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What are the legal consequences of an employee continuing to
work after the employee has reached the agreed upon retirement age?
Does a new contract of employment come into force or does the old
contract continue operating? Can an employer still terminate
employment on the basis that the employee has reached (and passed)
their retirement age? These questions have been the subject of much
debate over the years. They were addressed again in the recent
decision of the Labour Appeal Court in MISA obo Landman v Great
South Panel Beaters.
In this case, a contract of employment provided for a retirement
age of 60. The employee in question worked up to and beyond the
retirement age without any issues being raised by his employer
about his retirement. After nine months of him continuing to render
his services, his employer gave notice of the termination of his
employment on the basis that he had reached the retirement age of
60.
Aggrieved by this, the employee referred an automatically unfair
dismissal dispute to the Labour Court. In terms of section
187(1)(f) of the Labour Relations Act, 1995
(“LRA“), if the reason for the dismissal
is that an employer unfairly discriminated against someone on the
basis of their age, the dismissal would be automatically unfair.
However, section 187(2)(b) states that 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 Court dismissed the employee’s claim of an
automatically unfair dismissal. It found that, because the
dismissal took place on the basis of the employee’s age after
he had reached the agreed retirement age, section
187(2)(b) of the LRA still applied and the dismissal was
not unfair. The employee appealed the decision in the Labour Appeal
Court (“LAC“).
The employee’s case on appeal was that, when his employer
permitted him to work beyond the retirement age, it waived the
right to later rely on the retirement age to terminate the
employment relationship. He also argued that, when he worked past
the retirement age of 60, a new contract of employment came into
existence through the conduct of the parties. He argued that the
initial contract of employment ceased to have relevance. This meant
that the retirement age in the previous contract of employment
could not be relied upon by the employer to terminate the
employment relationship.
The LAC did not agree with the employee’s arguments. It
found that if an employer permits an employee to work beyond an
agreed or normal retirement age, this does not amount to a waiver
of the right to rely on section 187(2)(b) of the LRA to
dismiss an employee unless the clear and unequivocal conduct of the
employer indicates an intention to waive that right.
It also found that a contract of employment does not
automatically terminate by the effluxion of time when the
retirement age is reached by an employee, nor is the contract
tacitly renewed on different terms. Instead, the employment
relationship continues, which means that the initial agreed or
normal retirement age remains applicable. The LAC accordingly
agreed with the findings of the Labour Court and dismissed the
appeal.
The decision confirms that an employer may fairly terminate a
contract of employment, on the basis of age, even if an employee
has worked beyond an agreed or normal retirement age. The mere fact
that the employee has worked beyond their retirement age does not
mean that the agreed or normal retirement age is rendered
redundant.
However, the court was careful to confirm that where the clear
and unequivocal conduct of the employer indicates that there was a
waiver of the right to rely on the retirement age, or where the
employer has agreed to a further period of employment, the employer
would be bound by this agreement. It should be remembered that
where termination occurs at the instance of one party (the employer
in this instance), an employee is entitled to receive notice of
notice termination.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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