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

[1] Target Australia Pty Ltd (Target) operates a store located at Todd Street in Alice Springs (the Alice Springs Store). Employees of Target, including employees at the Alice Springs Store, have their terms and conditions regulated by the Target Australia Retail Agreement 2022 (the Target Agreement).

[2] Both Target and Kmart Australia Limited (Kmart) are part of the Wesfarmers Limited corporate group. Target and Kmart are therefore associated entities within the meaning of clause 12 of the Act.

[3] Target has decided to permanently close the Alice Springs Store. Several employees are being transferred to a Kmart Transfer Store: Kmart has offered employment to both of the 2 permanent Target employees of the Alice Springs Store, and it also expects to offer employment to some of the casual staff.

[4] Kmart has sought orders for the Target Agreement to cease application to employees at the Alice Springs Store who accept employment with Kmart. Kmart employees' terms and conditions are regulated by the Kmart National Agreement 2024 (Kmart Agreement). Kmart wishes the terms and conditions of employees who accept employment with it at the Kmart Transfer Store to be regulated by the Kmart Agreement.

[5] On 12 June 2025, Kmart Australia Limited (Kmart Australia), made an application for the following orders.

1. By s 318(1)(a), the Target Australia Retail Agreement 2022 (or any successor agreement) does not and will not cover
   1. all Target Australia Pty Ltd (Target) employees:
      1. covered by the Target Australia Retail Agreement 2022; and
      2. employed in the Target Alice Springs store which will close in early 2026 (Closure Store) and
      3. who have accepted offers of employment with Kmart Australia Limited to work at a Kmart store (Kmart Transfer Store), and
   2. All permanent employees (casual, part-time and full-time) employed by Target into a Kmart Transfer Store who accept or have accepted offers of employment with Kmart before 12 February 2026 up to the operative date of these Orders.

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

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

1. By s 318(4), the order is to come into operation on and from X XXXX 2026.

[6] For the reasons I give below; after considering the matters I must take into account under s 318(3), I exercise my discretion under s 318(1) to make the orders sought.

[7] The material filed by Kmart is comprehensive. It includes a detailed application, written submissions and a witness statement of Ms. Tara Dul, the People and Capability Business Partner South Australia for Kmart.

[8] The Shop Distributive & Allied Employees' Association (SDA), in a letter dated 6 February 2026 to Ms. Dul which was included in the application, broadly supports the Commission exercising its discretion to make the orders sought.

[9] On 18 February 2026, I issued directions which included:

• Kmart to provide copies of the directions to employees affected by the application by 20 February 2026.
• Kmart to provide copies of submissions of fact and law it filed in this application to all affected employees and to the SDA by 27 February 2026.
• SDA to file with the Commission and to serve on Kmart any material it filed to reply to the Kmart submissions by 6 March 2026.
• Any affected employee who opposes the application to notify Chambers by 6 March 2026.
• In the absence of any parties opposing the application, the application is to be decided on the papers.

[10] The Commission received no correspondence opposing the orders sought. On that basis, I will decide this matter on the papers.

• [11] The discretion to make the orders sought by Kmart under s 318(1) will only be exercised after the factors set out in s 318(3) are considered.[1] These factors, which must be read having regard to the objects of Part 2.8, are intended to enable the Commission to balance appropriately the protection of employees' entitlements under certain instruments with the need for some flexibility to depart from the default rules about coverage of instruments following a transfer of business.[2]

The object of this Part is to provide a balance between:

(a) the protection of employees' terms and conditions of employment under enterprise agreements, certain modern awards, and certain other instruments; and

(b) the interests of employers in running their enterprises efficiently.

if there is a transfer of business from one employer to another employer.

[13] Section 318 sets out the circumstances where the proposed orders can be made: that the Target Agreement will not cover the Transferring Employees; and the Kmart Agreement will cover those employees in respect of their work at Kmart.

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;

[14] Kmart, as the new employer, has standing to bring this application pursuant to s 318(2)(a) of the Act.

HAS THERE BEEN A TRANSFER OF BUSINESS FROM TARGET TO KMART AND IS THE TARGET AGREEMENT A TRANSFERRABLE INSTRUMENT?

[15] It is clear there was a 'transfer of business' from Target to Kmart within the meaning of s 311 of the Act and the Target Agreement is a transferable instrument under s 312. It follows that the transferable instrument covers Kmart under s 313.

