14/06/2017
Section 187(1)(f) of the Labour
Relations Act, 66 of
1995 (LRA) states that a dismissal
will be automatically unfair if
the reason for the dismissal was unfair
discrimination on a range of
listed grounds.
By: P.A.K le Roux
One of these listed
grounds is the age of an employee.
Since its enactment, this provision
has been relied on by a steady stream
of employees claiming that they
have been discriminated against on
the grounds of their age in the situation
where their the employer has insisted
that they retire. The employer
has typically argued that the employee
has reached the age where employees
in its organisation must retire
and, in seeking to enforce this
view, dismissed the employee. An
employee aggrieved by this decision
has then relied on section 187(1)(f)
and argued that the dismissal was automatically
unfair.
The employer has then, in turn,
sought to rely on section 187(2)(b)
which provides an employer with a
statutory defence against such a
claim. This provision was specifically
enacted to permit an employer to
terminate employment on the ground
that the employee must retire. However,
section 187(2)(b) does not provide
employers with a carte blanche
in this regard. It sets certain requirements
that have to be met before it
can be relied upon. This contribution
deals with the decisions of our Labour
Courts interpreting and applying
this section.
Section 187(2) reads as follows-
‘(2) Despite subsection (1)(f)
(a) a dismissal may be fair if
the reason for dismissal is
based on an inherent requirement
of the particular job;
(b) a dismissal based on age is
fair if the employee has reached the
normal or agreed retirement age for
persons employed in that capacity.’
In Schweitzer v Waco Distributors (A Division
of Voltex (Pty) Ltd (1998) 19 ILJ 1573
(LC), one of the first decisions interpreting
section 187(2)(b), the Labour Court provided
the following (often referred to) analysis
of section 187(2)(b). In order for the defence
contained therein to apply the following
questions must be considered –
- Was the employee’s dismissal based on
age?
- If the answer to the above question is in
the affirmative, did the employer have a
normal or agreed retirement age?
- If the answer to the second question is in
the affirmative, had the employee
reached this retirement age?
Normal or agreed retirement age
By far the majority of decisions considering
this section deal with the question whether
the employer had a normal or agreed retirement
age for its employees.
An agreement to retire at a certain age can be
found in an employee’s contract of employment
or in an employer’s policy, provided
that the policy has contractual binding effect.
In several cases an agreed retirement age
has been derived from the rules of a pension
or provident fund of which the employee
was a member. See, for example, SA Metal
& Machinery Co Ltd v Gamaroff [2010] 2
BLLR 136 (LAC), and ARB Electrical
Wholesaler (Pty) Ltd v Hibbert (2015) 36
ILJ 2989 (LAC). In Coetzee v Moreesburgse
Koringboere Bpk (1997) 18 ILJ 1341 (LC)
the Court found that, by joining the relevant
pension fund, the employee was bound by
the rules of the fund as amended from time
to time. The employee was therefore bound
by a rule amendment that changed his retirement
age. The agreement may also be an oral
one - see Rockliffe v Mincom (Pty) Ltd
(2008) 29 ILJ 399 (LC).
An employer is bound by this agreement
and, should it seek to change an agreed retirement
age, the consent of the employee to
the change is necessary. Any attempt to introduce
a change without consent constitutes
a repudiation of the contract of employment.
The same applies if the employer seeks to introduce
an agreed retirement age in the situation
where there is no such retirement age.
This is illustrated by the decision in Rubin
Sportswear v SA Clothing & Textile Workers
Union & others (2004) 25 ILJ 1671 (LAC).
In this case the employees concerned had
been employed by a company by the name of
Val Hau et Cie (Val). Val entered into an
agreement with Rubin Sportswear in terms
of which the manufacturing part of its business
was transferred to Rubin Sportswear.
This transaction constituted a transfer of part
of a business as a going concern. The employees
involved with manufacturing therefore
transferred to the employment of Rubin
Sportswear in terms of section 197 of the
LRA on the terms and conditions of employment
that they enjoyed with Val. Rubin
Sportswear had a normal retirement age of
60 for its employees. Val did not have an
agreed or normal retirement age. By virtue of
the provisions of section 197 (bolstered by a
collective agreement entered into with the
SA Clothing and Textile Workers Union) the
employees transferred to Rubin Sportswear
on the basis that they did not have an agreed
or normal retirement age. After the transfer
Rubin Sportswear attempted to enforce a
policy in terms of which its normal retirement
age would also apply to the transferred
employees. This resulted in the dismissal of
four employees on the basis that they had
reached the normal retirement age. The employees
approached the Labour Court and argued
that their dismissal had been automatically
unfair because the reason for their dismissal
was their age. Rubin Sportswear argued
that the employees had reached the agreed, alternatively
the normal, retirement age. The
Labour Court found that there was no agreed
or normal retirement age in respect of these
employees and that their dismissals had been
automatically unfair.
