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Retirement age and allegations of discrimination

By Gillian Lumb, Director, Claudia Grobler, Candidate Attorney, Cliffe Dekker Hofmeyr

 

Section 6 of the Employment Equity Act 55 of 1998 (EEA) includes, amongst the listed grounds on which an employer may not unfairly discriminate against an employee's, age. How section 6 impacts on and is to be understood in relation to an employer’s retirement policy or practice was revisited by the Labour Court in Khan v MMI Holdings Ltd [2021] 42 ILJ 1737 (LC), a decision handed down in May 2021.

 

Khan was employed as the chief executive officer of MMI International, a division of MMI Holdings Ltd. When he started his employment he concluded a partially written, partially oral contract of employment with Bankmed. This contract transferred to MMI Holdings Ltd pursuant to various commercial transactions. The letter of appointment, made available by Khan, refers to various rules and regulations of Bankmed and states that these formed part of his terms and conditions of employment. The rules and regulations include Bankmed Pension Fund rules which provide for retirement at the age of 60.

 

On 30 May 2016 Khan received an email from MMI Holdings attaching documentation relating to his retirement. On 30 June 2016 he received a letter confirming his retirement as of 30 June 2016. Khan was not paid after 30 June 2016. Before the Labour Court Khan claimed that in the absence of a practice or policy or agreed retirement age, MMI Holding forcibly retired him. As part of his claim he alleged that if the court found that there was a retirement policy to which he was bound, this amounted to discrimination based on age, which is a listed prohibited ground in terms of section 6(1) of the EEA. He sought a declarator that such a policy unfairly infringed upon his rights and asked for payment of damages under section 50 of the EEA in the amount of R55 million.

 

MMI Holdings resisted the claim of unfair discrimination under the EEA, relying on section 187(2)(b) of the Labour Relations Act 66 of 1995 (LRA) which provides that “a dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity”, and stated that section 6 of EEA and section 187(2)(b) of the LRA must be read consistently. Conversely, Khan argued that section 6 of the EEA must be read and interpretated separately from section 187(2)(b) of the LRA and that what the LRA regards as fair does not necessarily mean fair for purposes of the EEA.

 

When addressing the conflicting arguments the court applied the principle of interpreting statutes consistently. The court held that an employee whose employment terminated through the application of a retirement policy has two potential courses of action: automatically unfair dismissal under the LRA, or an unfair discrimination claim under the EEA, or both. The two claims would arise out of the same set of facts. This, the court found, clearly indicates that the LRA and EEA must be interpreted consistently. The court reasoned that the legislature could not have intended that the same conduct could be fair in terms of the LRA, but unfair in terms of the EEA. This would encourage employees to “forum shop” and bring claims under the EEA. In addition, the LRA was enacted before the EEA and the legislature would have been alive to the provisions of section 187(2)(b) of the LRA relating to fair dismissal based on the fact that an employee has reached the agreed or normal retirement age, when it enacted the EEA. The court concluded that the LRA and EEA can be interpreted consistently as section 187(2)(b) of the LRA is a justification ground affording an employer a defence under section 11(1)(b) of the EEA where the alleged discrimination is shown to be rational, not unfair, or otherwise justifiable.

 

This judgment serves as important confirmation that a retirement policy which establishes an age at which an employee retires – while differentiating between those younger than the retirement age and those who have reached or exceeded the retirement age – will not give rise to a successful claim for unfair discrimination based on age under the EEA. 

 

For more information, please contact Gillian Lumb at [email protected]

Article published with the kind courtesy of Cliffe Dekker Hofmeyr www.cliffedekkerhofmeyr.com

 

 

 

 

 

 

 

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