RETIRING EMPLOYEES

Monday, April 16, 2007
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RETIRING EMPLOYEES

By Talita Laubscher

"Aging is the most unexpected thing to happen in one’s life."
Leon Trotsky

Section 187 of the Labour Relations Act renders discriminatory dismissals based on grounds such as race, sex, gender, religion and age automatically unfair. This is in line with the general prohibition of unfair discrimination on these and other grounds contained in the Constitution and the Employment Equity Act. However, where age is concerned, the Labour Relations Act makes an important exception, namely that an employer may retire its employees when they have reached the "agreed" or "normal" retirement age. Once the employee has reached this age, the employment relationship terminates and this does not constitute a dismissal for purposes of the Labour Relations Act, nor is it automatically unfair.
Contrary to popular belief, there is no general retirement age in South Africa. Employers and employees are therefore free to agree at which age the employees will retire. This agreement is normally found in the employee’s employment contract, or may, in special circumstances, be determined with reference to the rules of the retirement fund to which the employee belongs.

But what is a "normal" retirement age? The Labour Appeal Court considered this question in Rubin Sportswear v SACTWU & Others. Rubin Sportswear acquired the business of Val Hau et Cie as a going concern. This meant that the Val Hau employees transferred to Rubin Sportswear on the terms and conditions they enjoyed at Val Hau. There was no agreed or normal retirement age at Val Hau, but at Rubin Sportswear the normal retirement age was 60. A number of the transferred employees have reached this age and Rubin Sportswear desired their retirement. Rubin Sportswear accordingly issued a notice to all the employees that the retirement age of 60 would apply to them with immediate effect. The employees contended that this was a unilateral change to their terms and conditions and, when they were eventually "retired", claimed that their dismissals were automatically unfair as it constituted unfair discrimination on the basis of age.

The Labour Appeal Court agreed. It held that a retirement age becomes a normal retirement age when employees have been retiring at that age over a certain long period – so long that it can be said that the norm for employees in that workplace, or for employees in a particular category, is to retire at that age. The period must be sufficiently long and the number of employees who have retired at that age must be sufficiently large to justify saying that it is a norm for such employees to retire at that age. The court held that Rubin Sportswear was precluded from introducing 60 as the "normal" retirement age by simply declaring unilaterally that it was the normal retirement age for all its employees. Without obtaining the employees’ consent in this regard, the purported change was unlawful and of no legal effect.
Fixing a retirement age in an employment contract creates certainty for both the employer and the employees as to when the employees will retire. Employers are therefore well-advised to agree the retirement age with the employee upon commencement of employment.

A separate question is whether employees who have worked beyond the agreed/normal retirement age may be retired at any time thereafter, or whether an employer is required to follow a formal pre-retirement procedure with them.

Initially, the old Industrial Court held that where an employer allowed an employee to work past the established retirement age, the employer waived the right to insist on the employee’s retirement. This meant that an employer could only dismiss such an employee for a fair reason and in accordance with a fair procedure and could not rely on the fact that the employee has reached retirement age to effect the termination of the employment relationship.
However, the Labour Court in Schweitzer v Waco Distributors (a division of Voltex (Pty) Ltd) held that s187(2) of the Labour Relations Act changed this position. Here the employee’s employment was terminated at the age of 67, two years after he had reached the agreed retirement age of 65. The termination was not based on any complaints regarding his work performance or conduct, but purely on account of his age. The employee alleged that this constituted unfair discrimination. The Labour Court held that where a termination is based on age, one needs to ask three questions in order to determine whether s187(2) apply, namely a) whether the dismissal was based on age, b) whether there was an agreed or normal retirement age in place and c) whether the employee had reached this age. Where all three these questions are answered in the affirmative, as in the Schweitzer case, the termination does not amount to unfair age discrimination. In these circumstances, the employee may therefore be retired at any stage after s/he had reached the established retirement age without it constituting unfair discrimination and, in addition, without the employer being obliged to follow any pre-retirement procedure.

Effectively, employees who are allowed to continue working past retirement age are employed "at will" – the employer may at any stage require them to retire.
But the employer must act fairly in doing so. In Botha v Du Toit Very & Partners, the Labour Court accepted that the normal retirement age for persons employed in Botha’s position was 65. He was not retired upon his 65th birthday and the employer also did not discuss the issue of retirement with him at any stage. However, shortly before his 67th birthday, the employer gave him one month’s notice that he would be required to retire. The court held that while the employer was entitled to require Botha to retire, merely giving him one month’s notice was unfair. The employer should have consulted with him and attempted to reach agreement on the date that Botha would retire. Such consultation would have avoided surprise and indignation.
The position is less clear in relation to employees who commence employment after having reached the relevantretirement age. In these circumstances, it is advisable to employ them for a mutually agreed fixed period only.