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Can Retirement Age be determined by a Benefit Policy Scheme?

By Bongani Khanyile, Director, Bongani Khanyile Attorneys

 

In a reportable judgment of Deon Bos v EON Consulting (Pty) Ltd, Snyman AJ considered the above question which was based on the alleged claim of automatically unfair dismissal based on age. The facts were as follows: the applicant was employed by the respondent from 1 March 2003 as a financial manager. He was 57 years of age when he started employment with the respondent.

 

It was common cause that no actual written employment contract was concluded when the applicant commenced employment with the respondent, stipulating the retirement age. The applicant testified that the issue of retirement or retirement age was not even contemplated by the parties when he commenced employment. The applicant was unaware of the existence of any prescribed retirement age in the respondent.

 

In 2010, the respondent introduced a group life, income protection and funeral aid scheme for its employees. the applicant was the nominated trustee, on behalf of the respondent, on this scheme, and he explained this scheme was in essence a life insurance policy in the normal sense, which entitled employees to benefits in terms of the policy if certain events arose. employees were eligible for participation in the scheme until the age of 65. This group life, income protection and funeral aid scheme was not linked to actual retirement of employees and all being said nothing to do with retirement. The fact that employees were no longer eligible to participate in the scheme, and he explained this scheme was in essence a life insurance policy in the normal sense, which entitled employees to benefits in terms of the policy if certain events arose. Employees were eligible for participation in the scheme until age 65.

 

The respondent revised the policy twice without dealing with compulsory retirement age. On the third revision, the respondent for the first time imposed a retirement age of 65 years of age.

 

The Court found that the applicant at the time had already turned 65 and had continued working. He was never once intimated that he had exceeded retirement age. The Court accordingly found that the dismissal fell foul of s187(1)(f) in that it was based on age. It found further that the dismissal was not justifiable in terms of s187(2)(b) and thus unfair.

 

The Court correctly held that it is not a requirement that employees have to be consulted on or that they have to agree to a retirement age as stipulated in the employer's retirement policy. Furthermore, the employer is entitled to unilaterally fix and then implement retirement age.

 

Importantly though, the Court found that the first proviso for unilateral implementation is that the implementation itself cannot work retrospectively, which is what the respondent in casu tried to do. The second proviso, said the Court, is that the unilaterally implemented policy cannot be at odds with or contradict an employee's conditions of employment or agreed retirement age.

 

The lessons that can be gleaned from this case can be summed up as follows in my view:

 

1. Retirement age should be clearly communicated eg. must be contained in a
    contract of employment or retirement policy.

 

2. An employee that has reached their retirement must be informed and if s/he
   continues working, should be informed that s/he is now on "borrowed time."

 

3. Retirement age can be fixed in a benefit scheme, however this should be
    clearly stated and be applied consistently when workers reach retirement
    age.

 

4. Implementation of retirement policy can never be applied retrospectively.

 

Click here to download the judgement

 

Bongani Khanyile LLB (UJ), Post Dip Corp Law (UJ) is a Director at Bongani Khanyile Attorneys.

For more information kindly contact Bongani at 

 

 

 

 

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