SOUTH AFRICA: WORKING BEYOND RETIREMENT AGE – THE LAC CONFIRMS THE LEGAL POSITION
While there is no employment retirement age prescribed by law in South Africa, many employers have set retirement ages for their employees. An employee’s retirement age may be agreed in the employee’s employment contract or contained in a policy document or retirement fund rules. However, whether it be for financial reasons, the desire to remain productive, or the ease with which employees can now work remotely, it has become increasingly common for employees to work beyond retirement age.
Terminating such employees’ employment after they have reached retirement age has historically been tricky territory for employers to navigate and has led to a number of legal challenges over the years. These challenges have arisen in the context of section 187(1)(f) read with section 187(2)(b) of the Labour Relations Act, 1996 (LRA). In terms of these sections, a dismissal based on age will be automatically unfair (and constitute unfair discrimination), unless it can be shown that the employee has reached the normal or agreed retirement age for persons employed in that capacity.
After some diverging case law emanating from the Labour Court (see our previous newsflash where we discuss the different approaches here), this week, the Labour Appeal Court (LAC) confirmed the legal position in the matter of MISA obo Landman v Great South Autobody CC t/a Great South Panel Beaters.
The employee in this case commenced employment with Great South Panel Beaters (GSPB) during November 2007. The parties entered into a written employment contract that provided that the employee’s retirement age was 60. He turned 60 on 15 March 2018 but continued working. Neither party raised the issue of the employee’s retirement until GSPB wrote to the employee on 14 January 2019 informing him that his services would terminate with effect from 12 February 2019, as he had reached the agreed retirement age of 60.The employee, with the assistance of the Motor Industry Staff Association, referred an automatically unfair dismissal dispute to the Labour Court. The Labour Court held that a dismissal based on age is not automatically unfair in circumstances where the employee ‘has reached’ the normal or agreed retirement age. As the employee in this case had reached the agreed retirement age of 60, his dismissal was accordingly fair.
The employee’s argument
The employee appealed to the LAC, arguing that where an employee continues working after reaching the agreed retirement age and neither party relies on the fact that he has reached his retirement age, a new (second) employment contract comes into existence. It is then impermissible for the employer to rely on the retirement age as per the first employment contract, as the relationship is now governed by the terms of the new employment contract. Consequently, any dismissal based on age will be automatically unfair, unless the employer can prove that the parties agreed on a new retirement age or there is a normal retirement age that applies to the employee. The employee contended that allowing an employer to rely indefinitely on an agreed retirement age months or years after the employee has reached that age effectively puts the employee at the mercy of the employer and is open to abuse.
The LAC’s findings
The LAC disagreed with this argument and agreed with the Labour Court. It held that section 187(2)(b) of the LRA is clear and unambiguous: a dismissal will be fair where the employee ‘has reached’ the agreed or normal retirement age, that is, where the employee has passed her/his agreed or normal retirement age. Properly construed, the section affords an employer the right to dismiss an employee fairly based on age, at any time after the employee has reached her/his agreed or normal retirement age.
The court disagreed that this interpretation would leave employees vulnerable. The court confirmed that it would be impermissible for an employer to rely on section 187(2)(b) in circumstances where the employee’s age is not the real reason for the dismissal. Where, for example, the real reason for the dismissal is based on the employer’s operational requirements, then it would be open to the court to order the employer to pay severance pay.
This decision is in line with the balance of authority emanating from the Labour Court in recent years, including the decision of Solidarity obo Strydom and Others v SITA, decided in May this year, where the Labour Court held that SITA could avail itself to the protection in section 187(2)(b) from the date that the employees reached their normal retirement age and at any time thereafter.
Accordingly, where an employee continues to work for an employer uninterrupted after reaching retirement age, the legal position is now clear: the employment relationship and employment contract continue, and the agreed or normal retirement age remains unchanged. The employer will then be free to dismiss the employee based on age at any stage thereafter by relying on section 187(2)(b) of the LRA.
This will be the case unless it can be proven that a new retirement age has been agreed between the parties, or it is clear from the employer’s unequivocal conduct that it has waived its right to dismiss the employee after she/he has reached retirement age. According to the LAC, this interpretation is consistent with the purpose of the section, which is to allow the employer to create work opportunities for younger members of society, which is particularly important in the context of South Africa with its unprecedented unemployment levels.
The trend of working beyond retirement age is likely to continue, but employees who do so should be mindful that they will, in effect, be working on ‘borrowed time’.