Retirement or unfair dismissal? What employers should know

A recent case settled by the Labour Court ruled in favour of an employee who was terminated due to reaching the “agreed retirement age” of that company – with a labour expert saying that this serves as an important lesson for employers to abide by their own policies.

In 2019, a company (the respondent) took over the cleaning contract for which the applicant had worked since 2002. The applicant was employed under a fixed-term three-year contract when the new company took over. A year later, downsizing in the company led to the applicant receiving one month’s retirement notice.

As a result, the employee pursued legal action.

The country’s labour laws lack a specified retirement age and terminating an employee based on age may violate Section 187(1)(f) of the Labour Relations Act (LRA). This section automatically deems dismissals unfair if done for arbitrary reasons such as age discrimination. “South African labour law prohibits unfair dismissal based on arbitrary grounds, including age,” said Tammy Koekemoer, a dispute resolution official at Consolidated Employers Organisation.

It is under Section 187(1)(f) that the applicant pleaded their case.

The company defended the decision, arguing that it was not unfair because the applicant reached the agreed retirement age (of the company) of 60 and the decision was based on operational requirements.

The defence was argued under an exception outlined in Section 187(2)(b) of the LRA, that states that a dismissal based on age becomes fair once an employee reaches the “normal or agreed retirement age in that capacity”.

However, the court found that the company’s actions did not constitute fair retirement practices for various reasons.

The company failed to provide sufficient notice for the applicant, violating their right to prepare for retirement. The company’s argument crumbled when it was found that they had breached their own retirement policy by hiring the applicant at the age of 62, despite the contract stipulating a retirement age of 60 as part of their “agreed retirement age in that capacity”.

The ruling regarded the dismissal as unfair and a result of age discrimination. The court ordered the respondent to provide the applicant with 12 months of compensation (R58,324.80) as well as pay the applicant’s costs.

This case “exemplifies the importance of adhering to fair retirement practices and the consequences employers may face if found in violation of such regulations.” Koekemoer concluded.