[16] Given Kmart can make this application and the relevant agreement is a "transferrable instrument" under s 318(1), the next step is to consider each of the matters which I must take into account under s 318(3).

CONSIDERATION OF THE MATTERS THAT MUST BE TAKEN INTO ACCOUNT UNDER S 318(3)

[17] Kmart submits the Target Agreement should not apply to the Transferring Employees. It favours the Kmart Agreement to cover them. The reasons for this view include that Kmart wishes to:

• avoid a situation where the Kmart Agreement and the Target Agreement both apply at the Transfer Store;
• ensure terms and conditions of employment are consistent at Kmart stores nationally;
• avoid employee dissatisfaction arising from inconsistent terms and conditions of employment, and a negative impact on employee morale between the Target team members and existing and future team members of Kmart who are covered by the Kmart Agreement;
• encourage a harmonious, single workplace culture in a Kmart Transfer Store and Kmart's broader national stores network; and
• avoid costs associated with implementing and managing two separate agreements in Kmart's stores.

[18] Ms. Dul, in her witness statement, articulates a series of problems which would arise should the Kmart Agreement and the Target Agreement both apply at the Alice Springs Store. They include:

• The terms of the Target Agreement and the Kmart Agreement have different span of hours, overtime penalties, weekend penalties and minimum part time hours. This would pose challenges for the Store Managers and Line Managers at Mildura who are responsible for rostering. This would not be viable operationally.
• Operating two enterprise agreements in one store would require upskilling and additional training to ensure Store and Line Managers understand the differences between the agreements and to ensure that Managers avoid breaching either agreement.

[19] Ms. Dul also states that "material payroll and other administrative issues" would result from the Target Agreement applying at one of Kmart's stores. These issues include:

• Target and Kmart payroll systems are processed by two different teams with two different "operating rhythms."
• The Target payroll system runs from Sunday to Saturday whilst the Kmart payroll system runs from Monday to Sunday, with payment being made on different days. a
• Additional costs would be incurred, and additional resourcing would be required to try to manage these systems in an integrated way.

Views of the employees who would be affected by the order - s 318(3)(a)(ii)

[20] The submissions and evidence provided by Kmart in support of this factor include:

Consultation and engagement with Alice Springs Store staff

• Consultation with team members on the conversion of Target Alice Springs to a Kmart store commenced in or around 23 May 2025. The consultation process initially involved team talks and one on one discussions with individual team members.
• Following the team talks, team members were provided with a consultation notice in relation to the store closure.
• "Ongoing conversations" were undertaken with team members regarding the store closure and transfer to a Kmart store where team members were given the opportunity to indicate their preferred store for transfer.
• On or around 13 January 2026, further team talks and individual one on one conversations were held where the application was discussed and team members were provided with a copy of a high-level summary comparing the Target Agreement to the Kmart Agreement, and both enterprise agreements. Employees were also sent an email following this discussion, with the high level summary.

[21] In or around February 2026, Kmart offered contracts of employment to all relevant team members at Target Alice Springs on the basis that Kmart would:

• Recognise employees' prior service with Target; and
• Apply to the FWC for the section 318 orders with the effect that, if granted, the Kmart Agreement would apply to their employment with Kmart.

[22] Ms. Dul in her statement confirmed that "nine (9) team members, inclusive of casuals have accepted offers of employment with Kmart".

[23] Since 9 September 2024, Ms. Dul has engaged in communication with Trevor Libbis - a Regional Senior Organiser of the SDA, who represents employees covered by the Target Agreement and the Kmart Agreement. That communication included discussions regarding the store conversion, the transfer process and intention to apply for the section 318 orders.

[24] On 22 May 2025, Carolyn Robertson, People & Capability Manager WANTSA communicated with Josh Peakof of the SDA on the store closure.

[25] By a letter dated 6 February 2025, Mr. Darcy Collett, a lawyer for the SDA, informed Ms. Dul that the SDA:

2. agrees with the proposition that the Target Alice Springs employees will not be

1. is comfortable with team members currently covered by the Target Australia Retail Agreement 2022 being covered by the Kmart National Agreement 2024."

[26] It should also be noted that I invited the affected employees to indicate opposition to the orders sought by Kmart. No responses were received.

Whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment - s 318(3)(b)

[27] Ms. Dul states that a financial comparison was made by the Kmart Employee Relations team which compared the payment that permanent team members would receive under the Target Agreement to what they would receive under the Kmart Agreement.

