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[117]
[2026] FWC 261
General information, not legal advice.
Fair Work Commission
2026-01-30
Original judgment source is linked above.
s.318 - Application for an order relating to instruments covering new employer and transferring employees
Application for an order relating to instruments covering new employer and transferring employees - orders made
[1] On 5 December 2025, Kmart Limited T/A Kmart (Kmart) made an application pursuant to s.318 of the Fair Work Act 2009 (Cth) (the Act) seeking the following Orders:
(a) all Target Australia Pty Ltd (Target) employees:
(ii) employed in the Target Earlville store located at Earlville Shopping Centre, Mulgrave Road, Cairns City, QLD, 4870 (Target Earlville), which will close in early 2026 (Closure Store); and
(iii) who have accepted offers of employment with Kmart Australia Limited to work at a Kmart Store (Kmart Transfer Store); and
(i) during the period after the date of Kmart's application to the Fair Work Commission (FWC) pursuant to section 318, dated 5 December 2025; and
(ii) who have accepted or accept offers of employment with Kmart to work in a Kmart Transfer Store;
(together, the Transferring Employees) in respect to their employment with Kmart.
(a) the time when the Transferring Employees become employed by Kmart; and
[2] For the reasons set out below, I am satisfied that it is appropriate to make the Orders sought pursuant to s.318(1) of the Act.
[3] The Form F40 - Application for orders in relation to a transfer of business (Form F40) and accompanying documents filed by Kmart relevantly outline the background to the application, and I will briefly relay this background here.
[4] Kmart operates retail stores in Australia. Kmart Australia Limited (Kmart) and Target Australia Pty Ltd (Target) together form the Kmart Group within the broader group owned by Wesfarmers Limited (Wesfarmers).
[5] On Friday 22 May 2020, Wesfarmers announced on the Australian Stock Exchange its intention to rebadge a number of Target and Target Country stores as Kmart or Kmart Hub stores.
[6] On or around July 2025, Target announced to employees that the current Target Earlville Store would close in early 2026.
[7] On or around July 2025, Target engaged in consultation with employees at the Earlville Store regarding the closure of the Target Earlville Store and subsequent redeployment options, including a transfer of their employment from Target to Kmart.
[8] During this consultation period, it was confirmed that all employees would be issued an offer of employment based on their store preferences. A copy of the offer of employment for part time and casual employees is at 'JG-6' of the statement of Jessica Gill.
[9] On or around November 2025, Kmart issued each of Target's two (2) permanent part time employees, based on their redeployment preference, with an offer of employment. The offer of employment confirmed that for individuals who accepted the offer, their employment with Kmart would commence on 12 January 2026 on the following basis:
(a) Employment in the same position as they were currently employed at Target;
(b) The work performed at Kmart would be the same or substantially the same, as the work performed at Target;
(c) Kmart would recognise the period of continuous service with Target;
(d) That Kmart intended to apply to the FWC for an order, the effect of which (if granted by the FWC) would be that their employment with Kmart would be covered by the Kmart National Agreement 2024 (Kmart EA);
(e) If the Commission granted the order sought by Kmart, all terms and conditions of the Kmart EA would apply to the Transferring Employees in respect of their employment with Kmart; and
(f) Employees would be taken to have resigned from their employment with Target with effect from the commencement date of their employment at Kmart.
[10] Kmart also issued contracts of employment to five (5) casual employees, on the same conditions as above. A copy of the offer of employment for casual is attached at 'JG-7' of the statement of Jessica Gill.
[11] Six (6) out of the seven (7) Target employees, inclusive of casuals, have accepted the offer to transfer to Kmart, with the deadline to accept offers being 3 December 2025, with follow up communication to be sent to any employee who has not accepted the offer.
[12] On or around November 2025, team members who did not transfer to a nearby Target Store were provided with offers of employment with Kmart Australia Limited to work at a Kmart Store (Kmart Transfer Store).
[13] On 5 December 2025, Kmart made an application under section 318 of the FW Act for an order that the Target EA (or any successor agreement) does not, and will not cover all Target employees covered by the Target EA and employed in a Kmart Transfer Store mentioned above, who have accepted offers with Kmart, and all employees (casual and part time) hired by Target in the Target Earlville store after the date of Kmart's application with the FWC and who accept offers of employment with Kmart (together, the Transferring Employees).
[14] The Application is supported by the Australian Workers' Union - Queensland and Northern Territory (AWU). A copy of the letter provided by the AWU in support of the application is at JG-6 of the statement of Jessica Gill.
[16] Section 318 of the Act states as follows:
318 Orders relating to instruments covering new employer and transferring employees
(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.
(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;
(d) if the application relates to a named employer award - an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (b).
