application.

Background

[4] Eureka operates retail outlets which offer fuel and convenience store services. It is a subsidiary of Coles. The two companies are ‘associated entities’ as defined in s 50AAA of the Corporations Act 2001 (Cth). In November 2019 Eureka decided to close its Coles Express store in Innisfail effective from 30 June 2020. There were limited redeployment opportunities at Coles Express given the remote location in Far North Queensland. Coles offered to employ the five transferring employees in roles at the Coles supermarket in Innisfail. The employees accepted those offers, commencing employment at Coles on 1 June 2020. The offers of employment were not conditional on the Commission granting an order under s 318. Coles says that the work performed by the five transferring employees at the new Coles supermarket is substantially the same as the work they performed at the Coles Express in Innisfail. It is the retail work of a shop assistant. It involves dealing with customers, attending to the sale of goods and the display and replenishment of stock.

Statutory framework

[5] Section 318(1) of the Act provides that the Commission may, on application by a person or organisation identified in s 318(2), 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.”

[6] The power to make orders under s 318 is premised on the Commission being satisfied that there has been, or that there is likely to be, a transfer of business for the purpose of s 311 of the Act. I am satisfied that there has been a transfer of business from Eureka to Coles for the following reasons.

[7] First, the employment of the five employees of Eureka has terminated and within three months of termination the employees became employees of Coles (s 311(1)(a) and (b)). Secondly, having regard to the information in the application, I consider that the work performed by the transferring employees for Coles is the same or substantially the same as the work they performed for Eureka (s 311(1)(c)). Finally, there is a ‘connection’ between Eureka and Coles as described in s 311(6), because Coles was an associated entity of Eureka at the time the transferring employees became employed by Coles (s 311(1)(d)).

[8] Next it is necessary for me to consider s 318(3), which states that, in deciding whether to make an order under s 318(1), the Commission must take into account certain matters.

The views of the new employer and affected employees - s 318(3)(a)

[9] The Commission must take into account the views of the new employer and the employees who would be affected by the order. The view of Coles, as the new employer, is that the application should be granted. It contends that granting the application will enable the transferring employees to be integrated into the Coles supermarket team more effectively. It will avoid burdensome administration associated with continuing to apply the Express Agreement to the transferring employees at Coles. And it will ensure that the transferring employees can access beneficial conditions in the Coles Agreement, with concurrent protection through the ‘top up’ mechanism in the Coles Agreement (see below). Coles also submits that the proposed orders give effect to its desire to ensure that its supermarket employees are covered by a common set of terms and conditions.

[10] The views of the five affected employees are that the application should be granted. The employees signed ‘transfer of employment consent forms’, in connection with their applications for positions with Coles. These confirm the employees’ understanding that, if Coles makes a relevant application under the Act, and the Commission grants the application, the Coles Agreement, rather than the Express Agreement, will apply to their employment with Coles. It states that employees are supportive of such an application. The signed forms also acknowledge that employees have had the opportunity to ask questions, to review material provided by Coles, and also to seek advice about the effect of the application on their employment. The employees’ view about the application is therefore an informed one.

[11] The views of the employer and the views of the affected employees, which are evidently well-informed views, weigh in favour of granting the application.

Whether any employee will be disadvantaged – s 318(3)(b)

[12] The Commission must consider whether any employee would be disadvantaged by the order in relation to their terms and conditions of employment. Coles contends that the transferring employees will not be disadvantaged by the granting of the application.

[13] The Express Agreement differs from the Coles Agreement in certain respects, reflecting to some extent the different underpinning awards (the Vehicle Manufacturing, Repair, Services and Retail Award 2010 for the Express Agreement and the General Retail Industry Award 2010 for the Coles Agreement). Appendix 3 to the application outlines these differences. The Coles Agreement contains a number of conditions that are more favourable to employees than the Express Agreement. It offers the possibility of career progression, through the six-level classification structure, to supervisory and managerial classifications, whereas the Express Agreement has only one classification. The Coles Agreement provides overtime for working outside the span of hours, where the Express Agreement has a 24 hour, seven-day span. The Coles Agreement provides for more frequent and longer rest and meal breaks. It also has higher applicable evening and Sunday penalties, and more generous redundancy entitlements.

[14] On the other hand, the Express Agreement contains certain provisions that are more beneficial to employees than the Coles Agreement. These include an additional 7.6 hours per year of paid personal leave, and an additional day’s wages (or time in lieu) for permanent team members working non-standard rosters where a public holiday falls on their non-working day. It also provides for higher Saturday penalty rates, and a higher casual rate.