[28] A comparison was made with the team members' current rates of pay compared to the rate they would receive under the Kmart Agreement. The comparison revealed all permanent team members were better off under the Kmart Agreement compared to the Target Agreement when working the same shifts, notwithstanding shift penalties are paid on the base rate of pay plus the penalty under the Target Agreement, but under the Kmart Agreement are paid on the Award rate of pay plus one cent.

[29] Ms. Dul also makes submissions about the relative benefits of the pay increases under the Kmart Agreement when compared to the Target Agreement. Kmart argues the pay increases under the Kmart Agreement are superior. The pay increases under the Target amount to the Award rate "plus five cents an hour" for team members. By contrast, the pay increases under the Kmart Agreement are equivalent to the "Award rate plus:

• 15 cents per hour in July 2026.
• 20 cents per hour in July 2027.
• 25 cents per hour in July 2028, with penalties also paid on the base rate of pay rather than the equivalent Award rate of pay (including penalties) plus one cent per hour."

The nominal expiry date of the enterprise agreements - s 318(3)(c)

[30] The nominal expiry date of the Target Agreement is 7 February 2027. The nominal expiry date of the Kmart Agreement is 17 November 2028.

Whether the enterprise agreement would have a negative impact on the productivity of the Kmart workplace - s 318(3)(d)

[32] The submissions Kmart make concerning this factor include:

• The continued application of the Target Agreement at the Kmart Transfer Store would negatively impact the productivity of Kmart's business and there "would likely be increased tensions amongst the workforce due to the application of different terms and conditions".
• There would be administrative burdens resulting from the introduction of another enterprise agreement in Kmart stores. This would cause Kmart to incur significant costs in respect of its payroll system. Additional resourcing would be required and the potential for error would be increased.

[33] Kmart contrasts these issues with the situation if only the Kmart Agreement applied. It would provide certainty for transferring team members and, for Kmart itself, regarding the applicable terms and conditions of employment at Kmart.

Whether Kmart would incur significant economic disadvantage as a result of the Target Agreement or Kmart Agreement covering it - s 318(3)(e)

[34] Kmart argues difficulties in implementing and administering two sets of conditions across a single workforce will cause Kmart to incur additional costs because:

• Training and resourcing costs would be involved in up-skilling staff so they can understand and implement the terms of the Target Agreement in addition to the Kmart Agreement;
• Costs would be incurred in "building" the Target Agreement into Kmart's rostering and payroll system; and
• A financial impact would arise from reduced team member satisfaction and a reduction in team morale at a store level. This would be caused by having team members working under different terms and conditions. This will impact productivity and profitability. It may also result in "low morale amongst team members, which could lead to deterioration of customer experience and consequential reduction in profit."

The degree of business synergy between the Target Agreement and The Kmart Agreement - s 318(3)(f)

[35] Kmart argues there is little business synergy between the Kmart Agreement and the Target Agreement. There are significant operational differences between the two instruments including inconsistencies in span of hours, overtime and weekend penalties and minimum part time hours. The application of two Agreements would hamper the efficient conduct of Kmart's operations.

[36] Kmart argue the public interest supports the orders being made because it supports ongoing employment for the Alice Springs workforce in the new Kmart store, in a manner that is "efficient" and which "does not result in employees being disadvantaged".

[37] On my examination of the material filed in relation to the relative advantages and disadvantages of the Kmart Agreement over the Target Agreement, the transferring employees are, at best, only marginally better off under the Kmart Agreement. However, this must be balanced against the benefit of the continuity of employment Kmart has agreed to provide, and the considerable benefit of ongoing employment in a regional centre.

[38] The marginal improvement in the conditions of transferring employees must be balanced against the gross inefficiencies and problems that would be experienced by Kmart in the application of two enterprise agreements at the Alice Springs Store. The complexity of applying two industrial instruments for payroll, rostering, and other systems are significant.

[39] On balance and taking into account all the factors under s 318(3) I am satisfied that I should exercise my powers under s 318(1).

• [40] For these reasons I will publish orders to the effect of the following together with this decision:[3]

• Under s 318 (1)(a), I will order the Target Agreement (or any successor agreement) does not, and will not, cover Kmart or the Transferring Employees.
• Under s 318(1)(b), I will order the Kmart Agreement (or any successor agreement) will cover the Transferring Employees.
• These orders will come into operation on and from 25 March 2026 under s 318(4)(b).

[1] Explanatory Memorandum of the Fair Work Bill 2008 (Cth) [1259].

[3] PR798003.

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