3 October 2022 by , and Employment Law Alert

Age is nothing but a number: Can an employer fairly dismiss an employee who has reached the agreed retirement age?

In Motor Industries Staff Association and Another v Great South Autobody CC T/A Great South Panel Beaters (JA68/2021), the Labour Appeal Court (LAC) considered whether an employer can fairly dismiss an employee based on age, at any time after the employee has reached the agreed upon age of retirement.

The facts briefly are that the employee entered into an employment contract with the employer on 30 January 2008. It is common cause that the employment contract expressly stated that the employer’s retirement age was 60 years. On 15 March 2018, the employee turned 60 years old and continued to render his services to the employer as per the employment contract. On 14 January 2019 (and some nine months after the employee reached the agreed retirement age of 60), the employer informed the employee in writing that his employment contract would be terminated with effect from 12 February 2019 as the employee had reached the normal retirement age. The employee was subsequently dismissed and referred a dispute to the Labour Court contending that his dismissal constituted unfair discrimination in terms of section 187(1)(f) of the Labour Relations Act 66 of 1995, as amended (LRA).

The Labour Court

The Labour Court considered section 187(2)(b) and the relevant jurisprudence. In essence, this section reads that the dismissal of an employee based on age is not automatically unfair in circumstances where the employee has reached the agreed or normal retirement age. The Labour Court found that since the employee had already reached the retirement age of 60 (as per his employment contract) at the time of his dismissal, section 187(2)(b) applied and therefore the employee’s dismissal was fair. Consequently, the Labour Court dismissed the employee’s claim and further held that the argument that the parties “tacitly” entered into a new employment contract when the employee continued to render his services beyond the age of retirement would “have no traction”.

The Labour Appeal Court

Dissatisfied with the findings of the Labour Court, the employee was successful in his application to apply for leave to the LAC. The LAC commenced by analysing the cause of action and the defence advanced by the employer. The employee argued that in terms of section 187(1)(f) his dismissal was automatically unfair because the reason for his dismissal was based on an arbitrary ground, in this case, his age. Secondly, the employee alleged that his dismissal was based purely on age and by dismissing him, the employer had unfairly discriminated against him. The employee persisted with the argument that the employer had waived his right to rely on the retirement age in the employment contract by allowing him to continue working after 60 and, alternatively, that a new (second) contract of employment had come into existence between the parties.

The employer invoked the defence contained in section 187(2)(b) of the LRA and denied, firstly, that the parties had waived the effect of the retirement provisions in the employment contract and secondly, that the parties had tacitly entered into a second employment contract when the employee continued to render his services beyond the agreed retirement age of 60.

The LAC considered the provisions of section 187(2)(b) of the LRA and found that where regard is given to its ordinary meaning, as the dismissed employee had already reached the agreed or normal retirement age, it follows that the dismissal is deemed to be fair. More importantly, the LAC found that section 187(2)(b) does not prescribe a timeframe within which the dismissal should take place and therefore, this section affords the right to an employer to dismiss an employee on the basis of age at any time after the employee has reached the retirement age. The LAC further found that this right also affords employees the opportunity to terminate their services at any time after reaching the agreed retirement age. The LAC accordingly dismissed the employee’s appeal.

Conclusion

This judgment provides some certainty on an otherwise grey area regarding employees who have reached their agreed-to retirement age but continue to work beyond that date. In essence, the LAC has held that section 187(2)(b) enables employers to fairly terminate the services of an employee at any stage after the retirement age has been reached. The LAC had little sympathy for the employee’s argument that he stood to lose his retirement benefits because he was dismissed before 65, which was the retirement age provided for in terms of the applicable provident fund and found that the employee understood his retirement age to be 60 and therefore he was reasonably expected to have taken steps to prepare for his retirement. Interestingly, the LAC held that section 187(2)(b) provided a framework for employers to provide employment opportunities to younger employees, especially in a country that is plagued by record levels of unemployment, particularly amongst the youth. It remains to be seen whether the employee will seek to appeal the LAC’s decision to the Constitutional Court.

download PDF

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2022 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com

You may also be interested in