Explore the recent Constitutional Court rulings on retirement age dismissals in South Africa, highlighting the complexities and implications for employers and employees alike. File photo.
By: Talita Laubscher, and Chloë Loubser
The correct interpretation of section 187(1)(f) read with section 187(2)(b) of the Labour Relations Act, 1996 (LRA) has been the subject of much debate over the years. In terms of these sections, 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 for persons employed in that capacity’.
An ‘agreed’ retirement age may exist where an employee’s retirement date is specified in the employment contract or a separate document, and a ‘normal’ retirement age may occur where there is a standard practice of requiring employees to retire at a particular age.
The issue that often arises in an increasingly older workforce where employees remain productive beyond the agreed or normal retirement age is whether an employer may retire an employee who has been allowed to work beyond this retirement age.
By way of example, where the agreed retirement age is 60 and the employee continues to work, can the employer at age 62 require the employee to retire, or can it only terminate the employment contract in accordance with one of the recognised fair reasons for dismissal and in accordance with a fair procedure?
Following diverging views in the Labour Court, the balance of authority in recent years has supported the view originally adopted in Schweitzer v Waco Distributors (A division of Voltex (Pty) Ltd) (Waco) that an employer may fairly dismiss an employee on the basis of age at any stage after the employee has passed the agreed or normal retirement age. This interpretation was endorsed in September 2022 by the Labour Appeal Court in the case of MISA obo Landman v Great South Autobody CC t/a Great South Panel Beaters.
Just when it appeared that the legal position was settled, the Landman matter, along with the case of Solidarity obo Strydom and Others v State Information Technology Agency SOC Limited, were referred to the Constitutional Court for consideration.
The Constitutional Court could not reach a consensus on the interpretation of section 187(2)(b) of the LRA and three different judgments were delivered.
Background of the cases
In the Landman case, the employee continued working beyond the agreed retirement age of 60 specified in his employment contract. There was no discussion between the employee and the employer at the time he turned 60, and no agreement on a new retirement date. The employer dismissed the employee almost a year later, on the basis that he had reached retirement age.
In the Solidarity case, a more complex contractual arrangement was applied, with reference to the relevant pension fund rules. Sometime after reaching the normal retirement age, the employees received notices of retirement.
In both cases, the employees alleged that their dismissals were automatically unfair. On appeal, the matters were consolidated before the Constitutional Court, as both concerned the interpretation of section 187(2)(b) of the LRA.
Judgments and divergent views
The Constitutional Court delivered three judgments, each offering a different interpretation of the section.
The first judgment, penned by Zondo CJ (as he then was) revisited the decision in Waco. Incidentally, it was Zondo CJ himself who decided the matter in Waco 26 years earlier, which case he now found was wrongly decided.
In Waco, the principle was established that a dismissal based on age is permissible under section 187(2)(b) of the LRA at any time after the employee has passed the agreed or normal retirement age. Zondo CJ held that this interpretation is inconsistent with the fundamental values of the Constitution.
Allowing dismissals on the basis of age beyond the agreed or normal retirement date offends Constitutional values because, first, it could lead to potential abuse by employers. This is because employers could potentially use age as a pretext for other reasons for dismissal. For example, employees who have worked beyond retirement age who participated in a lawful strike could simply be dismissed on the basis of age.
Second, the interpretation in Waco places employees who continue to work past retirement age in a vulnerable position and it places the employer in an unduly strong position. Section 187(2)(b), which permits termination on the basis of age, is a limitation of the right not to be unfairly discriminated against, and as such it must be interpreted restrictively.
The only circumstance in which an employer could accordingly rely on age to bring an employment relationship to an end is therefore a) where there is an agreed or normal retirement age; and b) retirement occurs exactly on the agreed/ normal retirement date. If the contract allows for this, this date does not need to be the employee’s birthday but could be the last day of the month in which the employee reaches the agreed or normal retirement age.
The second judgment, per Van Zyl AJ, approaches the issue from a contractual perspective, suggesting that the employer has the right to terminate employment upon the employee reaching retirement age but this right must be exercised by way of election, within a reasonable period of time. Failure to do so may indicate an election not to terminate the employment relationship, with the result that any subsequent dismissal must be for reasons of misconduct, incapacity, or the employer’s operational requirements. What constitutes a reasonable time for the exercise of this election is a matter that must be determined with reference to the facts of each case.
In the third judgment, Rogers J largely endorses the approach in Waco and the LAC’s decision in Landman. Rogers J notes that the wording of section 187(2)(b) is clear: ‘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 wording is ’has reached’; not ’reaches’. It further does not make sense that an employer may retire an employee on the basis of age on the exact agreed date, but not later, when the employee would be older. Rogers J observed that this is a legislative choice and a policy decision and, importantly, noted that the constitutionality of section 187(2)(b) was not challenged.
Accordingly, an employer may require an employee to retire at any stage after they have reached the normal or agreed retirement age, provided reasonable notice of the upcoming retirement is given. Such reasonable notice applies both where the employee is required to retire upon reaching the agreed or normal retirement age or at any time thereafter.
Rogers also indicated that it is desirable, from the point of view of decency, dignity and compassion, for an employer to discuss the matter of an employee’s upcoming retirement with them before simply giving notice of retirement.
Legal effect of the case
While the Court was able to reach a consensus on the orders to be made in the respective matters, based on the facts of each case, the fact that there is no majority when it comes to the legal issue means that the law is not yet settled.
Until another matter with similar facts comes before the Court and enjoins it to reconsider the issue, the legal position will remain as it was following the LAC decision in Landman – ie that the Waco interpretation remains good law. This means that employers are allowed to require an employee to retire at any stage after having reached the agreed or normal retirement age.
Practical takeaways for employers
This case, and others, have shown that costly disputes can arise when employers terminate the services of employees who have continued working after an agreed or normal retirement age. With the law in this area not yet settled, employers are encouraged to take steps to avoid claims.
At the outset, it is advisable for employers to agree on a retirement age with employees and to reflect this age clearly in the relevant employment contract. It is not always practical for an employee to retire on their exact birthday date, and it is often sensible for the employee’s services to terminate at the end of the month in which this age is reached. To cater for this, the contractual provision should expressly reflect this arrangement.
It is also important for employers to have systems in place that remind them when individual employees will be reaching their respective retirement dates so that the relevant steps can be taken and handover plans made timeously. Too often retirement dates come and go unnoticed, or unspoken of, by either party.
The matter of retirement should be discussed with the employee concerned. If the employer would like an employee to continue working, this should be discussed and ideally, a new retirement date should be expressly agreed, upon or another suitable form of contract negotiated. If the employee is not required to continue working, the employee should then be notified reasonably in advance of the upcoming retirement date.
In circumstances where the employee has worked past the agreed or normal retirement age, the employer may require the employee to retire, but again reasonable advance notice should be given. A period of three to six months would arguably be reasonable.
* Laubscher is a partner, and Loubser is a knowledge and learning lawyer at Bowmans South Africa.
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