Employers are often faced with employees who have aged and struggle to maintain the standard of work that they once performed. Though this is no fault of the employee, as ageing is a natural occurrence in the lives of each and every person, it may still have a negative impact on the productivity of an employer’s operations. It is due to this reason that South African Labour Law makes provision for an employee’s contract of employment to be terminated due to retirement.
That being said, most employers are still unclear as to when an employee’s employment may be terminated due to retirement. When one considers the law, it becomes clear that there is no stipulated retirement age in South Africa. A common misconception, however, still exists that employees have to retire anywhere between the ages of 55 to 65. As already mentioned, there is no stipulated retirement age in South Africa. It is thus advisable that clarity on an employee’s retirement age is contained in an employee’s contract of employment, or alternatively, in terms of a policy created by the employer. If either one of these provisions are met, an employee may be requested to retire when that specific employee reaches the retirement age as stipulated.
In terms of section 187(1)(f), no employer may unfairly discriminate against an employee, directly or indirectly, on any arbitrary ground, including, but not limited to race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility. As age is thus a “listed ground” of prohibited discrimination, employers should be careful not to treat employees differently based purely on their age. If an employee’s age is the reason for his/her dismissal, it could thus potentially amount to an automatically unfair dismissal.
Automatically unfair dismissals differ from normal dismissals and are usually adjudicated by the Labour Court, should the matter not be settled at conciliation.
In order to avoid an adverse ruling by the Labour Court, an employer will have to consider whether it has a defence to an employee’s claim in terms of section 187 (2)(b) of the LRA. This section reads as follows: “A dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity.”
The court stated in Rubin Sportswear v SA Clothing & Textile Workers Union & Others (2004) 25 ILJ 1671 (LAC) that the retirement age of a company is determined firstly where there is an agreed retirement age between the employer and employee or, failing such, where the employee reaches the ‘normal’ retirement age applicable to employees of that employer. The latter normal retirement age is generally established through a recognised practice of employees of that employer retiring at that age over a long period of time.
In Hilary Truter v Carecross (Pty) Ltd C956/2013 (2015, unreportable judgement) there was no reference to retirement age in the employee’s employment contract, and the resolution of the board declaring the retirement age to be 65 was never formally discussed or communicated to the employee. The court, therefore, ruled that there could be no agreed retirement age. Secondly, no other employee had in the past retired at the age of 65 and further, the only other employee who had retired, retired at 70 years old. The employer could, therefore, also not establish that there was a normal retirement age. The court thus held that the dismissal was automatically unfair and ordered the reinstatement of the employee with costs.
An agreed retirement age can thus be found in a contract of employment or a collective agreement and is usually agreed to by an employer and employees.
In Cash Paymaster Services (Pty) Ltd v Browne (2006) 27 ILJ 281 (LAC), the LAC held that “(t)he provision relating to the normal retirement age only applies to the case where there is no agreed retirement age between the employer and the employee.” A normal retirement age must further be established by fact and can be done by ascertaining an employee’s retirement age in terms of his/her contract of employment or any policy linked to such a contract of employment. One may also consider the Rules of an employee’s pension fund and/or the retirement age stipulated in an employee’s pension fund, this may however not be decisive on its own.
In light of the above, it is advised that employers ensure that a clause stipulating an employee’s retirement age is contained in an employee’s contract of employment, or alternatively, in a policy drafted by management and discussed and/or brought to the attention of the employees. Establishing a “normal retirement age” could further be extremely difficult, especially in cases where an Applicant employee was the first employee of a company to be retired in the absence of an agreed retirement age. Employers are further cautioned that the Labour Court may reinstate an employee, with or without costs, and may further make a ruling for the employee to be compensated by up to 24 months’ remuneration.
Article by: Gerhard Strydom
Dispute Resolution Official – Kimberley