(3) In deciding whether to make the order, the FWC must take into account the following:
(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;
(d) whether the transferable instrument would have a negative impact on the productivity of the new employer's workplace;
(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;
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;
[17] Kmart's position is that the transfer of employees from Target Earlville to a Kmart
Transfer Store is likely to constitute a 'transfer of business' within the meaning of section
(a) the employees will terminate their employment with Target and then commence employment with Kmart within 3 months (section 311(1(a) &(b));
(b) the work performed for Kmart will be substantially the same (section 311(1)(c)); and
(c) there is a connection between Target and Kmart (section 311(1)(d)) as they are associated entities (section 311(6)).
[18] For the purposes of s.311(1) of the Act, I am satisfied that there has been a transfer of business. I am also satisfied that each of Transferring Employees are transferring employees within the meaning of s.311(2) of the Act.
[19] I will now consider the factors under s.318(3) of the Act in determining whether to make the Orders sought.
Section 318(3)(a) The views of Kmart and of the employees affected by the Orders
[20] It is Kmart's view that the Target EA should not apply to it or any employees who transfer from Target Earlville.
[21] Kmart prefers that the employees are covered by the Kmart EA for the following reasons:
(a) Kmart seeks to ensure the terms and conditions of employment are standardised and consistent for all Kmart employees in all Kmart stores nationally;
(c) that existing 'wages' employees of Kmart are covered by the Kmart EA;
(d) Kmart wants to ensure that there is not employee dissatisfaction, tension, confusion and industrial unrest arising out of inconsistent terms and conditions of employment between existing Kmart employees and any employees that transfer;
(e) Kmart seeks to promote a harmonious, single workplace culture across its stores nationally; and
(f) Kmart seeks to avoid the costs and administrative resources associated with implementing two enterprise agreements in its payroll systems, and the operational challenges of managing two separate agreements across enterprise agreement covered retail employees in one store.
[22] With respect to ascertaining the views of the Transferring Employees, Kmart says that in or around July 2025, Target engaged in consultation with employees at the Target Earlville store. The consultation process involved:
(a) letters to employees explaining the proposed store closure, Kmart's proposed offers of employment and Kmart's intention to apply to the FWC for the section 318 orders;
(b) distribution by email of a high-level summary providing the differences between the Kmart EA and Target EA;
(c) preparation of financial analysis confirming the financial impact of the application of the Kmart EA on transferring employees;
(d) regular consultation and one on one meetings at a local level with People and Capability representatives and store manager, to respond to questions regarding the store closure process and the applications for the section 318 orders; and
(e) further one on one meetings at a local level with People and Capability representatives and the store manager around redeployment opportunities, providing team members with the opportunity to give their store location preferences.
[23] In or around July 2025 Kmart and Target engaged in communication with associated unions including the Shop, Distributive and Allied Employees Association (SDA) and the AWU which is covered by both the Target EA and Kmart EA, regarding the proposed store closure transfer process and intention to apply for the section 318 orders.
[24] On or around 26 November 2025, Kmart made offers of employment to the 2 permanent employees at Target Earlville on the basis that:
(a) Kmart would recognise the employee's service with Target; and
(b) Kmart intended to apply for the section 318 orders with the effect that, if granted, the Kmart EA would apply to their employment with Kmart.
[25] On or around 26 November 2025, Kmart also made offers of employment to 5 casual
[26] As at the date of this Application, 6 out of the 7 of the employees have accepted offers of employment on terms which make it clear that if Kmart is successful in obtaining the order, the Kmart EA will apply to their employment with Kmart, with the deadline of accepting offers being on or around 3 December 2025.
[27] Kmart says that it has not aware of any employee objecting to the Application or the section 318 orders sought.
[28] As part of the conduct of this matter, I issued Directions for the filing of material. These Directions required Kmart to serve on all Transferring Employees a copy of the Form F40 and supporting documents filed with the Form F40. These Directions provided the opportunity for any Transferring Employees, and any employee organisation which ordinarily represents the industrial interests of the Transferring Employees, to file any material which addressed certain factors under s.318(3) by 21 January 2026. The parties also had until 23 January 2026 to advise the Commission if they wanted to be heard in relation to the application.
[29] No material was filed by the Transferring Employees or any employee organisations in accordance with the Directions.
[30] The AWU supports the Application, as evidenced by a letter dated 4 December 2025 which was filed with Kmart's Form F40 and marked Attachment 1A.
[31] I am satisfied that the Transferring Employees and employee organisations have had the opportunity to provide their views on the application. I therefore consider that the views before the Commission weigh in favour of making the Orders.
