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

Kmart Australia Limited Trading AS Kmart Australia

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

• [1] On 27 October 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:

1. Pursuant to s.318(1)(a) of the Act, the Target Australia Retail Agreement 2022 (Target Agreement) (or any other successor agreement) does not, and will not, cover:

a. All Target Australia Pty Ltd (Target) employees:

1. Covered by the Target Agreement; and
2. Employed in the Target Charlestown store located at Pearson Street, Charlestown, NSW, 2290 (Target Charlestown), which has been, or will be converted to a Kmart store in 2025 (Conversion Store); and
3. Who have accepted offers of employment with Kmart to work at the Conversion Store; and

1. During the period after the date of Kmart's application to the Fair Work Commission pursuant to section 318, dated 24 October 2025; and
2. Who accept offers of employment with Kmart to work in the Conversion Store;

(together, the Transferring Employees) in respect to their employment with Kmart.

2. Pursuant to Section 318(1)(b), the Kmart National Agreement 2024 (Kmart Agreement) (or any successor agreement) covers the Transferring Employees in respect of their employment with Kmart.

3. In accordance with Section 318(4), this order shall come into operation at the later of:

1. The time when the Transferring Employees become employed by Kmart: and
2. The day on which this order is made.

• [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) filed by Kmart relevantly outlined the background to the application, and I will briefly relay this background here.

• [4] Kmart operates retail stores in Australia. Kmart is an entity within the Wesfarmers Limited corporate group. Target is also an associated entity of Kmart within the meaning of s.12 of the Act (being entities within the Wesfarmers Limited corporate group).

• [5] Both Kmart and Target employ retail employees to undertake store operations work. In particular, Target employs retail staff to undertake sales, customer service and operational work at its stores. Kmart submitted that as part of a broader store conversion, Target and Kmart have agreed that:
  • Target will convert its Target Charlestown store (located at Pearson Street, Charlestown, NSW, 2290) to the Conversion Store;
  • Kmart will take over from Target the store operations work at the Conversion Store; and
  • Target will transfer 12 of its permanent retail employees to Kmart to perform the store operations work.

• [6] Kmart says that the store conversion is expected to be completed on or around 17 November 2025, and the transferred work will be performed by employees of Kmart at the Conversion Store. With respect to these transferring employees, Kmart submitted that on or around 21 October 2025, offers of employment had been made to the 12 permanent employees from Target Charlestown who were performing the store operations work. Kmart says that these offers stated that employment was due to commence on or around 17 November 2025. Kmart also submitted that it intends to make offers of employment to the casual employees. At the date of filing the Form F40 (27 October 2025), 23 out of the 68 employees had formally accepted Kmart's offers.

• [7] In its Form F40, Kmart submitted that the offers of employment made to the transferring Target employees: were on terms and conditions no less favourable overall than their terms and conditions with Target Agreement (and in some respects, more favourable); would recognise continuous service with Target for all purposes; and confirmed to these employees that Kmart would be making an application under s.318 of the Act for an order that the Kmart Agreement would apply to their employment with Kmart, and that the Target Agreement would not apply.

• [8] 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;

• [9] Kmart submits that the transfer of employees from Target to Kmart is likely to constitute a 'transfer of business' pursuant to s.311(1) of the Act for the following reasons:

• The Transferring Employees will terminate their employment with Target.

• Within 3 months following the termination, the Transferring Employees will commence employment with Kmart (expected on or around 17 November 2025).

• The work the Transferring Employees will perform for Kmart is the same or substantially the same as the work the Transferring Employees performed for Target. In this respect, Kmart says that the Transferring Employees will continue to be employed as retail employees at the same store location (Pearson Street, Charlestown, NSW, 2290), which has been, or will be, converted from a Target store to a Kmart store, performing the same or substantially the same sales, customer service and operational duties.

• Kmart also says that there is a connection between Target (the old employer) and Kmart (the new employer) because Target and Kmart are associated entities within the meaning of s.12 of the Act (both being entities within the Wesfarmers Limited corporate group) - see s.311(6) of the Act.

• [10] 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.

• [11] 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

• [12] Kmart seeks the orders so as to standardise employment conditions so that all of its employees, including the Transferring Employees, who will be performing the same or substantially similar work at the Conversion Store are governed by the same industrial instrument. Kmart says the reasons for this are:
  1. to ensure that all terms and conditions of employment are standardised and consistent for all Kmart employees in all Kmart stores nationally;
  2. to maintain productivity in its stores; 
  3. so that existing 'wages' employees of Kmart are covered by the Kmart EA;
  4. to ensure that there isn't 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;
  5. to promote a harmonious, single workplace culture across its stores nationally; and
  6. 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.

• [13] With respect to ascertaining the views of the Transferring Employees, Kmart says that the Transferring Employees also received with their offer of employment, a document comparing the key terms of the Kmart Agreement and the Target Agreement (Comparison Document). A copy of this document was filed with the Commission along with the Form F40.

• [14] The 12 permanent Transferring Employees who have been offered employment were provided with information about the s.318 application made by Kmart. As part of the application, Kmart submitted that no Transferring Employees have objected to the application or the s.318 orders sought. Kmart also attached a letter from the Shop, Distributive and Allied Employees Association (SDA) dated 24 October 2025, in which the SDA expresses its support for the application.

• [15] 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 18 November 2025. The parties also had until 20 November 2025 to advise the Commission if they wanted to be heard in relation to the application.

• [16] No material was filed by the Transferring Employees or any employee organisations in accordance with the Directions.

• [17] 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

• [18] 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.

• [19] 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%.

• [20] 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:
  1. plus10 cents in July 2025;
  2. plus 15 cents per hour in July 2026;
  3. plus 20 cents per hour in July 2027;
  4. 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.

• [21] I have considered the Comparison Document filed with the Commission, and both the Target Agreement and Kmart Agreement.

• [22] 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

• [23] 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

• [24] 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:
  1. there would likely be increased tensions amongst the workforce due to the application of different terms and conditions;
  2. 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
  3. 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.

• [25] Kmart also says that there would be significant economic disadvantage because of additional expenses incurred in:
  1. 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;
  2. additional training for Kmart managers and staff; and
  3. the negotiation by Kmart of replacement enterprise agreements once the agreements have passed their nominal expiry dates.

• [26] 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

• [27] 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.

• [28] 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

• [29] 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.

• [30] I find the degree of business synergy to be a neutral factor in determining whether the Orders should be made.

• [31] 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.

• [32] Kmart says it is in the public interest because it promotes ongoing employment opportunities for the Target Charlestown 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).

• [33] 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.

• [34] Having considered the matters above, the factors pursuant to s.318(3) of the Act either weigh towards the granting of the Orders or are neutral. I am satisfied that, in light of the factors considered above, that the Orders sought should be granted. An Order[1] to this effect will be issued with this Decision.

[1] PR794668.

Printed by authority of the Commonwealth Government Printer