On appeal to the Labour Appeal Court (LAC)
the employer did not argue that there was an
agreed retirement age; it argued, however, that
there had been a normal retirement age. It was
common cause that the old employer, Val, had
not had an agreed or normal retirement age
and that the employees were transferred to Rubin
Sportswear on this basis. This then raised
the question whether Rubin Sportswear had
been entitled to unilaterally introduce a retirement
age. The LAC held that it could not. The
employees’ contracts with Val did not have a
provision fixing a retirement age and Rubin
Sportswear’s attempt to introduce such a term
constituted a repudiation of the terms of their
contracts which they were entitled to accept or
reject. In this case the employees had elected
not to accept the repudiation and accordingly
the purported change was unlawful and of no
legal effect. (This seems correct subject to
the comment that it seems that Rubin Sportswear
was seeking to introduce an agreed retirement
age and not seeking to introduce a
normal retirement age.)
The LAC also considered whether Rubin
Sportswear could argue that there was a normal
retirement age. After referring to definitions
in dictionaries and to reported cases
dealing with the meaning of the word ‘normal’
in other contexts, it came to the conclusion
that the word as used in section 187(2)(b) -
‘[19] … means what it says. It means that
which accords with the norm.’
The LAC also pointed out that section 187(2)
(b) requires that the norm must be established
with reference to employees who are employed
in the same capacity. In order to rely
on the defence found in the section the employer
will have to show, not only that the employee
had reached the normal retirement age,
but that the employee had reached the retirement
age normal to employees employed in
the same capacity. It is conceivable that one
employer could have different normal retirement
ages for different categories of employees.
The Court went on to state that -
‘[22] In my view a certain age cannot suddenly
become a normal retirement age for
employees or for a certain category of employees
simply because the employer wakes
up one morning and decides that he wants
a certain age as the normal retirement age
for his employees or for a certain category
of his employees. He can put a proposal to
his employees on what should be the retirement
age and, if they agree, then there will
be an agreed retirement age in that workplace
applicable to all those who have
agreed to the proposal. A retirement age
that is not an agreed retirement age becomes
a normal retirement age when employees
have been retiring at that age over
a certain long period – so long that it can
be said that the norm for employees in that
workplace or for employees in a particular
category is to retire at a particular age. 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.’
See also Evans v Japanese School of Johannesburg
(2006) 27 ILJ 2607 (LC).
The LAC also had occasion to consider in
some detail the requirement of a normal or
agreed retirement age in its subsequent decision
in Cash Paymaster Services (Pty) Ltd v
Browne (2006) 27 ILJ 281 (LAC). This decision
also dealt with the situation where an
employee had been transferred to a new employer
in terms of section 197 of the LRA.
When employed by his old employer the employee’s
agreed retirement age had been 65.
After the transfer had taken place his new
employer, Cash Paymaster Services (CPS),
tried to enforce a retirement age of 60 and terminated
his employment on this basis when
he reached the age of 60. The employee
claimed that his dismissal had been automatically
unfair on the basis of his age. He also argued
that section 187(2) found no application
because he had been retired prior to his retirement
age of 65. CPS appears to have accepted
that there had been an agreed retirement
age of 65, but argued that the dismissal was
nevertheless still fair because the normal age
of retirement in the industry that the employer
operated in was 60. It argued that this had the
result that the dismissal fell within the ambit
of section 187(2)(b) – a retirement could be
fair on the basis that an employee had reached
the normal retirement age even if the employee
and the employer had agreed to a later date
of retirement. The LAC rejected this approach
in the following terms –
‘[25] There is no merit in the appellant's
contention. The retirement age dispensation
provided for in section 187(2)(b) of
the Act is one that works on the basis that,
if there is an agreed retirement age between
an employer and an employee, that
is the retirement age that governs the employee's
employment. This is the case even
when there is a different normal retirement
age for employees employed in the capacity
in which the employee concerned is employed.
The 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.
[26] It would make no sense for the Act to
make provision for an agreed retirement
age if such an agreement would not be
binding on the employer if there is a normal
retirement age for employees employed
in the relevant capacity. What
makes sense is precisely what the law is,
namely, where there is an agreed retirement
age, that agreement governs the position
irrespective of the existence or otherwise
of a normal retirement age for employees
employed in the relevant capacity.
Where there is no agreed retirement age
but there is a normal retirement age for
employees employed in the relevant capacity,
the position is governed by the normal
retirement age for employees employed in
that capacity’.
