Retirement age-related employment termination

Can a company force an employee into retirement if there’s no agreement on the retirement age? This was one of the questions that the Labour Court answered in the 2015 case of Arb Electrical Wholesalers (Pty) Ltd v Hibbert. The company “retired” Hibbert at the age of 64. Hibbert took issue with this, claiming that he was unfairly dismissed. Both the Labour Court and the Labour Appeal Court agreed with him. The Labour Court held that where:

• the employer unilaterally retires the employee; but
• there is no agreement between the employer and employee on the actual age of retirement,

then the “retirement” actually constitutes an automatically unfair dismissal on the basis of unfair age discrimination. Hibbert claimed compensation amounting to 24 months’ salary, under the Labour Relations Act, and also asked for a further claim for damages incurred under the Employment Equity Act. The Labour Court took into consideration that Hibbert had in any event anticipated retiring at the age of 65, and accordingly granted him 12 months’ salary as compensation. However, Hibbert’s claim under the Employment Equity Act failed on the basis that he was unable to prove his damages. Both the employer and employee were dissatisfied with the Labour Court’s ruling – for different reasons! So the employer appealed and Hibbert cross-appealed, which is how the matter landed up in the Labour Appeal Court. The Labour Appeal Court confirmed the Labour Court’s ruling on all counts: Hibbert’s dismissal on the basis of his age was unfair, entitling him to 12 months’ salary as compensation, but there was insufficient evidence of any damages suffered to entitle to an award under the Employment Equity Act. It is noted that the Labour Appeal Court did make some useful observations about an employee’s recourse in the event of an unfair dismissal, as follows:

Labour Relations Act compensation

• If an employee is unfairly dismissed, their primary recourse is reinstatement. The court must order reinstatement in the event that it adjudges the dismissal to be unfair, unless one of the exceptions in section 193(2) of the Labour Relations Act applies. Section 193(2) LRA provides that the court must require the employer to reinstate the employee unless:
  • the employee does not wish to be reinstated;
  • the circumstances surrounding the dismissal are such that a continued employment relationship would be intolerable;
  • it is not reasonably practicable for the employer to reinstate the employee; or
  • the dismissal is unfair only because the employer did not follow a fair procedure.
• When an employee is reinstated, they’re entitled to receive payment of their full salary from the date of dismissal to the date of reinstatement. Thus the payment made by the employer constitutes the salary he would have earned if not for the dismissal. It is not regarded as compensation per se.
• Only where reinstatement is not ordered, for whatever reason (refer to the s193(2) LRA exceptions) will the court order compensation, being just and equitable compensation for the humiliation caused to the employee by the employer. This compensation is limited to 12 months’ remuneration following an ordinary dismissal, or 24 months’ remuneration following a discriminatory dismissal.

Employment Equity Act compensation

• If the unfair dismissal is discriminatory, the employee may also have a claim for compensation under the Employment Equity Act. Ie. the employee could potentially claim under both the LRA and the EEA.
• There is no cap on claims under the Employment Equity Act, but the amount must be just and equitable.
• However, the court also noted that the employer cannot be penalised twice for the same wrong. Thus the court must view both claims together and make a determination that is just and equitable under the circumstances.

The moral of the story: make sure that you have an agreed age of retirement in place, eg. In your Contracts of Employment, or in your Employment Policies and Procedures. And make sure that dismissals are on good cause shown, and not discriminatory in nature. Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.