Employment law update – Retirement age

March 1st, 2013

By Talita Laubscher and Monique Jefferson

In Karan t/a Karan Beef Feedlot v Randall [2012] 11 BLLR 1093 (LAC) the Labour Appeal Court (LAC) considered whether Karan Beef Feedlot was entitled to require Randall, its group financial director, to retire on 28 February 2006 on a month’s notice. At the time, Randall was just under 63 years of age.

Randall alleged that he was dismissed and that his dismissal was automatically unfair. He referred the matter to the Commission for Conciliation, Mediation and Arbitration, which was opposed by Karan Beef Feedlot on the grounds that its normal retirement age was 60 and it was accordingly within its rights to require Randall, who had worked past the normal retirement age of 60, to retire.

Randall was employed as a financial controller on 1 June 1997. His employment contract did not specify a retirement age. He was, however, a member of the company’s provident fund, which stipulated 60 as the normal retirement age. On 8 August 2003 the company sent Randall a letter confirming that he would reach his retirement age of 60 on 25 March 2004. The letter stated, however, that the company wanted him to continue to work and that ‘the normal notice period would apply’ in the event that it wanted him to retire.

Subsequent events led Randall to believe that he was employed indefinitely: On 25 March 2005 Karan, the owner of the business, phoned Randall to wish him a happy 61st birthday. Karan told Randall that it was a pleasure to have him as his ‘top financial man’ and that he valued his services. On 17 November 2005 Randall was reappointed as a director and on 23 November he received a letter outlining his salary increase, which would be effective from 1 January 2006.

On 18 January 2006 the chief executive officer (CEO) and the group human resources manager met with Randall. The group human resources manager referred to the letter given to Randall prior to him reaching the age of 60 and stated that, in terms thereof, he was furnishing Randall with one month’s notice and that he was to retire as from 28 February 2006. Randall was ‘shocked’ and asked to be given the opportunity to stay on until the end of the financial year, but this was turned down. Randall was subsequently asked to leave on 1 February 2006 and was paid in lieu of notice.

The evidence for the company at the Labour Court was that the provident fund rules fixed the age of 60 as the normal retirement age. As regards the process that would be followed when an employee reached that age, the system would flag an employee who was to retire in the next six months. The group human resources manager would then approach the employee’s department manager to receive feedback as to whether or not the employee was to retire. The majority of employees retired at age 60, but approximately 16 employees had remained in employment beyond this age.

About six months prior to Randall’s 60th birthday, the group human resources manager spoke to the CEO about his retirement and the CEO instructed him to furnish Randall with a letter informing him that he was required to work past his retirement age. At the time, Randall was involved with the rollout of a specific accounting system. However, on 17 January 2006 the CEO informed the group human resources manager that the bulk of the system had been completed and that Randall was to retire.

The Labour Court, per Francis J, held that since it was common cause that the reason for Randall’s dismissal was his age, the company bore the onus to prove that it had a retirement age and what this was. If the company succeeded in proving the retirement age, the court would need to consider whether the company was entitled to unilaterally decide when Randall had to retire since Randall had worked past the retirement age.

As regards the first question, the court held that it had been established that there was a normal retirement age in place at the company and this age was 60. This was supported by the fact that Randall did not dispute the letter in which he was requested to work beyond his retirement age of 60. Further, Randall was a senior employee and a trustee of the provident fund. Therefore, he was not only aware of the fact that 60 was the normal retirement age, but he was also aware of the issues pertaining to retirement age and how these affected employees. Finally, the letter from Randall’s attorneys stated that Randall ‘did reach retirement age’ on 25 March 2004 (ie, at the age of 60). Therefore, despite Randall’s denial, he knew that the company had a normal retirement age and that this was 60.

As regards the company’s contention that it was entitled to require Randall to retire at any stage after his 60th birthday simply by giving him contractual notice, the court held, inter alia, as follows –

  • the letter of 8 August 2003 did not contain a new retirement age;
  • it gave the company the right to require Randall to retire by giving him contractual notice (ie, 30 days);
  • there was no indication that Randall was required to work for only a limited duration after his 60th birthday as pleaded by the company;
  • he was not informed that the reason for his retention beyond 60 was to oversee a specific task or project; and
  • his employment was therefore now for an indefinite period.

In the circumstances, the Labour Court held that: ‘[I]t cannot and is not our law that an employer can unilaterally decide when to retire an employee who it has required to work beyond his retirement age … .’

The court went further and held that: ‘Where the respondent on its own decided to keep [the employee] in employment beyond that period [ie, agreed or normal retirement age] there would have to be a fair reason to terminate his services.’

The company was accordingly entitled to rely on Randall’s age only if the parties had reached a new agreed retirement age. The court held that no evidence was led concerning what the new agreed retirement age was after Randall turned 60. Hence, the Labour Court held that the company could not unilaterally impose a retirement age as it did in this case. The company’s reliance on s 187(2)(b) of the Labour Relations Act 66 of 1995 was accordingly misplaced and Randall’s dismissal was found to be automatically unfair. He was awarded 20 months’ remuneration in compensation.

The company appealed to the LAC and argued, inter alia, that the mere fact that Randall’s employment was extended beyond the normal retirement age did not mean that the company somehow lost the protection of s 187(2)(b) or that a new or agreed retirement age had to be brought about.

The LAC, per Tlaletsi JA (with Davis JA and Murphy AJA concurring), held that it was common cause that Randall’s dismissal was due to his age and that the Labour Court had correctly found that there was an agreed retirement age and that this was the age of 60.

As regards the application of s 187(2)(b), in this matter there were two plausible arguments: The first was that where there is a normal or agreed retirement age and the employee has reached that age, the employer enjoys protection from that date. The employer can therefore at any stage require the employee to retire.

The second was that when there is agreement reached between the employer and the employee before the employee has reached the normal or agreed retirement age, to determine a new retirement age, the employer will only enjoy protection under s 187(2)(b) once the new agreed retirement age is reached.

On the facts of this matter, the LAC did not have to determine the merits of the first argument. It was common cause that the company informed Randall that he would be required to work beyond his retirement date and it was left to the company to determine on notice when Randall would in fact retire.

The LAC held that the finding of the Labour Court that the company was not entitled to unilaterally determine Randall’s subsequent retirement date was not correct. This was because Randall had tacitly agreed to work beyond the normal retirement age and left it to the company to determine his retirement age on notice.

The LAC stated that there was nothing unlawful or unfair about this agreement by the parties under these circumstances.

It was at all times open to Randall to reject the company’s condition to be able to retire him on one month’s notice and to make a counter-proposal. This he never did.

The appeal accordingly succeeded and each party was ordered to pay its own costs.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an associate at Bowman Gilfillan in Johannesburg.

This article was first published in De Rebus in 2013 (March) DR 47.