CPS also argued that the retirement age
agreed to between the employee and the old
employer fell away when the employee, after
the transfer, signed a document entitled ‘Offer
of Employment’ and another document entitled
‘Articles of Agreement’. CPS argued that
these documents, read together, contained the
terms and conditions of employment applicable
to the employee and that these documents
did not contain a retirement age. There was
therefore no agreed retirement age. The LAC
rejected this argument. It pointed out that
there was no provision in either of these documents
that indicated that they contained all
the terms and conditions of employment applicable
to the employee. There was also nothing
inconsistent with the continued existence
of an agreement that the age of 65 would continue
to be the agreed retirement age.
In the Rubin Sportswear decision the LAC
posed the question whether the normal retirement
age must be established with reference
to persons who are employed by the same
employer or whether it may also be established
with reference to the practice in a particular
industry. However, the LAC did not
answer this question. In the decision, the LAC
appears to accept that this may occur.
In Botha v Du Toit Vrey & Partners CC
(2005) 26 ILJ 2362 (LC) the Court appears to
have accepted that the normal retirement age
could be determined with reference to the industry
in which the employee was employed.
In Bos v Eon Consulting (Pty) Ltd (JS 948/14
12/8/2016) the Court accepted that ‘the norm’
can be established internally within an employer’s
organisation or externally in a particular
industry. It stated that, when relying on
an industry norm it is ‘critical’ for the employer
to present credible evidence, preferably
by an expert, as to what constitutes the industry
norm. A comparison with the retirement
age applied by directly comparable employers
in the industry ‘would also be a consideration’.
Industry wide collective agreements or
‘other forms of regulation’ in that industry
would also be relevant. If an employer seeks
to establish a norm within its own business it
must also lead evidence in this regard. This
evidence could include evidence of what practice
the employer has adopted in this regard,
and the provisions of any policy and the rules
of any relevant pension or provident fund.
Because the termination of employment due
to the attaining of the age of retirement is akin
to the expiry of a fixed-term contract., because
it leads to the termination of employment
‘without due process’ the agreement or norm
must be clear and unambiguous.
Also of interest were the Court’s views with
regard to employer policies regarding retirement
age. It sees such a policy as ‘the easiest
way of establishing a retirement age norm’.
This contention can be explored in more detail.
For example, if a contract of employment
states that the employee must join a specified
provident fund and that the employee will be
bound by the rules of that fund as amended
from time to time, it is submitted that in this
case the employee has agreed to any retirement
age that may be provided for in the
rules of the fund – there is an agreed retirement
age.
A more difficult issue arises in the situation
where the employment contract contains a
provision which states that the employees are
bound by any policies that the employer may
introduce and amend from time to time. In the
Bos decision the Court states that an employer
is, in principle, entitled to unilaterally fix
and then introduce a normal retirement age by
introducing a policy to this effect, provided
that this cannot be done retrospectively in the
sense that it cannot be applied to an employee
who has passed the retirement age. The
policy can also not contradict an employee’s
existing conditions of employment or an
agreed retirement age. This second requirement
clearly limits the employer’s ability to
introduce a policy in this regard. If there is no
agreed retirement age an employee has a contractual
right to work until such age as he or
she wishes, subject to the employer’s right to
dismiss on the grounds of misconduct, incapacity
or operational requirements. An attempt
to introduce a retirement age by way of
a policy could constitute a change to existing
terms and conditions of employment. This also
was the view adopted by the LAC in Rubin
Sportswear. The Bos decision relies on the
decision in Bedderson v Sparrow Schools Education
Trust (2010) 31 ILJ 1325 (LC) as authority
for the view that a policy can introduce
a retirement age. This is incorrect. In this decision
the Court, after accepting that an employer
has the right, in general terms, to introduce
policies stated that –
‘[23] However, I was also of the view that
the common-law right to issue such policies
does not extend as far as actually
changing the terms on which employment
can be terminated. Generally speaking,
policies must be formulated and applied
within the framework of the contract which
authorizes their formulation. The applicant's
contract does not envisage a retirement
age. The employer cannot, by introducing
a policy, change this fundamental
aspect of the employment relationship.
Taken to its extreme, it could mean that an
employer could evade potential liability
for unfair dismissal by simply introducing
a policy in terms of which the contract of
employment of its employees would terminate
automatically in certain circumstances.’
See also Bank v Finkelstein t/a Finkelstein &
Associates (JS 219/15 26/10/2016) which also
expresses many of the sentiments expressed in
the Bos decision.
