Section 187(1)(f) of the Labour Relations Act 66 of 1996 (“LRA”) provides that a dismissal will be automatically unfair if it is found that the employer unfairly discriminated against the employee on any arbitrary ground, including age. However, section 187(2)(b) of the LRA 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.”
Over the years, various interpretations of the above provisions have led to several court challenges arising from situations where employees, who continue working for employers beyond their normal or agreed retirement age, are subsequently dismissed based on their age.
This was the case in Motor Industry Staff Association and Another v Great South Autobody CC t/a Great South Panel Beaters, where the Labour Appeal Court (“LAC”) recently clarified the legal position.
In this case, Landman had been employed with Great South Panel Beaters since November 2007.
In terms of his employment contract, his agreed retirement age was 60. After reaching the age of 60 on 15 March 2018, he continued working for his employer and neither party raised the issue of retirement at that stage.
Several months later, on 14 January 2019, Great South Panel Beaters issued Landman with a notice indicating that his employment would terminate, with effect from 12 February 2019, due to him having reached the agreed retirement age. Landman, assisted by the Motor Industry Staff Association, challenged his dismissal by referring an automatically unfair
dismissal dispute to the Labour Court.
The Labour Court concluded that his dismissal based on age was fair in terms of section 187(2)(b) of the LRA in that he had already passed his agreed retirement age of 60 at the time of his dismissal. Dissatisfied with the findings of the Labour Court, Landman appealed to the LAC.
The arguments advanced by Landman were, inter alia, that:
- Due to the employer failing to secure his retirement when he reached the agreed retirement age, the employer had waived its right to rely on the retirement clause in his employment contract.
- Alternatively, a new tacit agreement came into existence which altered the retirement age and, therefore, the employer could no longer rely on the retirement clause in the previous contract.
- Allowing an employer the right to rely indefinitely on an agreed retirement age places the employee in a vulnerable position and is open to abuse.
The LAC disagreed with Landman’s interpretation of section 187(2)(b), stating as follows:
“ Section 187(2)(b) of the LRA contemplates that where an employee continues to work for the employer uninterrupted after reaching retirement age, the employment relationship and employment contract continue. In other words, for purposes of a dismissal in terms of section 187(2)(b), 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. This effectively means that the agreed or normal retirement age of the employee remains unchanged.”
According to the LAC, the relevant section affords the employer the right to fairly terminate the employment relationship at any time after the employee has reached their normal or agreed retirement age. The LAC found this interpretation to be in line with the purpose of the section, namely, to allow the employer to create job opportunities for younger members of society, which is crucial in the context of South Africa’s current unemployment crisis.
The LAC went on to find that there was nothing in the employer’s conduct which inferred that it had waived its right to dismiss Landman in terms of section 187(2)(b), or that it had waived his agreed retirement age. Furthermore, none of the evidence in this case suggested that the parties had entered into a new tacit agreement which altered the agreed retirement age. The LAC accordingly found Landman’s dismissal to be fair.
The LAC noted that the facts of the above case were distinguishable from those in Datt v Gunnebo Industries (Pty) Ltd, where the employee and employer had entered into a new agreement in terms of which it was agreed that the employee would continue working after her agreed retirement age of 65 and until such time as they mutually agreed that she should take retirement. This agreement, the Labour Court found, extended the retirement age to a future unspecified date. In that case, the employer therefore could not invoke a defence in terms of section 187(2)(b) of the LRA and the dismissal was found to be automatically unfair.
Accordingly, where an employee continues to work for an employer after reaching their normal or agreed retirement age, the employment contract continues unchanged, unless it can be shown that the parties had either agreed to a new retirement age or that the employer’s clear and unequivocal conduct indicated that it had waived its right to dismiss the employee after reaching the retirement age. Unless one of the aforesaid two conditions are applicable, the employer will be entitled, at any stage after the employee has reached their retirement age, to exercise its right to fairly dismiss the employee in terms of section 187(2)(b) of the LRA.
More recently, Labour Court sitting in Cape Town, reaffirmed the position as confirmed by the LAC, in Mocwaledi v Premier of the Northern Cape Province.
In light of the above, it is advisable that employers take steps to ensure that an agreed retirement age is expressly incorporated into their employees’ employment contracts, or that a clear policy exists in terms of which a set retirement age is stipulated, in order for employees to prepare accordingly for their retirement. Moreover, employers are advised to remind employees who continue to work beyond retirement age, that it reserves its right in terms of section 187(2)(b) of the LRA to fairly terminate the employment relationship and contract at any given time.
That being said, employers must exercise caution and not rely on section 187(2)(b) as a basis to dismiss an employee who has passed their retirement age where the real reason for dismissal is not based on age but in fact related to misconduct, incapacity, or the operational requirements of the business. In the latter case, the employer is expected to follow and comply with the normal dismissal procedures provided for in the LRA and codes of good practice.
Our offices are experienced in dealing with matters such as the aforesaid and can provide the necessary advice and assistance in relation hereto. Should you require assistance with any employment related matter, you can contact our offices for a consultation with our labour department.
Judgments referred to:
1) Motor Industry Staff Association and Another v Great South Autobody CC t/a Great
South Panel Beaters (JA68/2021)  ZALAC 103; (2022) 43 ILJ 2326 (LAC) (27
2) Datt v Gunnebo Industries (Pty) Ltd (JS 355/07)  ZALC 23.
3) Mocwaledi v Premier of the Northern Cape Province (C681/2019)  ZALCCT 1.