[15] The applicable base hourly rate of pay for employees covered by the Express Agreement is $20.61. The legal base rate of pay however is the Award rate of $21.54, which applies by virtue of s 206 of the Act. The transferring employees had been receiving a discretionary payment on top of this, such that their actual hourly rate at Eureka was $23.66 per hour. Under the Coles Agreement, the transferring employees will receive an hourly rate of $21.91, however the Coles Agreement has more frequent penalties, which are expected to see them better off.

[16] Further, Coles has undertaken that it will apply its ‘top up’ scheme to the transferring employees’ employment. Pursuant to this scheme, which is contained in clause 5.3 of the Coles Agreement, eligible team members continue to receive at least the average rate of pay that they formerly received under the previous agreement (clause 5.3.1). The five transferring employees are not ‘eligible employees’ for the purpose of the clause, however Coles will apply the top-up scheme to them as though they were eligible employees. It has assigned to them a ‘protected pay rate’ of the kind contemplated by clause 5.3 and confirmed that they will continue to earn at least as much as they were earning on average when working under the Express Agreement.

[17] I do not consider that the transferring employees will be disadvantaged if the application is granted. They will receive various more favourable conditions under the Coles Agreement, as well as the protection of the top up provision which Coles has undertaken to apply to their employment. This weighs in favour of granting the orders sought.

The nominal expiry date of the agreement – s 318(3)(c)

[18] If the application under s 318 relates to an enterprise agreement, the Commission must consider the nominal expiry date of the agreement. The Express Agreement nominally expired on 30 June 2015. The Coles Agreement nominally expired on 30 April 2020. I consider the nominal expiry dates of the agreements to be a neutral factor.

Negative impact on productivity – s 318(3)(d)

[19] The Act requires the Commission to consider whether the transferrable instrument would have a negative impact on the productivity of the new employer’s workplace. Coles submitted that if the application were not granted, and the Express Agreement were to continue to apply to transferring employees’ employment with Coles on an ongoing basis, Coles would then need to set up and administer the Express Agreement permanently within its payroll systems, at considerable and disproportionate cost and inconvenience. I accept Coles’ submission in relation to this matter.

[20] Coles’ productivity would be negatively impacted if the application were not granted because of the administrative, technological and human resources burden it would impose on Coles, which could affect the productivity of its workplace. Productivity is in essence a measure comprised of the quantity of outputs relative to the quantity of inputs (see ANMF v RSL Care RDNS Limited t/a Bolton Clarke 1). If the order is not granted, a substantial volume of additional inputs will be required to bring about essentially the same output, namely an effective payroll system that applies to all Coles’ supermarket employees.

Whether the new employer will incur significant economic disadvantage – s 318(3)(e)

[21] Coles submits that it would incur economic disadvantage, relative to the small number of transferring employees, if the orders were not granted. It does not contend that there would be a significant economic disadvantage in relation to the entire Coles enterprise. I consider this factor to be a neutral consideration in this case.

The degree of business synergy etc. – s 318 (3)(f)

[22] The Commission is required to consider the degree of business synergy between the transferrable instrument and any workplace instrument that already covers the new employer. Coles contends that there is little if any business synergy between the Express Agreement and the Coles Agreement. It also submits that a standard Coles Express site rarely has more than two team members employed at the same time, and therefore the Express Agreement does not contemplate the standard diverse aspects of a supermarket, including the presence of different departments, supervisory roles, and the performance of higher duties on a temporary basis. The un-synergistic nature of the two business is said further to be underscored by the fact that two different modern awards underpin the two agreements. I consider that there is little business synergy between the two instruments and that this consideration weighs in favour of the proposed orders being made.

Public interest – s 318 (3)(g)

[23] Section 318(3)(g) requires the Commission to consider ‘the public interest’. It does not specify whether this consideration is concerned with the question of whether the application is in the public interest, or instead not contrary to the public interest. In my view the present application is compatible with the public interest. However, I do not consider that the public interest carries any weight in this matter and that it is therefore a neutral consideration.

Conclusion

[24] Taking into account all of the statutory considerations in s 318(3), I have decided to grant the application. Coles has presented a persuasive rationale for the granting of the orders. Relevant employees have been informed of the proposed arrangements and support them. There would be an adverse productivity impact if the orders were not made. Employees will not be disadvantaged by the proposed orders. In all the circumstances I consider that it is appropriate to make the orders sought.

[25] I will make an order that, pursuant to s 318(1)(a) of the Act, the Eureka Operations Fuel and Convenience Team Member Agreement – 2011 will not cover Coles or any of the transferring employees in relation to the employment of the transferring employees with Coles. I will also order that, pursuant to s 318(1)(b), the Coles Supermarkets Enterprise Agreement 2017 will cover the five transferring employees.

[26] An order giving effect to this decision will be issued separately in PR720592.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

<AE894331  PR720591>

 1   [2018] FWCFB 3807 at [15] to [19]