Kmart Australia Limited

[2016] FWC 5912

[2016] FWC 5912

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
(AG2016/4951)

Target AUSTRALIA RETAIL AGREEMENT 2012

[AE898762]

Retail industry
COMMISSIONER GREGORY	MELBOURNE, 22 AUGUST 2016

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

[1] This matter involves an application by Kmart Australia Limited (“Kmart”) under s.318 of the Fair Work Act 2009 (Cth) (“the Act”). It is made as a consequence of the decision by the parent company, Wesfarmers, to rebrand two existing Target Australia Pty Ltd (“Target”) stores, located at Broadmeadows and Templestowe in Melbourne, as Kmart stores. That process involves a transfer of business under s.311 of the Act from an “old employer” to another employer, being the “new employer.” Kmart and Target are both wholly-owned subsidiaries of Wesfarmers.

[2] The application was dealt with in a hearing on 22 August 2016 and a decision handed down in transcript at the conclusion of those proceedings. This decision reflects what is contained in the transcript. It also includes some minor corrections and amendments to the decision in transcript, but these are not intended to change the intent of the decision in any way. Mr Richard West from Minter Ellison was given permission to appear on behalf of Kmart under s.596(2)(a) of the Act as the matter involves a degree of complexity and his involvement would enable it to be dealt with more effectively. Ms Julia Fox appeared for the Shop Distributive and Allied Employees’ Association (“the SDA”).

[3] It is understood that approximately 60 employees are employed in each of the existing stores, and it is intended to offer ongoing employment to each of them as part of the rebranding exercise. A number of additional employees will also likely be employed because of the extended opening hours proposed in the rebranded stores.

[4] The employees are now employed under the terms and conditions contained in the Target Australia Retail Agreement 2012 1 (“the Target Agreement”), which was approved by the Commission on 12 December 2012 and commenced operation 7 days later. Its nominal expiry date is 31 July 2016. However, as a consequence of the rebranding of the stores it is proposed that the employees will now be covered by the Kmart Australia Ltd Agreement 20122 (“the Kmart Agreement”), which was approved in a decision handed down by Commissioner Gay on 27 August 2012. That Agreement came into operation on 3 September 2012, and its nominal expiry date is 30 April 2016.

[5] The application accordingly seeks orders under s.318 of the Act to the effect that the Target Agreement no longer has application to the employees who continue in employment at the Broadmeadows and Templestowe stores following the rebranding of those stores, which is intended to occur in November 2016.

[6] Section 317 enables the Commission “… to make certain orders if there is, or is likely to be, a transfer of business from an old employer to a new employer.

[7] Section 318 continues to provide that an Order can be made that an existing transferable instrument that would otherwise “cover the new employer and a transferring employee does not or will not cover the new employer and transferring employee.” It also provides that any such Order can be made on application by various parties, including “the new employer or a person who is likely to be the new employer.” Section 318(3) continues to provide that in deciding whether to make any such Order the Commission must take into account the various matters set out in the sub section. I therefore now turn to consider each of those matters in the context of this application.

The views of the new employer or a person who is likely to be the new employer

[8] The application in this matter has been made by the new employer, Kmart, and it obviously supports the application, and seeks that an Order in the form of a draft Order attached to its application be made. Two separate Statutory Declarations made by Mr David Matheson, the Chief Operating Officer at Kmart, were also provided in conjunction with the application. They provide details about the circumstances at each of the stores, as well as further explanation about why Kmart seeks the Order proposed. The Declarations indicate Mr Matheson has been involved in the planned rebranding of the two retail stores currently trading as Target stores.

[9] The Declarations continue to indicate that the Order would maintain common employment conditions in all of Kmart’s stores, and would ensure the employees in the two stores 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 a consequence of the employees in the two stores being covered by a different enterprise agreement.

[10] Two further Statutory Declarations made by Ms Suzanne White, the National Employee Relations Manager at Kmart, were also attached to the application. They again deal with the circumstances in each of the two stores, and set out in some detail the consultation process that has taken place with the employees in the stores, and with the SDA, the Union that has coverage of the employees in the stores.

[11] They also attach documentation which contains a comparison of the different conditions contained in the two enterprise agreements. It is understood that this was used in the team member consultations that took place with employees about the proposed rebranding of the stores. The Declarations provided by Ms White also set out a number of proposed commitments to be entered into by Kmart in regard to various conditions in the Target Agreement that are more favourable for employees. The Declarations also note that the employees covered by the Kmart Agreement are currently receiving wage rates that are higher than those now specified in the Agreement. This is the result of some “interim wage increases” now being paid to employees as a consequence of negotiations concluded with the SDA. The declaration indicates these increases would also be applied to the transferring employees.

[12] As indicated, the Declarations also set out various commitments to be made by Kmart in the proposed offers of employment to be made to employees as part of the rebranding process in regard to the maintenance of arrangements in the Target Agreement that are more favourable than those contained in the existing Kmart Agreement. It is understood that these commitments would remain in place until such time as a new Kmart Agreement is negotiated and put in place.

