Greater certainty around working beyond retirement age

Most people consider retirement at the age of 60 or 65, but there may be instances where employees want to, or have to, continue working beyond retirement age. However, it is important to note that if they do, they are working on ‘borrowed time’.

The Labour Appeal Court recently gave clarity on the circumstances in which an employer can terminate the employment of someone who has reached the agreed or normal retirement age.

Chloë Loubser, lawyer in the dispute resolution department of law firm Bowmans, says retirement age is generally agreed upon in the worker’s contract, the company’s policy document or the retirement fund rules.

In this case, the agreed upon retirement age was 60. The employee, a Mr Landman, remained in the employ of the company, Great South Autobody, for 10 months after he reached the agreed retirement age.

Fair versus unfair dismissal

Landman was eventually notified that he had to retire and was given one month’s notice. He took the matter to the Labour Court, claiming he was unfairly dismissed.

In terms of the Labour Relations Act, a dismissal based on age will be automatically unfair (and constitute unfair discrimination), unless it can be shown that the employee has reached the normal or agreed retirement age.

The court found that a dismissal based on age is not automatically unfair in circumstances where the employee “has reached” the normal or agreed retirement age. In this case the employee had reached the agreed retirement age of 60, therefore his dismissal was fair.

The matter was taken on appeal before the Labour Appeal Court, where Landman argued that where an employee continues working after reaching the agreed retirement age and neither party relies on the fact that the retirement age was reached, a new (second) employment contract comes into existence.

Landman argued that it would be impermissible to rely on the initial retirement age since there was now a new contract in place.

The employee would be at the mercy of the employer if the employer relies indefinitely on the agreed age months or years after the age has been reached.

The appeal court disagreed with this argument and held that the act was clear and unambiguous – a dismissal is fair when the employee has reached the agreed or normal retirement age.

“Accordingly, where an employee continues to work for an employer uninterrupted after reaching retirement age, the legal position is now clear: the employment relationship and employment contract continue, and the agreed or normal retirement age remains unchanged,” explains Loubser.

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The wording

Talita Laubscher, partner at Bowmans, says the act expressly uses the words “has reached” the agreed or normal retirement age. It does not say “reaches”, which would imply that the employer can only bring the contract to an end on the particular date on which the employee reaches the agreed retirement age.

In interpreting the words “has reached” the courts said the employer may at any time thereafter require the employee to retire. Laubscher adds that when the employer does this, it should provide a reasonable time period to the employee.

Landman was given one month whereas the Labour Court, in another case, thought a period of three months would be reasonable, remarks Laubscher.

“Employees working beyond the agreed retirement age with no fixed-term contract in place or with no new retirement age agreed, can be required to retire at any time. This may come as a huge shock to the employee. Certainty is best for all concerned.”

Laubscher says if the employee is still able to properly perform their duties without complaint, it is advisable to explore either the conclusion of a fixed-term contract after reaching retirement age, or agreeing to a new retirement age with the employer.

Employment contract

Laubscher advises employees to check their employment contracts to ascertain whether the contract contains a retirement age. If so, they must engage with the employer sufficiently well in advance to agree on the way forward if they wish to continue working beyond the agreed retirement age.

Allowing employees to work for a specified period after they have reached the agreed retirement age may give employers a good opportunity to ensure skills transfer which may serve important operational purposes.

“A transition phase between the agreed retirement age and the ultimate agreed retirement age or expiry of a fixed-term contract may accordingly be beneficial to both the employer and the employee,” says Laubscher.

If the employer wishes to bring the employment contract to an end because of a reason other than the fact that the employee has reached the agreed retirement age, the employer must comply with the principles of a fair dismissal, she adds.

Read: Early retirement comes at a huge cost