Section 318(3)(b) Whether any employees would be disadvantaged by the Orders in relation to their terms and conditions of employment
[32] Kmart says that Transferring Employees will not be disadvantaged in relation to their terms and conditions of employment should they be covered under the Kmart Agreement.
[33] I note that under the Target Agreement shift penalties are paid on the base rate of pay plus the penalty, whereas under the Kmart Agreement shift penalties are paid on the General Retail Industry Award rate plus 1%.
[34] Under the Target Agreement the July 2025 and July 2026 wages increase is the General Retail Industry Award (GRIA) rate of pay, plus 5 cents per hour. The pay rate increases under the Kmart EA are equivalent to the GRIA rate of pay:
(d) plus 25 cents per hour in July 2028, with penalties also paid on the base rate of pay rather than the equivalent GRIA rate of pay (including penalties) plus 1 cent per hour.
[35] I have considered the Comparison Document filed with the Commission, and both the Target Agreement and Kmart Agreement.
[36] In considering the terms and conditions of the Target Agreement and Kmart Agreement, I am satisfied that employees would not be disadvantaged in relation to their terms and conditions of employment. I therefore consider that this factor weighs in favour of granting the Orders sought.
Section 318(3)(c) The nominal expiry date of the Target Agreement
[37] The nominal expiry date of the Target Agreement is 7 February 2027 and for the Kmart Agreement it is 17 November 2028. I do not consider that this factor weighs against the granting of the Orders sought.
Section 318(3)(d) Whether the Target Agreement would have a negative impact on the productivity of the new employer's workplace
[38] Kmart says that the Target Agreement would cause a negative impact on the productivity of its workplace if the Orders sought were not made. It says that:
(a) there would likely be increased tensions amongst the workforce due to the application of different terms and conditions;
(b) material payroll and other administrative issues would result from the introduction of another enterprise agreement into Kmart stores, which would cause Kmart to incur significant costs in respect of its payroll system, and additional resourcing which would be required. This would also lead to an increased chance of errors being made and would be a burdensome additional administration requirement for Kmart; and
(c) management and other staff will require substantial time and training in order for Kmart to ensure that the correct terms (including rostering and entitlements) of both agreements can be applied in its stores.
[39] I accept these submissions. On the material before me, I am satisfied that if the Orders sought were not made, that the application of the Target Agreement would have a negative impact on Kmart's productivity. I am satisfied that these additional administrative and cost burdens associated with the operation of a secondary enterprise agreement would negatively impact Kmart's productivity. I therefore consider that this factor weighs in favour of granting the Orders sought.
Section 318(3)(e) Whether Kmart would incur a significant economic disadvantage as a result of the Target Agreement covering Kmart
[40] Kmart also says that there would be significant economic disadvantage because of additional expenses incurred in:
(a) the implementation and administration of two enterprise agreements in Kmart stores in Australia, which would require significant payroll system updates and incur additional resourcing in the Kmart payroll team;
(b) additional training for Kmart managers and staff; and
(c) the negotiation by Kmart of replacement enterprise agreements once the agreements have passed their nominal expiry dates.
[41] Kmart relies on the factors outlined above to say that if the Target Agreement were to cover it, then it would incur significant economic disadvantage due to having to incur additional expenses from the application of the Target Agreement. It says that operational efficiencies would also be minimised and that it would be exposed to significant payroll compliance complexities.
[42] Whilst I accept here would be some economic disadvantage, I am not satisfied that Kmart would incur significant economic disadvantage. I consider this factor to be neutral in the consideration of whether the Orders sought should be made.
Section 318(3)(f) Degree of business synergy between the Target Agreement and the Kmart Agreement
[43] On this factor, Kmart says that there are significant operational differences between the two Agreements which include differences in the span of hours, overtime, penalties and minimum part time hours.
[44] I find the degree of business synergy to be a neutral factor in determining whether the Orders should be made.
[45] This factor is informed by the objects of Part 2-8 of the Act, as stated under s.309 of the Act. More specifically, the public interest criterion requires that I consider the balance between the protection of employees' terms and conditions of employment under the enterprise agreements, with the interests of employers in running their enterprise efficiently.
[46] Kmart says it is in the public interest because it promotes ongoing employment opportunities for the Target Earlville workforce in the new Kmart store, in a manner that is efficient and does not result in employees being disadvantaged. Kmart says it has previously made applications for the transfer of employees from Target to Kmart under a predecessor agreement and the Commission has granted such orders. (PR789951, AE898762, PR724115 and AE8988762 PR2729855).
[47] I do not consider that it is contrary to public interest to grant the Orders sought. However, in the circumstances, I also do not consider that this factor carries any particular weight where the considerations and submissions referred to in this Decision have not been disputed between the parties. As such, I consider that this factor is a neutral consideration in terms of whether the Orders sought should be granted.
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