[13] The Declarations also provide a summary of the views of the employees who attended the various consultation and information sessions. They indicate that the employees are overwhelmingly in support of the Kmart Agreement having application to their employment following the rebranding in the event they accept employment with Kmart, when offered.

The views of the employees

[14] Section 318 next requires that the Commission take account of the views of the employees who would be affected by the application, and by the making of any Orders as a consequence of the application.

[15] I have made reference already to the consultation processes that have taken place with the employees in the two stores about the proposed rebranding, and about the intention to have the Kmart Agreement apply to the employees after the rebranding, instead of the existing Target Agreement. They also indicate that an overwhelming majority of the employees who participated in these processes support this outcome.

[16] Kmart’s representative also advised that the notice of listing of the hearing was posted on relevant store notice boards in both the Broadmeadows and Templestowe stores. It can be noted in response that the Commission has not been contacted by any employee seeking to be involved in the proceedings since that time.

[17] The application also includes a further Statutory Declaration provided by Mr Raffaele Ciccone, a Research Officer with the SDA. It indicates he was involved in the employee information sessions held at the two stores for the purpose of providing information about the proposed rebranding, and the differences between the Target and Kmart agreements. These sessions also sought to obtain the views of the employees about the proposal that their future terms and conditions of employment would be covered by the Kmart Agreement.

[18] The declarations also contained some notes of those meetings prepared by Mr Ciccone, which detail some of the issues raised in the discussions. They also indicate that an overwhelming majority of the employees involved answered “yes” in response to the question, “Are you supportive of the Kmart Agreement applying to transferring team members at the Templestowe/Broadmeadows store knowing the differences with the Target Agreement?”

[19] I am accordingly satisfied, based on the material contained in the application and the attached Statutory Declarations, that the overwhelming majority of employees now covered by the Target Agreement support the present application and the Order being sought.

Whether any employees would be disadvantaged by the Order in relation to their terms and conditions of employment

[20] The application and the Statutory Declarations provide information about aspects of the arrangements applying under the Target Agreement that provide more advantageous entitlements than those contained in the Kmart Agreement. However, they also contain a variety of commitments to maintain those benefits until such time as a new Kmart Agreement is approved in place of the existing Agreement.

[21] The Declarations also provide information about entitlements under the Kmart Agreement that are now greater than those actually set out in the Agreement.

[22] I am satisfied based on the submissions provided in the proceedings, and by the materials contained in the Declarations, that there are no employees that would be disadvantaged in any significant way in relation to their terms and conditions of employment by the proposed Order being made. It would, in fact, appear that some additional opportunities might be provided for employees, both in terms of additional employment opportunities and additional store opening hours.

If the Order relates to an enterprise Agreement – the nominal expiry date of the Agreement

[23] Both the Target and Kmart Agreements have passed their nominal expiry dates.

Whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace

[24] I am satisfied that the continuing application of the transferable instrument at the Broadmeadows and Templestowe stores would have some negative impact on the productivity of the business for the reasons indicated, in particular, in the Statutory Declaration provided by Mr Matheson. This provides further support for making the Order sought.

Whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer

[25] There is no suggestion that Kmart would incur significant economic disadvantage if the transferable instrument were to continue to apply to it. However, again for the reasons already referred to, and having particular regard to the Statutory Declaration provided by Mr Matheson, I am satisfied Kmart would suffer some economic disadvantage, particularly in terms of the different industrial arrangements that would need to be maintained, applied and administered for employees at the Broadmeadows and Templestowe stores, if the orders sought are not made.

The degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer

[26] I am satisfied that in the main these issues have already been canvassed in response to the other matters that the Commission is required to take account of. I am satisfied there would be some lack of business synergy between the relevant instruments, if for no other reason that they contain different terms and conditions of employment, and would require Kmart to administer and manage those different arrangements. It is understood in this context that if the Order is not made, the employees in the Broadmeadows and Templestowe stores, following the rebranding, would be covered by employment arrangements that are different from those applying to employees in every other Kmart store in the country.

The public interest

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

Conclusion

[28] In conclusion, having considered all the matters in s.318(3) that the Commission is required to take account of, I am satisfied it is appropriate for an Order to be made 3. An Order will accordingly be made in the terms of an amended draft Order handed up during the proceedings. The Order will have application from the date of the decision issued in transcript, being 22 August 2016, but in accordance with the provisions contained in s.318(4) will not come into operation for any employee until such time as that employee becomes employed by the new employer.

COMMISSIONER

Appearances:

Mr R West of Minter Ellison appeared on behalf of the Applicant.

Ms J Fox appeared on behalf of the SDA.

Hearing details:

2016.

Melbourne:

22 August.

 1   AE898762

 2   AE896430

 3   PR584500

Printed by authority of the Commonwealth Government Printer

<Price code C, AE898762  PR584499 >