1 November 2009

Retirement age - now what?

"Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples." - George Burns

An employment contract comes to an automatic end when the employee reaches the normal or agreed retirement age. Since a termination of employment at the exact normal or agreed retirement age is not a dismissal, there is no requirement of either procedural or substantive fairness before the termination can take effect. In practice, an employer will probably remind an employee that the retirement date is coming up, however, that does not amount to a dismissal notice, and should not be stated as such.

Employees at retirement age are not always ready to go, and the employer may not be ready to let them go. The question then arises - how do you deal with employment past the retirement age? Is the employer prohibited from relying on the employee's age, to justify a subsequent termination of employment?

Section 187 of the LRA prohibits an employer from dismissing an employee for certain listed grounds, including age. Should an employer dismiss an employee for one of these listed reasons, such dismissal would be automatically unfair.

If the employer has allowed an employee to work past his retirement age and wishes to terminate the employee's services unilaterally, (i.e. does not have agreement from the employee to so terminate his services) then such termination would constitute a dismissal. On the face of it, the dismissal would be for a reason based on age and therefore prohibited by Section 187(1)(f).

However, the LRA in Section 187(2)(b) provides that: "Despite sub-section (1)(f) -.. (b) a dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity."

Dismissals normally require an employer to act for a fair reason, and follow a fair process. Does this apply to dismissals of employees past retirement age, or can the employer simply give notice of termination at any time after an employee has reached and passed an agreed or normal retirement age?

The Court and LAC have held that a subsequent termination of employment will be for a valid reason. This was held to be the case even if other reasons for the termination were also found to exist. Once an employee has passed an agreed, normal retirement age, the employer can elect to terminate his employment at will for a reason relating to his age.

Whether or not a fair process must be followed is not as clear. There are contrary judgments of the Court on the issue. In the matter of Botha v Du Toit, Vrey and Partners CC (2005) 26 ILJ 2362 (LC) the Court held that (1) the employee's employment was terminated for a reason based on age, (2) Section 187(2) protected the employer because the employee had reached the normal or agreed retirement age, and (3) the employee was therefore dismissed for a fair reason. However, it held that it is not enough to have established a fair reason for dismissal - a fair procedure is also required.

Such process may include "...some form of consultation is required, and so demands the decrees of fairness."

The Court later criticised this approach in RockLiffe v Mincom (Pty) Ltd (2008) 29 ILJ 399. The Court found that, once the conditions of Section 187(2) have been met, it is impossible for an employee to succeed with a claim for a procedural unfairness in his dismissal.

Considering the structure of Section 187, the decision in Botha should not be discounted too readily. Even if the reason for the dismissal is fair (because it falls within the exception created by Section 189(2)(b)), there is still room to argue that the dismissal must be procedurally fair.

Retha Beerman,
Director, Employment law

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