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Mandatory retirement: a gift horse with some bite

Peter McDermott

There's no prescribed retirement age in South African labour law. Each employer or sector is left to its own devices to establish its mandatory retirement age and this can be done with reference to employment contracts, company policy or even provident/retirement fund rules and regulations. For example, the furniture bargaining council set its mandatory retirement age at sixty-five. However, none of the restaurant, metal engineering, motor industry or road freight bargaining councils have set a mandatory retirement age although a number do make provision for a fund. This lack of uniformity can result in uncertainty where mandatory retirement is concerned.

Section 187(1)(f) of the Labour Relations Act No. 95 of 1997 (LRA) states that discriminatory dismissals, based on age, are automatically unfair. This is the rallying cry for all those who find themselves unilaterally (and unwillingly) retired.

However, section 187(2)(b) of the LRA provides the crucial loophole:

  • "a dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity."

Remember that in all other cases, even if a dismissal doesn't fall into the category of automatically unfair it could still fall into the category of ordinary unfairness. However, here section 187(2)(b) of the LRA makes the dismissal explicitly fair.

Schweitzer v Waco Distributors (a Division of Voltex (Pty) LTD) 1998 19 ILJ 1578 (LC) created a simple three-step test to determine if this loophole applies:

  • Firstly, was the employee's dismissal based on age?
  • If so, secondly, did the employer have a normal or agreed retirement age?
  • If so, lastly, had the employee reached such normal or agreed age at the time of their dismissal?

If you answer 'yes' to all these, section 187(2)(b) of the LRA will apply. This seems fairly certain. The uncertainty sets in when employees are allowed to continue working beyond their mandatory retirement age.

Later cases show that the crux of the matter seems to be agreement

In Mervyn Datt v Gunnebo Industries (Pty) LTD (2009) JS 355/07 (LC):

  • Although the employee had reached mandatory retirement age, the company and employee entered into agreement in which it was agreed that the employee would continue working until such time as the parties "mutually agree[d]" that he would retire.
  • When the company unilaterally retired the employee after this agreement was reached, the court found that their agreement had created a "new" normal or agreed retirement age. Lacking consensus, this new retirement age hadn't been reached, which means that section 187(2)(b) of the LRA didn't apply.
  • The employer was ordered to pay the employee 24 months' worth of compensation.

The case of Ivor Micheal Karan t/a Karan Beef Feedlot v JWC Randall (2012) JA 87/10 (LAC) differed from the Mervyn Datt case regarding a few important points:

  • The company had assured the employee that he'd continue working beyond the mandatory retirement age and would be given notice if the company wanted to retire him.
  • The employee received this assurance but didn't respond to it in any way. The court found that the employee tacitly consented to the company's terms as he had continued in the company's employment.
  • When the company later opted, unilaterally, to retire the employee, the court found that this was in line with the new retirement age agreed to between the parties, which merely required that the company give notice.
  • Section 187(2)(b) of the LRA applied and the dismissal was found to be fair.

You may agree to extend employees' retirement age

It becomes clear, with reference to the above cases, that you may enter into an agreement with your employees to extend the mandatory retirement age to an uncertain future date. There is always the chance you and your employee won't be able to reach a mutual agreement so establishing a future date with a unilateral notice will benefit you.

If you are unable to reach an agreement, in terms of a delayed mandatory retirement , you'd be better served by upholding the established mandatory retirement age.

Remember that retirement remains a form of dismissal – with all that it implies. The employment (unless another agreement has been reached) doesn't simply lapse or expire because the mandatory retirement age has been reached. This means that you need to be very careful about allowing any indulgences in this regard as they can prove to be quite expensive.

Peter Mcdermott

Peter did a Bachelor of Technology (B.Tech), Human Resources Management and Services at Technikon Witwatersrand (1994-1998) and an Advanced Diploma – Labour Law, Law at University of Johannesburg (2001-2002).

He joined Labour Net in 1997 and was a consultant there until 2000, and has been a director and shareholder in Invictus Outsourcing Solutions since November 2001.

Peter has gained extensive knowledge and experience over the past 17 years in dealing with various Human Resources (HR) and Industrial Relations (IR) matters, including but not limited to :

  • Bargaining Council
  • Black Economic Empowerment (BEE)
  • CCMA
  • Contracts of Employment
  • Corporate Law
  • Disciplinary Procedures
  • Dismissals
  • Dispute Resolutions
  • Employment Equity (EE)
  • HR Policies and Procedures
  • Labour Court
  • Labour Relations
  • Negotiations
  • Performance Management
  • Personnel Management
  • Policies and Procedures
  • Retrenchments
  • Skills Development (SD)
  • Strikes
  • Talent Management
  • Trade Unions