What happens when an employee retires?
According to section 187(1)(f) of the Labour Relations Act 66 of 1995 (LRA) an employee may not be dismissed on grounds including his/her race, gender, sex, political or religious beliefs, or any other arbitrary ground unless it is an inherent requirement of the job or the employee has reached the agreed or normal retirement age.
Our courts have given the following important guidelines regarding termination of employment based on age:
- Dismissal based on age may be automatically unfair unless the employer can show that the employee has reached the age agreed between the parties to be an appropriate retirement age or the age is regarded as the normal retirement age in that particular industry.
- The labour court defined normal retirement age, as the age at which the employer requires its employees to retire and not the age at which an employee wishes to retire.
- The labour appeal court subsequently found that where employees’ contracts are silent as to the retirement age, the employer cannot unilaterally impose a retirement age without the employee’s consent. Doing this would indicate that the employer does not intend to keep to its obligations under the contract and, should the employer dismiss an employee upon reaching the unilaterally implemented retirement age, such dismissal may be automatically unfair.
- An employer may, however, introduce a retirement age applicable to all employees, provided that all relevant people have been engaged in a process of consultation beforehand and the manner in which it is introduced does not lead to undue prejudice to employees. An example of this could be where an employee has reached the age of 59 and has been informed that the retirement age is now 60 leaving that employee with little time to prepare for this. A phasing in process may be fair in the circumstances.
- If an employee continues working beyond the normal or agreed age of retirement, the employer cannot rely on the age of retirement, but must have good cause relating to the conduct/capacity of the employee and follow a fair procedure before dismissing the employee. This would be different if the employee is placed on contract after retirement age.