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National Tertiary Education Union

12/02/2016

The issue of whether an employer can compel an employee to be placed on retirement was under the spotlight once again, when former National Commissioner of Correctional Services, Mr Tom Moyane, stated in the media that "he had been 'retired'". The facts as emerged from media reports appear to be that Mr Moyane was appointed on a five year fixed-term contract of employment in 2010, at the age of 57, which contract was only due to expire in 2015. 

The Department of Correctional Services announced that Mr Moyane had reached the retirement age and it was for this reason that his services were being terminated. Mr Moyane had turned 60 in January 2013, which appears to be either the agreed or normal retirement age of the relevant department. 

The question that arises in the above scenario, as with other employees/employer who may face a similar situation, is whether the termination of an employee's services at retirement constitutes a fair dismissal or discrimination on the grounds of age. 

In terms of s187(1)(f) of the Labour Relations Act, 66 of 1995 (LRA), if the employee alleges that the reason for dismissal was because the employer unfairly discriminated against the employee based on age, this would constitute an automatically unfair dismissal. However, despite the above provision, s187(2)(b) of the LRA states 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. 

Therefore, given the above, an employer will be entitled to compel an employee to retire when he or she reaches a retirement age which was either agreed to, or when he or she reaches an age which is normally applicable as the retirement age for employees of that employer. 

What would normally constitute an agreed retirement age is if the retirement age has been incorporated into the contract of employment. This will amount to an agreement once the employee has signed the contract of employment. An agreement can also be reached during the course of employment between the parties, as to what the agreed retirement age would be. 

However, it is suggested that this agreement should be reduced to writing to enable enforceability. It is this written agreement that will entitle the employer to terminate the employee's services upon retirement age and which will provide a defence to any claim of discrimination based upon age. 

In the absence of an agreed retirement age, an employer will still be entitled to terminate an employee's services at the normal retirement age. A normal retirement age can be determined in various ways, ie an established practice applied consistently in the workplace over time, a policy in which the retirement age is stipulated and which policy has also been applied consistently, or a retirement age  that is indicated in the rules of the pension / provident fund, which the employer accepts as the normal retirement age. 

Would the employer be required to follow a fair procedure, prior to terminating an employee's services, on retirement? This issue was alluded to in the matter of Schweitzer v Waco Distributors (A division of Voltex (Pty) Ltf [1999] 2 BLLR 188 (LC), where the court stated that whilst some procedure may be required even in certain types of dismissals not specifically mentioned in the LRA, the legislature specifically stipulates that a dismissal based on the fact that an employee had reached retirement age, was fair in itself. It can therefore be inferred that no procedure is required to be followed, although it may be good practice to notify an employee timeously of such termination. 

Often employers agree or require employees who have reached retirement age to work beyond such age. It may also happen that employers inadvertently allow employees to continue employment, after having reached the retirement age. The question then arises as to whether the employer has waived its protection in terms of s187(2)(b) of the LRA, when it later seeks to terminate the employee's services based on the employees age. 

This scenario was discussed in the matter of Karan t/a Karan Beef Feedlot v Randall [2012] 11 BLLR 1093 (LAC). The facts, briefly, in this case were that the employee was informed that although he had reached the company's retirement age of 60 years, the respondent wished him to continue working, subject to the 'normal notice period', if he wished to retire. The employee was required by the employer to retire two years later and was given notice of such termination. The Labour Court had found the dismissal to be automatically unfair, on the grounds that the employer had failed to prove that the normal or agreed retirement age was 60 years and that the retirement date had been superseded by a fresh agreement, that the employee would be retained for an indefinite period. 

The Labour Appeal Court on appeal, however, found on the facts of the case that a valid agreement had been concluded between the employer and the employee, on a new retirement age, which would be determined by the employer. 

The court in this case identified two plausible arguments concerning the application of s187(2)(b). The first was that, where there is a normal or agreed retirement age and the employee has reached that age, the employer enjoys protection under s187(2)(b) from that date and is entitled to terminate the employment of the employee on the grounds of age at any time. 

The second argument was that, when agreement had been reached between the employer and employee before the latter has reached the normal or agreed retirement age, the employer may determine a new retirement age and will still enjoy protection under s187(2)(b), should he decide to terminate the employment when the new agreed retirement date arrives. 

In this case, the court found that the employee had received two letters in which the employer had reserved the right to decide when he should retire. In the case of Mr Moyane (based on information from media reports) it is believed that whilst the Department of Correctional Services would have been justified to terminate his services upon retirement, the entering into a fixed term contract of employment so close to retirement age, adds a different dynamic to those set of facts. 

Employers are therefore advised that, if an employer allows or requires an employee to continue working past the retirement age, whether agreed or normal, an agreement should be reached in respect of a new retirement date or age and the subsequent termination would then enjoy the protection of the LRA. 

In the absence of such agreement, the employer exposes itself to an automatically unfair dismissal, based on age discrimination. 

One of the ways in which to protect employers' rights would be to enter into a fixed term contract of employment, or a limited duration contract with the retiring employee, once the employee has reached the agreed or normal retirement age.

Similarly, where an employer does not have a normal or agreed retirement age, the termination of an employee's services at an advanced age, may attract a claim for an automatically unfair dismissal based on age discrimination.

By Mohsina Chenia, Director, Employment, Cliffe Dekker Hofmeyr 

For more information kindly contact Mohsina Chenia at mohsina.chenia@dlacdh.com