Case Law Alert
The proper understanding of Section 187(2)(b) of the Labour Relations Act (LRA) when an employee is allowed to continue working after having reached the agreed or normal retirement age.
The employee started working for the employer on a permanent employment contract in November 2007.
On 30 January 2018 the employee formally agreed with the employer that the retirement age within the company would be 60 years.
The employee turned 60 on 15 March 2018 but was allowed to continue working despite having reached the agreed retirement age of 60. Retirement was not discussed as something that needed to happen at the time.
On 14 January 2019 the employee was notified by his employer that his employment contract will be terminated on 12 February 2019 due to him having (already) reached retirement age.
The rules of the Motor Industry Provident Fund (which the employee was a member of) provided for a retirement age of 65 years. This was an arrangement between the employee, as a member and the fund (generally considered as the “normal” retirement age where there is no “agreed” retirement age), while the agreed retirement age was an arrangement between the employee and the employer.
The employee disputed his dismissal, arguing that it is automatically unfair in terms of Section Section187(1)(f) of the LRA as the only reason for his dismissal was his age. Therefore, the employer unfairly discriminated against him because of his age.
The dispute eventually found its way to the Labour Appeal Court (LAC) to be decided whether his dismissal was unfair.
- NUMSA, on behalf of the employee, argued that by allowing the employee to continue working after he reached the agreed retirement age and not ensuring that the employee retire at that stage, the employer, by implication, made a new or second agreement with the employee as far as retirement age is concerned.
This meant that the “normal” retirement age set by the provident fund, namely 65, became the retirement age. As a result, it was argued that the employer no longer could rely on the protection which Section 187(2)(b) gives to the employer to dismiss an employee fairly due to having reached the formerly agreed retirement age. The LAC rejected this argument – See Passage 29 Motor Industry-case.
- The LAC took guidance regarding the proper interpretation and understanding of Section 187(2)(b) from the Supreme Court of Appeal (SCA) -case: Natal Joint Municipal Pension Fund v Endumeni Municipality See Extract from SCA-case. The LAC then found as follows:
- The protection which the employer enjoys against claims of automatically unfair dismissal Section 187(2)(b) requires that the employee concerned must have reached the agreed or normal retirement age at the point when he/she was dismissed.
- The employer, however, cannot rely on the above-mentioned protection provided by Section 187(2)(b), if the reason for the dismissal is operational requirements, misconduct, or incapacity.
- Where the employer does not require the employee to retire when reaching the agreed or normal retirement age and allows the employee to continue working, the employment contract and the employment relationship never-the-less continue as normal, while the protection of Section 187(2)(b) still applies.
- No “new” or “second” employment contract was agreed to when employment continued after the agreed or normal retirement age has been reached.
- It is not unconstitutional for the employer to provide in its policy that employment is terminated when an agreed or normal retirement age is reached, thereby creating employment opportunity for younger persons in society.
- To enjoy the above-mentioned protection which Section 187(2)(b) offers to the employer, two things must have happened:
- The employee must have reached the agreed or normal retirement age; or
- The employer and the employee must have agreed to a retirement age earlier as the formerly agreed or normal retirement age.
- The LAC considers as “good law” the three conditions mentioned in the Labour Court case: Schweitzer v Waco Distributors (A Division of Voltex (Pty) Ltd) (1998), which cause a dismissal based on age to be fair in terms of Section 187(2)(b):
- The dismissal must be based on age.
- The employer must have an agreed or normal retirement age for employees employed in the capacity of the employee in question.
- The employee must have reached the agreed or normal retirement age.
- An employer cannot be considered to have waived its right to dismiss an employee fairly relying on Section 187(2)(b) by allowing the employee to continue with employment after the agreed or normal retirement age has been reached.
- Similarly, no such waiver will result from a failure on the part of the employer to ensure that the employee retires when reaching the agreed or normal retirement age.
The waiver mentioned in the above-mentioned two sets of circumstances may however apply when such a waiver is based on the clear and undisputable conduct of the employer, confirming the waiver.
For as long as allowing employees to continue working after having reached the agreed or normal retirement age happens consistently as the exception to the rule, and everyone understands it as such, the protection which Section 187(2)(b) gives to the employer still applies.