Dismissals after the retirement age
If an employer insists that an employee go on
retirement when reaching the agreed or normal
retirement age and actually dismisses the
employee on that date this will typically fall
within the ambit of section 187(2)(b). There is
some authority for the view that, if an employee
ceases working on this date, there is no
dismissal and that therefore there can be no
automatically unfair dismissal - the employment
contract expires automatically through
the effluxion of time. See the Coetzee and
Waco Distributors decisions and Schmahmann
v Concept Communications Natal (Pty)
Ltd (1997) 18 ILJ 1333 (LC).
What rights to job security does an employee
have if she has continued working after an
agreed or normal retirement age and the employment
contract or relationship continues in
force? This contentious issue was considered
for the first time in the Waco Distributors decision
by Judge Zondo (as he then was). In
this decision the parties accepted that there
had been an agreed or normal retirement age
of 65 that applied to the employee concerned.
However, he carried on working after he
reached this retirement age. Two years later
he was informed that he was being retired. It
was common cause that the reason for the termination
of his employment was his age and
was not due to any complaint about his work
performance or his conduct. He referred a dispute
to the Labour Court. One of his arguments was that his dismissal constituted unfair
discrimination on the basis of his age.
The employer relied on section 187(2)(b)
and argued that it was entitled to terminate
the employee’s employment because he
‘had gone past’ the age of 65. This raised
the question of how section 187(2)(b)
should be interpreted. Does the defence only
apply in the situation where retirement is
effected on the date that the agreed or normal
retirement age is attained; or does it
continue to apply to terminations effected
after this date as well? The Court was
clearly concerned with the implications of a
decision in favour of the latter approach. It
commenced its discussion on this issue by
stating that its initial view was that section
187(2)(b) could not apply in the situation
where the employee had not only
reached ,but had gone beyond, the agreed or
normal retirement age. It thought that it
would be unfair to dismiss an employee
purely on the grounds of age in circumstances
where there were no grounds to
fairly terminate employment.
However, the Court went on to state that it
had rejected its initial view in favour of a
conclusion that the section 187(2)(b) defence
remained available in the case of terminations
effected after the retirement date.
This was based on the argument that section
187(2)(b) refers to a ‘dismissal’.
When an employee reaches the normal or
agreed retirement age the employment contract
comes to an end through the effluxion
of time without the employer having to do
anything – there is no dismissal. Section
187(2)(b) could therefore not apply in this
situation and could only apply if the employee
had continued to be employed after
the termination date and was dismissed after
this date.
In Datt v Gunnebo Industries (Pty) Ltd
(2009) 30 ILJ 2429 (LC) another judge expressed
reservations about this approach but
did not find it necessary to decide on the
matter. However, the Labour Court has endorsed
the approach adopted in the Waco
Distributors decision in the Bos and Bank
decisions and Rubinstein v Price’s Daelite
(Pty) Ltd (2002) 23 ILJ 528 (LC).
In the Rockliffe decision the Court did not
refer to the Waco Distributors decision and
accepted that the employee may be able to
argue that, by not dismissing the employee
on the retirement date, the employer had
waived its right to rely on section 187(2)(b).
In Karan t/a Karan Beef Feedlot v Randall
(2012) 33 ILJ 2579 (LAC) the LAC had the
opportunity to consider the correctness of
the approach adopted in the Waco Distributors
decision but did not do so. Prior to
reaching his retirement age the employee in
this case was sent two letters by the employer
in which the employer indicated it would
like to keep the employee in employment
after he had reached his retirement age of
60. The letters also proposed that, if the employer
decided, at a later date, that he
should go on retirement it would give him
the ‘normal’ notice of termination of employment.
The employee did not respond to
these letters but simply carried on working
after he had turned 60. Some months later
the employer gave him notice that he would
be going on retirement. The employee argued
that he had been automatically unfairly
dismissed. The LAC rejected this contention.
It found that the employee had tacitly
agreed to work beyond his normal retirement
age and to leave it to the employer to
determine the retirement date. There was
nothing unlawful or unfair in the agreement
reached.
In the Datt decision the employer and the
employee had agreed that the employee
would continue in employment after reaching
his retirement age until such time as the parties
agreed that he would retire. A dismissal
in breach of this agreement was held to be
automatically unfair. See also the Bos decision.
It should also be noted that section 187(2)(b)
states that a dismissal is fair if the requirements
of the section have been met. This can
be contrasted with the formulation of section
187(2)(a) which states that a dismissal may
be fair if the reason for the dismissal is an
inherent requirement of the job. The consequence
of this, according to the Waco Distributors
decision, is that if a dismissal based
on age is found not to be automatically unfair
because the requirements of section 187(2)
(b) had been met, there is no room for an argument
that the dismissal was still nevertheless
procedurally unfair. However, the Court
does appear to have qualified this approach
by remarking that such fair procedure as the
employer may be obliged to follow in this
case is a procedure aimed at giving the employee
a hearing on whether the requirements
set by section 187(2)(b) exist. In contrast, the
Botha decision the Court accepted that procedural
fairness may be a requirement.
