Court decision challenges retirement norms

Court decision challenges retirement norms

A recent Labour Court judgment may make employment more secure for people working past retirement age. It has the implication that, if you are working beyond a retirement age agreed on by you and your employer, your employer cannot then discriminate against you on the basis of age; it has to treat you as it would any other employee.

Employers will normally stipulate a retirement age of, say, 60 or 65 years, in their employment contracts, at which point employees must retire. If the employer comes to an arrangement for an employee to work beyond the accepted retirement age, say, on a fixed-term contract, it cannot use age as a reason for terminating their employment prematurely.

In the case Seokwane versus Bidvest Prestige Cleaning Services (BPCS), heard late last year, the court found that a worker was dismissed unfairly under the circumstances.

Rosie Seokwane had been employed as a sub-contracted cleaner to Volkswagen SA. When her employment agency lost the contract in 2019, she was re-employed by BPCS, at the request of VW SA, on a standard three-year fixed-term employment contract. She was already 62 years old, which was over BPCS’s stipulated retirement age of 60 years.

In 2021, as a result of downscaling at VW SA, Seokwane lost her job, being given one month’s notice of her “retirement” by her employer, BPCS.

The court found that the true reason for Seokwane’s dismissal was based on BPCS’s operational requirements, which meant that it was not able to use section 187(2)(b) of the Labour Relations Act (LRA) as a defence for terminating her contract prematurely.

Section 187(2)(b) of the LRA allows employers to be protected from claims of unfair discrimination on the grounds of age if the reason for the dismissal is that the employee has reached the standard or agreed retirement age.

The judgment states: “The applicant was given a month’s notice of her retirement. The conduct is in conflict with fair retirement of employees, which gives employees fair notice of retirement. The retirement age is either contained in the contract of employment or is known by employers and employees in the capacity the employee is employed in. The knowledge gives employees enough time to prepare for their retirement. The manner in which the respondent retired the applicant denied her this opportunity. The dismissal is not justified by Section 187(2)(b) of the LRA.”

The court ordered that:

• The applicant’s dismissal by the respondent was automatically unfair.

• The respondent pays the applicant compensation in the amount of R58 324.

• The respondent pays the applicant’s costs.

In commenting on the case, Deon Visagie, a partner, and Jamie Jacobs, an associate, at law firm Webber Wentzel, said many employees, like the employee in the judgment, “have not saved enough for retirement and envisage life after retirement as a period in which they will have to take up further employment to afford the cost of living”.

Visagie and Jacobs said employers should ensure that they evaluated whether re-employing retired employees or those who were approaching or had reached retirement age constituted waiving of the employers’ rights associated with employees reaching retirement age.

“After doing so, employers cannot later rely on the stipulated retirement age as a reason to terminate their employment,” they said.

“Employers must ensure that they stringently implement their retirement policies, and if they deviate from the provisions in these policies, they must ensure that the employment agreements in respect of the specific employees cater for the bespoke needs of the factual circumstances at hand.”

Asked by Personal Finance whether the judgment might have the adverse effect of making employers more reluctant to employ people older than the stipulated retirement age, Visage and Jacobs said it should not.

“There are a number of employers who employ employees who have reached or exceed the stipulated retirement age. The case merely confirms that the employers should include provisions in the employment agreements of those who are working post-retirement that regulate how such a relationship should work.

“In this case, the employer in question merely employed the employee who already exceeded the stipulated retirement age without including such provisions and then proceeded to use retirement as the reason for dismissal, as a guise for the real reason for the employee’s dismissal,” they said.

PERSONAL FINANCE