Old but not cold

2005/04/01

In terms of section 187(2) of the Labour Relation Act LRA) A dismissal based on aged is fair if the employee has reached the normal agreed age. In other words it would not, at face value, be unfair dismissal or unfair discrimination should the employer terminate the services of an employer based on the grounds that he/she has reached the normal agreed retirement age.

It is important to distinguish between normal, and agreed retirement age. According to Zondo JP in the Labour Appeal Court case of Rubin Sport wear v SACTWU & Others (2004) 10 BLLR 986 (LAC) the term normal in the context of section 187(2) typical usual or expected. Retirement age that is not an agreed retirement age becomes a normal retirement age when employees have been retiring at that age over a certain long period – so long that it can be said that the norm for employees in that work place or for employees in that particular category is to retire at a particular age. The period must be sufficiently long and the number of employees in the particular category who have retired at that age must be sufficiently large to justify saying that it is a norm for employees in that category to retire at that age”.

Whilst there is no law that determines when a person must retire, employers often link their retirement age policy to the company’s pension/provident fund. However it is not sufficient for the employer to merely link normal retirement age to the fund’s rules to be deemed the ‘normal’ retirement age. The common retirement age is either 60 or 65 years. It is prudent for any employer to spell out the retirement age policy.

In the employee’s employment contract as well as the policy and procedure manual.
Of the number of cases referred to the CCMA and LABOUR Court relating to unfair dismissal or unfair discrimination based on age. The common allegations made by the dismissed employee are either that the employer did not have an agreed written retirement age policy in place, or that the employee continued his/her employment well beyond the retirement age and only at a late stage did the employer decide that the employee must retire.

In the former instance it is likely that the employee’s dismissal would be unfair if the employer did not specify the retirement age in the employee’s employment contract or in the company’s policy and procedures manual – unless the employer can prove on the balance of probabilities that the employee had reached the ‘normal’ age.

To prove ‘normal’ retirement age is relatively onerous and can be quite technical. Therefore the employer must take proactive steps to avoid any uncertainly - all the employer rally has to do is spell out in writing the company’s policy on retirement age. There are no set statutory procedures to follow although I would advise employer to consult with the employee well in advance (two or three months) of the employee reaching the agreed or normal retirement age and to hand the employee the necessary notice of termination. Having said this, if a specific retirement date has been agreed to (for example, the last day of the month following the employee turning 65 years old no notice of termination has to be given.

On the other hand where retirement age is not agreed upon in writing but there is a normal retirement age, the employer would be obliged to give notice as per the employee’s contract of employment.

As far as remuneration is concerned the employer is under no obligation to pay anything more than the employee’s normal monthly remuneration plus all accumulated annual leave due to the employee, calculated up to and including the employee’s last working date. The employee is not entitled to any severance pay.

Employers should safeguard themselves against allowing Employee’s who have reached the agreed or normal retirement age from continuing to work that age, This is because it may result in the enforcement of the retirement age policy suddenly becoming highly questionable and other employees may start to argue their retirement be the same fashion.

However, this is not to say that by allowing an employee to work beyond the agreed or normal retirement age. Te employer is waiving his/her right to terminate the employee’s employment. Such a termination albeit after the employee having worked past the normal agreed retirement age, would be deemed fair in terms of the LRA.

In Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd[1998] 19 ILJ 1573 (LC) Zondo] remarked that "… section 187 of the LRA cannot be interpreted as applying to the termination of the contract of employment by the effluxion of time. This is because the provision applies to a ‘dismissal’ of an employee having reached retirement age and because the meaning of ‘dismissal’ in section 186 does not include a termination of a contract of employment on grounds of the effluxion of time only. Accordingly it is substantively fair to dismiss an employee who has reached or gone past the normal or agreed retirement age”.

In determining the applicability of section 187. Zondo J stated”… in my view the questions that need to be asked are:

a) Was the employee’s dismissal base age?

b) if the answer to (a) is in the affirmative the next question is: Did the employer have a normal or agreed retirement age of its employees? If yes what was it

c) If the answer to the first question in (b) is in the affirmative the next question is; Had the employee reached such retirement age at the time of his dismissal?

If the answers to all three questions are in the affirmative, then section 187 is applicable

In essence it means that a dismissal based on the employee having reached the agreed or normal retirement age, is not an automatically unfair dismissal or unfair discrimination.