Coles Supermarkets Australia Pty Ltd

[2019] FWC 8175

[2019] FWC 8175

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
(AG2019/4301)

Retail industry
DEPUTY PRESIDENT COLMAN	MELBOURNE, 4 DECEMBER 2019

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. In the context of this application, 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 Eureka Agreement would not apply to three employees of Eureka who were offered and have accepted employment with Coles: Poonam Bajpai, Oshin Mercer, and Rhodora Larracas (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] Coles submitted statements from the three transferring employees indicating their support for the application. At a telephone mention on 29 November 2019, the Shop, Distributive and Allied Employees Association (SDA), an organisation covered by both the Express Agreement and the Coles Agreement, confirmed that it supported the application.

Background

[4] Eureka operates retail outlets which offer fuel and convenience store services. It is a subsidiary of Coles and the two companies are associated entities as defined in s 50AAA of the Corporations Act 2001 (Cth). In August 2019 Eureka decided to close its Coles Express store in Elsternwick effective from 27 October 2019. The Elsternwick store is an atypical Coles Express store, being more akin to a small-format supermarket. The decision to close the site was connected to the fact that a new Coles supermarket was soon to open immediately adjacent to the Elsternwick store.

[5] Coles offered to employ the three transferring employees in roles at the new Coles supermarket, and they accepted those offers, commencing employment at Coles towards the end of October 2019. The offers of employment were not conditional on the Commission granting an order under s 318. All other Eureka employees were redeployed to other Coles Express stores.

[6] Coles says that the work performed by the three transferring employees at the new Coles supermarket is substantially the same as the work they performed at the Coles Express in Elsternwick. 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

[7] 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.”

[8] 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.

[9] First, the employment of three 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)).

[10] 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)

[11] 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.

[12] The views of the three affected employees are that the application should be granted. The statements attached to the application confirm that each of the employees voluntarily applied for a position with Coles and understands that the effect of the application being granted would be that the Coles Agreement will cover their employment instead of the Express Agreement. The statements confirm that the employees have had the opportunity to ask questions, to review material provided Coles, and also to seek advice about the effect of the application on their employment. The statements confirm that the employees support the application.

[13] I note that Coles consulted with the transferring employees initially in August 2019 and again in October 2019. During the consultation process employees were provided with a letter outlining the transfer process; a ‘Transferring of Employment Consent form’; a ‘Team Member Brochure’ containing information on the transfer process and Coles’ intention to make the present application; a comparison document outlining the differences between the Express Agreement and the Coles Agreement; a copy of the Coles Agreement; and a guide to the Coles ‘top up payment’ system. Copies of these documents were attached to the application.

[14] 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)

[15] 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.

[16] 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, which is a significant factor as the new supermarket is open all hours. The Coles Agreement provides for more frequent and longer rest and meal breaks. It also has a higher applicable evening and Sunday penalties, and more generous redundancy entitlements.

[17] 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.

[18] The applicable base hourly rate of pay for employees covered by the Express Agreement is $21.54. This is in fact the Award rate, which exceeds the agreement rate and therefore applies by virtue of s 206 of the Act. The transferring employees were receiving a discretionary payment on top of this, such that their actual hourly rate at Eureka was $23.37 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. Further, Coles has undertaken to the transferring employees that it will apply its ‘top up’ scheme to their 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 three transferring employees are not ‘eligible employees’ for the purpose of the clause however Coles has agreed to 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 to the transferring employees that their take home pay will be at least, on average, no less than what they were earning in their employment with Eureka.

[19] I do not consider that the employees will be disadvantaged if the application is granted. They will receive various other 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)

[20] 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 has a nominal expiry date of 30 April 2020. From 1 May 2020, employees covered by the Coles Agreement will be able to bargain for a new collective agreement. I consider the nominal expiry dates of the agreements to be a neutral factor.

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

[21] 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. Taking into account the detailed explanation of this matter contained in the application, and without repeating or summarising that explanation here, I accept Coles’ submission in relation to this matter.

[22] In my view, 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 would in turn affect the productivity of its workplace. As to the concept of productivity, which 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)

[23] 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)

[24] 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.

[25] 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)

[26] 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.

[27] It may be accepted that the public interest here is informed by the objects of Part 2-8 (see s 309) as well as the object of the Act as a whole (see s 3). This brings into consideration concern for the protection of transferring employees’ conditions of employment and consideration of the importance of an employer being able to run its enterprise efficiently. 2 In my view the present application is compatible with the public interest. However, I do not consider that the public interest carries any particular weight in this matter and that it is therefore a neutral consideration.

Conclusion

[28] 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.

[29] 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. I will also order that, pursuant to s 318(1)(b), the Coles Supermarkets Enterprise Agreement 2017 will cover the three transferring employees.

[30] An order giving effect to this decision will be issued separately in PR714795.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

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

 2   Australian Laboratory Services Pty Ltd [2015] FWC 7916 at [48]