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When must employees retire?

By Jan du Toit

 

Very often during one of labour law training sessions a delegate will enquire about the exact age when an employee must retire. The truth is that the Basic Conditions of Employment Act does not prescribe an age at which employees must retire.

 

The question is how do we determine when an employee should retire? Is it at 55, 60 or 65? Since labour legislation is silent on this issue it will be up to the employer to prescribe the retirement age for its employees.

 

Having said this one must also take section 6 of the Employment Equity Act into consideration. In terms of this Act the dismissal of an employee based on his or her age may be seen as discrimination if the employer cannot prove that there was an inherent requirement in terms of age for the particular function that the employee fulfilled. This will normally be extremely difficult to prove.

 

In terms of section 187 (1)(f) of the Labour Relations Act the dismissal of an employee based on his or her age will be automatically unfair. Such a dispute will be dealt with by the Labour Court and up to 24 months of the employee’s remuneration may be awarded as compensation.

 

The question now is whether it is possible to “retire” an employee without ending up in the Labour Court? The answer to this question can be found in section 187 (2) (b):

“a dismissal based on age is fair if the employee reached the normal or agreed retirement for persons employed in that capacity.”

 

In Rubin Sportswear v SA Clothing & Textile Workers Union and others (2004) 25 ILJ 1671 (LAC), the LAC held, “Section 187(1)(b) creates two bases upon which an employer can justify the dismissal of an employee on grounds of retirement age. The one is an agreed retirement age, the other is normal retirement age. Those are the only two bases.”

 

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.”

 

The “normal” retirement age referred to above is usually determined by the employer and agreed to by the employee in either a contract of employment or a policy linked to such a contract. If there is no such an agreement in place the retirement age or date must be agreed to between the employer and employee. It is recommended that such an agreement should be reduced to writing in order to rebut possible claims of discrimination upon the termination of the employment relationship.

 

In Hibbert v ARB Electrical Wholesalers (Pty) Ltd (D775/10) [2012] ZALCD 13; [2013] 2 BLLR 189 (LC) (27 September 2012), the applicant claimed that he was dismissed based on his age in the absence of an agreement and that his dismissal was therefore automatically unfair. The employer alleged that there was no dismissal but that the applicant agreed to retire at age 64.

 

The applicant also claimed damages for the alleged unfair discrimination in terms of the Employment Equity Act 55 of 1998. The essence of this claim was that the applicant alleged that once the act of unfair discrimination based on his age was brought to the respondent’s attention it failed to act to remedy his selection for retirement based on age. As a result of being forced to retire at 64 he claimed he was unable to maintain payments on various policies and incurred medical aid membership fees.

 

The respondent argued that even though there was no agreement between the applicant and respondent on a normal retirement age, at a more general level there was consensus on the issue. The respondent sought to rely, in part, on the evidence of the Provident fund retirement provisions as support for inferring that 60 was the normal retirement age. It was pointed out that Hibbert had been granted a special dispensation by being exempted from the fund and could not rely on his exemption from membership of the fund to argue for a retirement age that was more generous than what the fund rules stipulated.

 

It was also suggested that the Provident fund rules of the respondent’s funds referred to the normal retirement age of ‘employees’ not only ‘members’. However, the only document referred to in evidence, which dealt with the respondent’s Provident fund rules was in the form of a memorandum addressed to members. It makes no mention of whether the retirement age is applicable to members or employees generally.

 

The difficulty with this argument is the fact that the applicant was clearly exempted from membership of the fund. Secondly, the respondent’s efforts to obtain the applicant’s acceptance of the retirement ages stipulated in the fund, indicates it saw the need to try and obtain his consent in order to apply those standards to him.

 

Moreover, it was conceded by the respondent that the company had not really addressed the issue of its retirement policy until it encountered the difficulties with the applicant. This is supported also by the evidence that at least two employees had retired at 71, which shows that notwithstanding the provident fund rules, there was not a consistently applied retirement policy that was applied to all.

 

The respondent’s dismissal of the applicant on account of his age in the absence of the existence of a normal retirement date was automatically unfair in terms of s 187 of the LRA and was an act of unfair discrimination in terms of s 6 of the EEA. The applicant’s claim for an award of damages under the EEA was dismissed but the respondent had to pay the applicant an amount of compensation equivalent to twelve months’ remuneration.

 

In Buhai / Hotbake Systems (Pty) Ltd t/a Rich Products Corporation of South Africa (2013) 22 CCMA 7.1.4 the applicant was told upon commencement of his employment that the company’s retirement age was 65. The applicant indicated that he did not just want to work for a year since he was already 64. The respondent assured him by indicating that a precedent had already been set in that there was an employee who was 72 years old, and another that was 73, so there would be no problem. The applicant understood that he could continue as a normal employee, as long as he was mentally and physically capable.

 

The respondent disputed having said that a precedent had been set. According to them all that was said was that the company was prepared to let employees stay on, despite the provident fund rule.

 

The applicant had been given a letter of appointment dated 28 May 2010 and he started to work for the respondent on 1 June 2010. His letter of appointment provided that the normal retirement age as per the rules of the respondent’s provident fund was at the end of the month in which an employee turned 65. He had turned 65 in August 2011 after he had worked for over a year. On 13 June 2012 the applicant was told about the respondent wanting him to retire. This had been in a letter from the respondent, which the applicant said had made him feel “gutted”.

 

This letter read as follows:

“You turned 65 during August 2011 and in terms of clause 12 of your Contract of Employment and the rules of the retirement fund you were required to retire at the end of August 2011.”

“However following consultations between you and Dirk Uys it was mutually agreed that you would continue in your present position until further notice, which at that time was contemplated to be for at most another 12 months. In other words your retirement was by agreement postponed until further notice from the company . . .”

 

The applicant suspected that he was suddenly “retired” because the company had been asked to implement a new buying system by the parent company in America. He was told about this in the meeting of 13 June 2012.

 

He was further informed that he would not be able to implement the new system and that he was being retired due to the decision to switch to the new system as well as hi his age. He was not given any further details, or allowed to try the new system.

 

The arbitrator reasoned that the applicant developed a reasonable expectation that he would continue to work, since he continued to work after he reached 65 in August 2011.

 

As to the issue of whether the CCMA had jurisdiction to deal with this matter, the arbitrator ruled that the applicant did not claim that his dismissal was automatically unfair by reason of his age, or that he was dismissed in terms of section 187 of the Labour Relations Act (“LRA”). He claimed that his age had been the pretext used by the employer, and that the real reason for his dismissal was either the respondent’s operational requirements or a negative perception of him that arose when he told the company his assets were being sequestrated. This fell squarely under section 186(1)(a) of the LRA, being a termination of the contract on notice, in which case the CCMA did have jurisdiction to deal with it.

The commissioner awarded compensation in the amount of R163 574,48.

 

Nothing however prevents an employer form fairly dismissing an employee that is unable to continue to perform effectively in his position as a result of the age of the employee. Such situations will be dealt with as incapacity in terms of schedule 8 of the Labour Relations act.

 

Jan du Toit can assist employers with IR and HR related services and can be contacted for a consultation at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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