Retirement – Know Your Rights!

“What do you call a person who is happy on a Monday? – Retired!”

 Article by Nichole Turner (Senior Labour Advisor)

Welcome to your permanent weekend! So, you have spent the last 40-odd years building your career to climb the corporate ladder, and provide for your family; but now you are ready to remove your tie and kick off your shoes to spend quality time with family; perhaps travel; play a few rounds of golf; or just slowdown in the general sense.

Well, you deserve it – you have worked hard; but what are your rights and obligations? How do you go about telling your employer?

On the other hand, what happens, if your employer initiates this conversation?

Legislation

Interestingly, neither the Basic Conditions of Employment Act 75 of 1997, nor the MIBCO Main Collective Agreement make provision for a specified retirement age.

Retirement age depends on the “norm” established in the industry, early retirement may be any time from the age of 55 years, and normal retirement can be either from the age of 60 or 65 years of age.

Contractual Obligations

Contractually speaking, you are bound to the terms of your contract of employment, as they speak to the employment agreement between you and your employer. Therefore, if your contract of employment makes provision for a date or age within which you are obliged to retire, then either you (or your employer) may make use of that clause within the contract; and you may inform your employer (or in turn, your employer may inform you) – in writing (i.e. give notice) of this intention to retire once the condition is met.

For example, your contract of employment may provide as follows: “An employee may, upon reaching 60 years of age, give his or her notice, to the employer, of his or her intention to retire, by providing the employer, one month written notice of such intention to retire, in accordance with the provisions of this clause. However, upon reaching 65 years of age, such employee is obliged to give his or her written notice of retirement to the employer, in the month that he or she turn 65 years of age.” 

The above clause is self-explanatory. This type of clause in the contract of employment makes provision for a suspensive condition. Meaning that upon reaching the age of 65 years, your contract of employment automatically terminates, because this condition is suspended until the condition is met – you reaching the age of 65 years.

However, this does not mean that you and your employer cannot agree to enter into an additional fixed term contract of employment for an additional period of time, (say, for example, 6 months, 3 or 5 years, depending on your needs, or that of the employer, for that matter).

Company Policy

If your contract of employment is silent on a retirement age, and the employer decides to implement a company policy, then the new company policy will not have retrospective effect, such company policy will only have effect for new employees employed after the policy is in place, or employees employed who have not met the policy established retirement age.

In Lyall v City of Johannesburg (JS171/2014) [2017] ZALCJHB 461 (22 November 2017) the Labour Court held that an employer may unilaterally implement a retirement age and apply the retirement age policy to employees. However, this implementation will not have retrospective effect. As a result, an employee who had already exceeded the proposed retirement age, at the time the policy is implemented, will not be governed by said policy.

No Contractual Obligation

However, not all employees are ready to retire at a certain age, for reasons, usually related to not having secured enough of a savings balance to sustain a relatively living wage income on their pension or provident fund. What happens however, if your contract of employment does not make provision for a specified date within which you are obliged to retire; what governs the relationship now?

Well, parties (employer and employee) are required to consult and agree, and reduce that agreement to writing, on when such employee’s retirement is to take effect. This leads us to the situation whereby, parties have reached an agreed retirement age. It is to be noted here, that the employer cannot force an employee to retire.

Automatically Unfair Dismissal

Section 187 of the Labour Relations Act 66 of 1995 (the LRA) provides that “A dismissal is automatically unfair …, if the reason for the dismissal is– (f) that the employer unfairly discriminated against an employee, directly or indirectly, on any arbitrary ground, including, but not limited to …age…” (own emphasis). This provision is referred to as the general rule. Therefore, if an employer dismisses you for the sole reason because of your age, such dismissal will be automatically unfair.

There is however, an exception to the general rule, found in section 187(2)(b) of the LRA, namely ‘…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 Labour Appeal Court (LAC) in the matter of Rubin Sportswear vs SA Clothing and Textile Workers Union and Others (CA8/03) [2004] ZALAC 8 (9 July 2004) at paragraph 24 states: “Section 187 (1)(b) creates two bases upon which an employer can justify the dismissal of an employee on grounds of retirement age. The one is an agreed retirement age; the other is normal retirement age. Those are the only two bases.”

The above-mentioned case further illustrates (paragraph 22) that a normal retirement age is established through a recognised practice of employees of the employer retiring at that age, by stating: “An example would be where, without any formal agreement, employees in a particular category have over 20 years been retiring at a particular age without fail. The period must be sufficiently long and the number of employees in the particular category who have retired at that age must be sufficiently large to justify saying that it is a norm for employees in that category to retire at that age. If the period is not sufficiently long but the number is large, it might still be that a norm has not been established. If the period is very long but the number of employees in the particular category who have retired at that age is not large enough, it might be difficult to prove that a norm has been established.”

Thus, a balance must be struck, if your contract of employment or policy makes provision for an age of retirement, or, if you have agreed on a retirement age, the evoking of that clause within the contract or company policy and/or agreement, will be justifiable and fair, and will not amount to an automatically unfair dismissal.

However, it must further be noted, that an employer relying on a retirement age, must apply this rule consistently in the workplace.

Normal Retirement Age versus Contractual Retirement Age

In the matter of Cash Paymaster Services (Pty) Ltd v Browne (2006) 27 ILJ 281 (LAC), the LAC held that “(t)he provision relating to the normal retirement age only applies to the case where there is no agreed retirement age between the employer and the employee.” (Own Emphasis)

In the matter of Truter v Carecross Health (Pty) Ltd (C956/2013) [2015] ZALCCT 8 (23 January 2015) the Court, followed the principle in the Rubin Sportsware judgment (supra); rejecting the employer’s argument that the “normal retirement age” had been established, ordering reinstatement, with costs, as the dismissal of the employee in this case was automatically unfair.

In another matter, ARB Electrical Wholesalers (Pty) Ltd v Hibbert (2015) 36 ILJ 298 (LAC) (21 August 2015) the LAC confirmed, that the dismissal of an employee without an agreed retirement age would constitute an automatically unfair dismissal and constitutes an act of unfair discrimination based on age in accordance with Section 6 of the Employment Equity Act 55 of 1998.

Conclusion

First thing is first – refer to your contract of employment or company policy for guidance. In the absence of such, be aware that the date you retire must be agreed upon between you and your employer.

When in doubt, remember MISA – Just a phone call or an e-mail away!

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