This case decided in the Labour Appeal Court in 2022 turns on the application of clauses relating to retirement age in employment contracts, and the fairness of dismissals based on an employee’s age. The employee in question had been employed by the company in November 2007, and in January 2008 signed an employment contract which stipulated that the employee’s retirement age would be at 60 years of age.
The employee turned 60 on 15 March 2018, but he was not terminated by the company at that stage and continued working under the same terms and conditions he had been under prior to reaching retirement age. On 14 January 2019, the employer notified the employee that his services would terminate on 12 February 2019, due to having reached the agreed retirement age of 60. The employee referred a dispute claiming that his dismissal was automatically unfair as it was based on unfair discrimination relating to age, a prohibited ground in terms of s 187(1)(f) of the LRA 1995. The dispute was to some extent spurred by the fact that the employee was a member of the Motor Industry Provident Fund, which provided that the retirement age of an employee who was a member of the fund was 65.
The employee also claimed that once an employee reached his contractual retirement age and neither party enforced the provision regarding retirement, the employer could not thereafter rely on the clause to effect termination. The employee believed a new contract came into effect after retirement age was reached, and it was up to the employer to show that a new retirement age was agreed to, or that a normal retirement age existed. The court’s decision on this matter rested on the interpretation of s 187(2)(b) of the LRA, which stipulates that ‘a dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons in that capacity’.
The wording of the section is clear and unambiguous, and on its ordinary meaning, once the employer proves that the dismissed employee has reached the agreed or normal retirement age, the dismissal is deemed fair. The section does not prescribe a time frame within which the dismissal should take place, provided it is after the employer has reached his or her agreed or normal retirement date. This effectively means that an employer has the right to fairly dismiss an employee based on age at any time after the employee has reached his or her agreed or normal retirement age.
The employee had contended that if an employer is permitted to rely indefinitely on an agreed or normal retirement age as a basis for dismissal once retirement age was reached, this would leave the employee in a vulnerable position by enabling the employer to abuse its position to dismiss the employee based on his age. The court disagreed with this argument, clarifying that an employer would only be protected by s 187(2)(b) if the reason for, or proximate cause of the dismissal is that the employee has already reached retirement age.
An employer would therefore not be able to invoke the retirement age as a reason for dismissal where the real reason for the dismissal is based on operational requirements, misconduct, or incapacity. The court also rejected the argument that a new contract came into effect once the agreed retirement age was reached. The employment contract does not terminate by the effluxion of time when the employee reaches his or her retirement age but is deemed to continue on the same terms and conditions in force before retirement age is reached.
The retirement age thus remains unchanged. In this case, it was clear that the reason for dismissal was based on the employee’s age, and not some other reason. In terms of s 187(2)(b) it is not unfair to discriminate against a person on the basis of age where the agreed to or normal retirement age has been reached. As the employee had reached the contractually agreed to retirement age, the employer was thus fully within their right to terminate the employee by giving notice. The dismissal was ruled to be fair, and the employee’s case was dismissed. < T: +27 (0)31 266 6570 C: +27 (0)82 786 7480 E: johanvd@labournet.com W: www.labournet.com
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