Under South African law, dismissing an employee based solely on their age is deemed automatically unfair, unless that employee has reached the agreed or normal retirement age for individuals employed in their line of work. Over the years, our judiciary has grappled with whether an employer is permitted to dismiss an older employee at any stage after they have reached the agreed or normal retirement age. Presented with the opportunity to finally settle the law, the country’s apex court failed to agree on this increasingly common employment issue.
The general position
Section 187(1) of the Labour Relations Act (‘the LRA’) lists various forms of automatically unfair dismissals, which occur when an employee’s employment contract is terminated without good reason or adherence to fair procedure. Specifically, section 187(1)(f) confirms that dismissing an employee based on their age is automatically unfair.
An exception to the rule
To limit employees from working beyond retirement, section 187(2)(b) of the LRA establishes a rare exception, that is a dismissal based on an employee’s age is deemed fair if they have ‘reached the normal or agreed retirement age for persons employed in that capacity.’
‘Agreed’ v ‘normal’: What’s the difference?
At present, there is no prescribed retirement age for any categories of employees under South African law. Accordingly, employers generally specify an ‘agreed’ retirement age in an employment contract or a separate document. Conversely, a ‘normal’ retirement age refers to instances where it is standard practice to require an employee to retire at a certain age, which varies depending on the industry and nature of work.
As average life expectancy increases and retiring comfortably remains elusive for most individuals, an increasingly older workforce seeks to work beyond the normal or agreed age of retirement. In light of this phenomenon, our courts have struggled with the proper interpretation of section 187(2)(b) of the LRA: Can an employer dismiss an employee, who has worked beyond the agreed or normal retirement age, at any time thereafter?
Prevailing jurisprudence
Historically, the courts have favoured the view expressed in the seminal case of Schweitzer v Waco Distributors, which held that an employer may fairly retire an employee at any point after they have reached the normal or agreed retirement age. More recently, this finding was followed by the Labour Appeal Court in Landman v Great South Autobody, which, along with Solidarity obo Strydom v State Information Technology, was referred to the Constitutional Court.
In Landman, an employee who worked beyond his contractually agreed age of retirement, namely 60 years of age, was dismissed on the basis of age nearly a year after turning 60, absent any discussions between himself and his employer. In Solidarity, six employees were dismissed in accordance with the rules of their pension fund – months to years after they reached the agreed retirement age. In both matters, which were consolidated on appeal to the Constitutional Court, the employees contended that their dismissals were automatically unfair under section 187(1)(f) of the LRA.
Faced with interpreting the scope of the exception under section 187(2)(b), the Constitutional Court ultimately failed to reach consensus, resulting in three separate judgments.
A breakdown of the three judgments
In the first judgment, Zondo CJ (supported by three other justices) held that Waco, which he initially decided, and subsequent cases relying on Waco’s reasoning, was incorrectly adjudicated in light of constitutional values. In examining the ambit of section 187(2)(b), Zondo CJ concluded that a dismissal based on age is fair in instances where an employee is retired on the exact date upon which they reach the agreed or normal retirement age, unless an agreement specifically provides that, where an employee reaches the agreed or normal retirement age on a date that does not occur on the last day of the month, their retirement date will be the last day of the month. Conversely, a dismissal based on age that occurs on a later date is automatically unfair.
In revaluating the correct interpretation of section 187(2)(b), Zondo CJ contended that permitting dismissals on the basis of age increases the vulnerability of employees who work beyond the agreed or normal age of retirement, and may encourage employers to use age as an excuse to dismiss employees for unrelated reasons. Given that the provision limits individuals’ rights to not be unfairly discriminated on the basis of age under section 9 of the Constitution, Zondo CJ reasoned that section 187(2)(b) should be narrowly interpreted to prevent abuse.
Contrastingly, the second judgment – penned by Van Zyl AJ – dictates that in instances where an employee has reached the agreed or normal retirement age, the employer may decide whether to terminate their employment on the basis of age. Notably, this decision must be guided by ordinary contractual principles and termination must be exercised within a reasonable period of time, subject to the employer having requisite knowledge of the prevailing legal position. Failure to terminate within a reasonable period of time, which is determined on a case-by-case basis, indicates an election to continue the employment relationship and thus suggests that a subsequent dismissal may be connected to reasons other than age.
Finally, the third judgment, which was authored by Rogers J, with three others concurring, held that section 187(2)(b) enables an employer to dismiss an employee on the basis of age on or at any time after said employee has reached their agreed or normal retirement age, subject only to the provision of reasonable notice. Mindful that such individuals are likely to be long-standing employees, Rogers J remarked that it is best practice for employers to properly discuss an employee’s upcoming retirement prior to notifying them. The third judgment thus most closely aligns with the decision in Waco.
The legal implications
Although the Constitutional Court agreed on the final orders in each matter, the absence of a clear majority means that that the law remains unsettled. Accordingly, the Labour Court and Labour Appeal Court will continue to apply the interpretation of section 187(2)(b) adopted in Waco, and subsequently applied in Landman. Therefore, an employer may dismiss an employee – on the basis of age – at any stage once they have reached the agreed or normal retirement age.
Given the Constitutional Court’s failure to settle this increasingly common employment dispute, it is highly advisable for employers to expressly stipulate an agreed retirement age in all employment contracts. For practical purposes, and depending on the nature of the employee’s work, the contract should provide for employment to terminate on the last day of the month in which an employee reaches the agreed age of retirement. If an employer intends to permit an employee to work beyond this agreed date, it is advisable to expressly record a revised retirement date to avoid potential disputes and costly remuneration orders.
For expert legal assistance with all labour and employment-related matters, contact our specialists at labour@stbb.co.za.
