Retirement age — Labour Appeal Court judgment gives clarity on an age-old debate

31 Oct 2022

A recent Labour Appeal Court decision confirms that an employer may fairly terminate a contract of employment on the basis of age, even if an employee has worked beyond an agreed or normal retirement age.

What are the legal consequences of an employee continuing to work after the employee has reached the agreed-upon retirement age? Does a new contract of employment come into force or does the old contract continue operating? Can an employer still terminate employment on the basis that the employee has reached (and passed) their retirement age?

These questions have been the subject of much debate over the years. They were addressed again in the recent decision of the Labour Appeal Court in MISA obo Landman v Great South Panel Beaters.

In this case, a contract of employment provided for a retirement age of 60. The employee in question worked up to and beyond the retirement age without any issues being raised by his employer about his retirement. After nine months of his continuing to render his services, his employer gave notice of the termination of his employment on the basis that he had reached the retirement age of 60.

Aggrieved by this, the employee referred an automatically unfair dismissal dispute to the Labour Court. In terms of section 187(1)(f) of the Labour Relations Act, 1995 (LRA), if the reason for the dismissal is that an employer unfairly discriminated against someone on the basis of their age, the dismissal would be automatically unfair.

However, section 187(2)(b) states 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.

The Labour Court dismissed the employee’s claim of an automatically unfair dismissal. It found that because the dismissal took place on the basis of the employee’s age after he had reached the agreed retirement age, section 187(2)(b) of the LRA still applied and the dismissal was not unfair. The employee appealed the decision in the Labour Appeal Court (LAC).

The employee’s case on appeal was that, when his employer permitted him to work beyond the retirement age, it waived the right to later rely on the retirement age to terminate the employment relationship. He also argued that, when he worked past the retirement age of 60, a new contract of employment came into existence through the conduct of the parties.

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He argued that the initial contract of employment ceased to have relevance. This meant that the retirement age in the previous contract of employment could not be relied upon by the employer to terminate the employment relationship.

The LAC did not agree with the employee’s arguments. It found that if an employer permits an employee to work beyond an agreed or normal retirement age, this does not amount to a waiver of the right to rely on section 187(2)(b) of the LRA to dismiss an employee unless the clear and unequivocal conduct of the employer indicates an intention to waive that right.

It also found that a contract of employment does not automatically terminate by the effluxion of time when the retirement age is reached by an employee, nor is the contract tacitly renewed on different terms.

Instead, the employment relationship continues, which means that the initial agreed or normal retirement age remains applicable. The LAC accordingly agreed with the findings of the Labour Court and dismissed the appeal.

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The decision confirms that an employer may fairly terminate a contract of employment on the basis of age, even if an employee has worked beyond an agreed or normal retirement age. The mere fact that the employee has worked beyond their retirement age does not mean that the agreed or normal retirement age is rendered redundant.

However, the court was careful to confirm that where the clear and unequivocal conduct of the employer indicates that there was a waiver of the right to rely on the retirement age, or where the employer has agreed to a further period of employment, the employer would be bound by this agreement.

It should be remembered that where termination occurs at the instance of one party (the employer in this instance), an employee is entitled to receive notice of notice termination. DM

Nils Braatvedt is Senior Associate in the Employment Department of law firm ENSafrica. Peter le Roux is Executive Consultant in the department.

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