By Leicester Adams
As an employer, one is often faced with a situation in which an employee has reached retirement age, but is still willing and able to continue working in a competent and efficient manner.
Where there is no indication of incapacity, poor performance or misconduct, an employer is often tempted to allow a 60-year-old person to continue working after retirement age has been reached. On the other hand, an employer sometimes has a person in his or her employ who cannot keep going until retirement age. In both these instances, the question arises as to whether the employer is entitled to force his or her employee to retire – whether it is at the age of 60 or 65 – or any age in between.
The short answer to this question is that, in terms of s 187(2)(b) of the Labour Relations Act 66 of 1995 (LRA), a ‘dismissal based on age is fair if the employee has reached the normal or agreed retirement age for people employed in the same capacity’. In other words, an employer is entitled to insist that an employee retires when he or she reaches the retirement age, as agreed between the employee and the employer, or when he or she reaches the age at which other employees of this employer normally retire.
Ideally, the retirement age should be written into the contract of employment. The employment contract should specifically provide that the employee will retire at the age of 60 or 65, or any other age for that matter. This clear provision in the employment contract requires the employee to retire at the age provided for, and entitles the employer to, for example, ‘dismiss’ an employee on turning 60. The legal difficulty relating to compulsory retirement is taken care of simply by writing the retirement age into the employment contract as the agreed option.
In the absence of an express agreement between the employer and the employee relating to the retirement age, the employer is nevertheless entitled to insist that the employee retires at the company’s normal retirement age. Whether a company has a normal retirement age for its employees will obviously depend on the facts. For example, a policy that employees are required to retire at age 65, which is applied consistently over a number of years, would be sufficient evidence of the normal retirement age. If the company has a long, established practice of employees retiring on the retirement date stipulated in the provident fund rules, then that date would normally be accepted as the normal retirement age. This was the case and the finding in the matter of Ivor Michael Karan t/a Karan Beef Feedlot and Another v Randall [2010] JOL 24897 (LC). Needless to say, the onus is on the employer to prove the facts that determine the normal retirement age of the company.
In the absence of sufficient evidence that 60 is the normal retirement age, an employer’s insistence that the employee retires at that age, would amount to a dismissal that is automatically unfair in terms of s 187(1)(f) of the LRA.
A further question then arises: In the absence of an agreed or normal retirement age, can an employee insist on continuing to work for as long as he or she is able to do so? Put differently, would an employer be entitled to ask a competent employee to retire in the absence of any of the other lawful grounds for dismissing an employee, such as incapacity, poor performance, misconduct or operational requirements?
This is unlikely to take place. More often than not, human resources departments of companies ensure that contracts of employment include the retirement age. Alternatively, one often finds that, over time, established companies have developed policies that indicate when employees must retire. It would accordingly be relatively easy for the employer to prove its ‘normal retirement age’ in these circumstances.
However, in the absence of a policy that indicates that employees are required to retire at a particular age, a 70-year-old person cannot be dismissed on the basis of his or her age. This would amount to an automatically unfair dismissal based on age. Therefore, an employee could in theory carry on working indefinitely if there is no agreed or normal retirement age.
But a scenario could also arise where an employee continues to be employed by an employer after he or she has reached the normal or agreed retirement age. This scenario presented itself in the Randall case, which incidentally was overruled on the facts of the matter by the Labour Appeal Court (LAC) (see 2013 (March) DR 47).
In this matter, the employee continued working past the normal retirement age of 60. When he was almost 63 years old, the company notified him of his retirement. In proceedings before the Labour Court, the employee alleged that he had been discriminated against based on his age and that his dismissal was automatically unfair in terms of the provisions of the LRA.
The courts considered the two conflicting schools of thought concerning the position of an employee who has reached a normal or agreed retirement age, but is allowed to stay on.
In the LAC matter, Karan t/a Karan Beef Feedlot v Randall [2012] 11 BLLR 1093 (LAC), the court had the following to say at paras 19 and 20: ‘There are two plausible arguments concerning the application of section 187(1)(f) and 187(2)(b) in this matter. The first is that where there is a normal or agreed retirement age and the employee has reached that age, the employer shall enjoy the protection prescribed in section 187(2)(b) from that date and at any time thereafter. He or she would be entitled to terminate the employment of the employee on the grounds of age. The second scenario is that, when there is an agreement reached between the employer and employee before the latter has reached the normal or agreed retirement age, to determine a new retirement age, the employer would enjoy the protection of section 187(2)(b), should he/she terminate the employment of the employee, once the new agreed retirement date is reached.’
In the end the LAC did not deem it necessary to decide on the merits of the first argument. However, the court a quo, adopted the second approach. It found that, since there was no evidence that the employee had been retained beyond 60 for a specific period or until he had completed a specific task, the company had unilaterally imposed the retirement day. The Labour Court found that the employee had been dismissed solely on the grounds of his age and that this constituted an automatically unfair dismissal.
On appeal, the court found that a valid agreement had been concluded between the employer and the employee stating that the new retirement age would be as and when stated by the employer. The principle to be extracted from this case in both the court a quo and the court of appeal is that once an employee is allowed to continue working past the retirement age, whether agreed or normal, and no agreement is reached between the employer and the employee relative to a new retirement date and/or age, the employer would not then be able to dismiss the employee subsequently on the basis of his or her age. That would be an automatically unfair dismissal.
Accordingly, it is prudent for an employer to retire an employee when he or she reaches retirement age. In the event that an employee is required to continue working beyond retirement age, there should be a specific agreement on what the new retirement age would be.
Leicester Adams BProc (Wits) is an attorney at Lindsay Keller in Johannesburg.
This article was first published in De Rebus in 2013 (Sept) DR 38.