Other fair reasons
Section 187(1)(f) prohibits unfair discrimination
of the grounds of age. Section 187(2)(b)
specifies one situation where the dismissal
will be regarded as fair. It is important to
note that there may be circumstances, probably
exceptional circumstances, where an
employer may be able to justify the fairness
of a dismissal on the grounds of age on
grounds other than that provided for in section
187(2)(b). See the discussion in Bedderson
v Sparrow Schools Education Trust
(2010) 31 ILJ 1325 (LC).
Other unfair dismissals
It is, of course, open to an employer to defend
an age discrimination claim by denying
that the reason for the dismissal was the age
of the employee and by arguing that the dismissal
was for some other reason. However,
this is not the end of the employer’s problems.
It may be able to avoid a finding that
the dismissal was automatically unfair; but it
may still be necessary, if the employee
pleads this, to defend a claim that the dismissal
was unfair. The employer will have to
show that the dismissal was related to the
employee’s conduct or incapacity or the employer’s
operational requirements and that a
fair procedure was followed prior to the dismissal.
The Employment Equity Act
In the
Waco Distributors decision the Court
accepted that its interpretation of section 187
(2)(b) had far-reaching implications but felt
that its interpretation was justified on the
wording of the section. It went on to speculate
that there may have been social policy
reasons for the way in which the section was
formulated. This included the creation of job
opportunities for younger members of society.
But this raises the interesting question whether
the same policy considerations would apply
to another claim that an employee who is
dismissed because of her age after she has
reached her normal or agreed retirement age
could bring – namely a claim based on an
allegation of unfair discrimination in terms
of the Employment Equity Act, 55 of 1998
(EEA).
The courts have accepted that a dismissed
employee may bring such a claim independently,
or together with, a claim based
on an allegation of an automatically unfair
dismissal. See, for example, ARB Electrical
Wholesaler (Pty) Ltd v Hibbert (2015) 36
ILJ 2989 (LAC) and the Bedderson decision.
But the EEA does not provide for a defence
equivalent to that provided in section 187(2)
(b). However, the EEA only prohibits unfair
discrimination and it is possible to argue
that dismissals after the attainment of the
agreed or normal retirement age in the circumstances
set out in section 187(2)(b)
would be regarded as fair in terms of the
EEA.
This issue was considered in Hospersa obo
Venter v SA Nursing Council (2006) 27 ILJ
1143 (LC). The conditions of employment
on which the dismissed employee in this
case was initially employed provided that
her retirement age was 70. The employer
then attempted to unilaterally enforce a new
retirement age of 60 and dismissed her on
the basis that she had passed this age. The
employee then referred a dispute to the Labour
Court. However, she did not claim that
she had been automatically unfairly dismissed
as envisaged in the LRA but claimed
that she had been unfairly discriminated
against as envisaged in the EEA. The Court
stated that the principles encapsulated in s
187 of the Labour Relations Act provided
guidance in the handling of allegations of
discrimination based on age.
It found that the employer had discriminated
on the basis of age when it dismissed the
employee and that the employer had not
been able to justify the fairness of the dismissal
– this on the basis that the employee
had not reached her agreed retirement age of
70.
Remedies
Section 193 of the LRA provides that an
employer can be ordered to reinstate or reemploy
an automatically unfairly dismissed
employee. Alternatively, she may be awarded
such compensation as is ‘just and equitable’.
However section 24 limits the compensation
payable to an amount equivalent to 24
months’ remuneration. Section 50 of the
EEA makes provision for a wider range of
remedies but also makes provision for the
payment of compensation. It also provides
that orders for damages may be made. In the
ARB Electrical decision the LAC dealt with
question of how to determine what amount
of compensation should be paid in some detail.
The most important point made for the purposes
of this contribution is that, when determining
the amount of compensation to be
paid the arbitrator should issue a single
award of compensation. The employer may
not be penalised twice. Interestingly, the
EEA does not set a limit on the amount of
compensation that may be ordered to be
paid. The result is that if separate claims are
brought in terms of the EEA and the LRA it
is possible that the compensation ordered to
be paid could exceed the 24 months’ remuneration
cap set by the LRA. In order to succeed
with a claim for damages the employee
will have to show that she has suffered loss
and the extent of that loss.